Buying an Annuity During Times of Inflation

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Inflation can throw a wrench into retirement plans. That’s because, over the long term, inflation erodes your income’s purchasing power. So even if you save and invest, your wealth may buy less and less with time.

Commercial annuities often pay a fixed monthly income. This fixed amount is susceptible to inflation. But if annuities are susceptible to eroded purchasing power, does that make them a poor retirement vehicle during inflationary times?

Understanding How Annuities Work

An annuity is a financial product sold by insurance companies. It provides income payments to an individual in exchange for a lump sum payment. Some annuities require a series of payments. Then, the insurance company invests the money you have paid.