Inflation Protection With Annuities

Keep up with the rising cost of living

By using a portion of your retirement assets to secure guaranteed lifetime income, you are ensuring that you’ll have a reliable income stream for the rest of your life. But with retirements often lasting 30 or more years, you may be concerned about whether lifetime income can help you maintain your current lifestyle as the cost of living increases over time.

For example, if your current monthly costs are $3,000, they will be about $4,000 in 10 years with only a 3% annual inflation rate. In 25 years, at that same low inflation rate, your monthly costs will have more than doubled to about $6,200.

How an annuity can help

Annuities sometimes offer ways to help mitigate the risk of losing purchasing power due to inflation, depending on the type of annuity and associated features you choose. Many of these annuities allow your income to increase based on favorable market returns, potentially balancing some of the negative impacts of inflation.

Wells Fargo Advisors offers variable annuities with lifetime income options that include an optional feature that helps protect you against rising inflation costs during retirement.

Important considerations

  • Features differ by product, and you will need to get enough market returns to offset withdrawals and fees. There is no guarantee of an increase since this is based on market performance.
  • Many immediate annuities offer an automatic cost-of-living provision that could either increase payments by a set percent each year (3%, for example) or increase based on changes to the Consumer Price Index.
  • While annuities for guaranteed income do offer inflation features, they primarily provide income for life. If your primary goal is inflation protection, please discuss with us the range of strategies — including annuities — that are available.

Let’s talk about your retirement income needs

Is an annuity right for you? Try our tool to find out, or contact a Wells Fargo retirement professional for help deciding.

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Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk.

Consumer Price Index

The most commonly used measure of inflation, the Consumer Price Index (CPI) tracks the average change in the prices of a fixed “market basket” of goods and services, including energy, food, health care, clothing, and entertainment. It is published by the U.S. Bureau of Labor Statistics.