Do Income Riders Protect Against Inflation

Hi there, I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Today, we’re diving into a hot topic: inflation. And more specifically, how it relates to annuities and income riders. This blog is packed with straight talk—no sales fluff. Let's get into it.

A Word on Sales Pitches and Seminars

If you've been to one of those bad chicken or fancy steak dinner seminars, you've probably heard this pitch: "Sign this contract, and you’ll get a bonus. Plus, your annuity income will increase with inflation!"

Sounds too good to be true? It is. There is no annuity company giving away free money. Upfront bonuses are simply part of the contractual guarantees—nothing more. When they pitch income increases tied to inflation, they’re not offering a miracle product. They're lowering your initial payment significantly—often by 20% to 30%—to offset any possible future increases.

The Truth About Income Riders

Income Riders are typically attached to Indexed Annuities. Think of them as a phantom account that calculates your future income. You can't cash it in. It's just a tool to determine your first lifetime income payment.

And the claim that your income will increase based on index performance? It’s smoke and mirrors. Insurance companies hedge their risks. They're not giving anything away. If an index option sounds like it’ll increase your income significantly, remember: the company has already lowered your starting income to cover that possibility.

So, how should you approach Income Riders? Shop them based on the highest contractual guarantee—period. These are commodity products. You’re not buying hopes and dreams. You’re buying math. At The Annuity Man, you can use our calculators to run real quotes confidentially.

What About COLA Riders?

Let’s switch gears and talk about Cost-of-Living Adjustment (COLA) riders on annuitization products like Immediate Annuities, Deferred Income Annuities, and Qualified Longevity Annuity Contracts.

COLA riders allow you to choose a fixed annual percentage increase—1%, 3%, or 5%—at the time of application. But here’s the catch: the higher the COLA percentage, the lower your initial payout. Simple math. That’s how insurance companies stay profitable and why their buildings are so big.

And those CPI-U inflation-tied annuities? They're no longer available. So, COLA is the only inflation adjustment option you can attach today.

You Already Own the Best Inflation Annuity

It’s called Social Security. Yes, you already have an annuity—so don’t be a hypocrite. If you hate all annuities, call Social Security and tell them to stop sending your checks. You won’t, because you like lifetime income. It’s secure. It’s reliable. And it adjusts with inflation.

Smarter Strategies to Combat Inflation

Instead of chasing sales pitches, consider this approach: Wait until inflation creates a real gap in your monthly income, then reverse engineer an annuity quote to fill that gap.

For example, let’s say you’re getting $3,000 per month from existing income sources and inflation pushes your needs to $3,500. That’s your $500 gap. You can solve for that amount by running a quote on The Annuity Man.

Another option: staggered annuity start dates. Buy annuities that begin at ages 70, 72, 75, 77, and 80. Payments increase naturally as you age, because the older you are when income starts, the higher the payment.

Final Thoughts

There’s no perfect annuity product that solves inflation. Anyone telling you otherwise is selling a fantasy. The best way to deal with inflation using annuities is simple: