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How Do Annuities Solve for Inflation?

Stan Haithcock
March 24, 2024
How Do Annuities Solve for Inflation?

Hi there. Stan The Annuity Man, America's annuity agent licensed in all 50 states. I am so glad you joined me today because today's topic is key. A lot of people ask me this, "Stan The Annuity Man, how do annuities help solve for inflation?" the gorilla in the room, inflation. "Stan, inflation. What are we going to do? Can I buy the eggs? Can I buy the gas? Can I buy things? Are we going to be able to survive inflation?" Well, annuities can solve for inflation, but just like everything in life, nothing is perfect. And if the sales pitch you're hearing from that local agent trying to be your friend sounds too good to be true, guess what? Spoiler alert: with no exceptions, it is.

‌All right. So, we're talking about inflation. Oh, man. My wife called me the other day from the store. She goes, "Have you seen the price of eggs? Have you seen it?" I'm like, "Yeah. We can buy the eggs. Buy the eggs. We're good." And to kind of get on my soapbox a little bit, if you have a lot of money, I mean, a lot of money, please don't call me and talk about inflation. That's arrogant. Inflation hits the lower level of society, as we all know. And many of us didn't grow up with money, so we were at the lower level at one point. As we have seen, inflation is cyclical. It will come and go, but if you have a lot of money, you'll be able to survive it, Chester. It's going to be okay.


‌But let's talk about strategies using annuities. And, by the way, spoiler alert, there's many different types of annuities. Please don't say, "I hate all annuities." No, there's many different types. But the first way to solve it is if it has an Immediate Annuity. A QLAC or a Deferred Income Annuity has what's called a COLA, Cost of Living Adjustments. C-O-L-A. That is a contractual numerical increase contractually by which the income will grow. Wait a minute. Don't get up and start clapping yet. There's a catch. In other words, you buy an Immediate Annuity and say, "Oh, I want it to increase by 3% every year as long as I'm breathing." That sounds fantastic, but the annuity company does not give that away.

‌Cost of Living Adjustment

‌Visual. Just envision one hand higher than the other. This is an Immediate Annuity without a COLA. This is the same Immediate Annuity with a COLA. So, annuity companies have big buildings for a reason. They don't give that away, but you already own the best inflation annuity on the planet. I know. Stop. You are saying, "I don't own an annuity. I'd never own annuity. No way I'd own annuity." Social Security is the best inflation annuity on the planet. You already own that one. But so, you can attach a COLA, and some really bad Indexed Annuity sales pitches out there say, "Well if the index increases, it increases the income stream, sir." Same visual. Indexed Annuity with that Income Rider without the COLA, the one with the COLA. In other words, they, the annuity company, will lower that initial payment. If you have a potential or contractual increase, they will lower that initial payment by 30 and maybe up to 40%.

‌You have to run those numbers mathematically to see if attaching something with a potential increase makes sense. In my opinion, Stan The Annuity Man, America's annuity agent licensed in all 50 states, top guy out here, the thought leader, the annuity whisperer, yes, you know who I am, I'm not sure you attach COLAs on potential increases. I'm not a big fan of potential anyway because I always tell people you own an annuity for what it will do, not what it might do. The will do is the contractual guarantees. The might do is the hypothetical, theoretical, projected, back-tested unicorns chasing the butterfly returns, "Mr. Jones. if you had done this 110 years ago," that nonsense. Don't do that.


‌Now, rational contractual ways to address inflation are to use annuities to buy income starting at future dates. Give you an example. You could buy a Deferred Income Annuity or a QLAC, one and the same; it depends on what type of account you're using, QLAC or a qualified IRA, with income starting at future dates. Give you an example. Let's say you have a QLAC and check the date of this blog; the amount that you can put into QLAC is $200,000. Let's say you broke that up in 50s. So, you did four $50,000 contracts with income starting at age 75, 77, 80 and 85. You have income coming in at different dates as you get older. That's an excellent way to address inflation. You could do the same thing with Income Riders as well.

‌But the bottom line with all of this, with inflation, if you look really hard and you look hard enough and you dig and you do the analysis and you dig in and you try to find that annuity that'll address for inflation, you'll never find it, but someone will sell it to you. I want to say that again. You'll never find it because it doesn't exist, but someone will sell it to you. So, be very careful. People will tell you, agents, advisors will tell you what you want to hear when it comes to inflation. But I want you to be rational. I want you to understand inflation is cyclical. If you have a lot of money, don't obsess over it. Turn off CNBC. Turn off Fox Business. And yes, I've been on both and love both. And please have me on again. But I tell the truth out here. They are trying to get clicks. They're trying to get audiences.

‌Inflation Is an Event

‌Inflation, if you have money, it's an event. It's like having the financial flu for a little bit. You can afford it. Yes, it does hurt. Yes, we are paying more for things. But you can use annuities for inflation to address inflation. And in my opinion, the way to do that is to have contractually guaranteed lifetime income starting at future dates. Now, you can visit my site The Annuity Man, and we have the best calculators on the planet. You can run lump sum, quotes for DIAs, SPIAs, QLACs, Income Riders or reverse engineer the quotes, solving for a monthly income amount, and you can run them for future dates, single life, joint life, et cetera. I would encourage you to schedule a call with us. There's a scant chance you get Stan The Annuity Man. Still, you're going to get somebody really smart, that's an employee of mine, that's been trained on all the Stanisms and the contractually guaranteed nature of our strategies, and we will walk you through the good, the bad, the limitations and the benefits, and put together a customized strategy for you to meet your goals.

‌And that's it. How do annuities solve for inflation? The answer is contractually. That's the way. My name is Stan The Annuity Man. I'll see you on the next Stan The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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