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Full time employment: Posting here.
- Joined
- Oct 10, 2009
- Messages
- 640
A good comparison of a plain vanilla SPIA annuity and a fixed-rate COLA one:
Oblivious Investor: Annuities with Fixed Cost of Living Adjustments Don’t Protect Against Inflation
Just posting for those who are interested. At this point, I'm not inclined to get any type of annuity.
Oblivious Investor: Annuities with Fixed Cost of Living Adjustments Don’t Protect Against Inflation
My point here isn’t that the COLA annuities are a bad idea. As you’ll notice, they do a better job of protecting against longevity than annuities without COLAs. (That is, the longer the lifetime, the better they perform.)
But annuities with fixed cost of living adjustments do not protect against inflation. Not only do they not keep up with high rates of inflation, they actually perform worse in the face of inflation than annuities without COLAs. If you want an annuity that provides true inflation protection, you have to buy one with payments that are tied to the actual rate of inflation.
Just posting for those who are interested. At this point, I'm not inclined to get any type of annuity.
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