Can Your Annuity Income Increase With Inflation? Here's the Truth

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Welcome to Shooting Straight with Stan.

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I'm your host, Stan the Annuity Man,

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America's annuity agent, licensed in all

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50 states. Today's topic is a hot one.

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It got your attention and you want to

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hope and believe it's true. And the

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topic is annuity increases

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with your income for inflation. So,

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annuity income increases for inflation.

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Does that exist, Stan? and the annuity

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ma'am. This local guy keeps telling me

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that his annuity will increase with

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inflation that it just tracks inflation.

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Uh no such product exists. Now let's

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talk about lifetime income for a second.

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Lifetime income is primarily based and

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priced on your life expectancy or if

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it's joint life expecties

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at the time you take the payment.

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Interest rates play a minor role.

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Interest rates play a minor role in the

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pricing. is is life expectancy. But when

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you attach a potential or contractual

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increase for inflation, the annuity

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company doesn't give that away. They

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just severely lower the initial income

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amount as compared to the exact annuity

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without that increase. Annuity companies

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have the big buildings for a reason.

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They have the logos on the plane for the

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reason they have they're sponsoring

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sports stadiums for a reason and sports

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arenas for a reason. They know when

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we're going to die. They don't give

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things away. And anyone that says that

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they have this annuity that increases

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with inflation, you're the sucker at the

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table. As they say in Vegas, you're the

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rude. If you don't know who that is,

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it's you. They don't give it away. It's

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math. So similar similar correlation.

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This is one you'll understand. Social

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Security, is it higher at age 70 payment

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or is it higher at age 65? It's higher

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at age 70. Why is because

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you're older. So, if you say, "Well,

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what if I took payments at 65 instead of

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70 or what if I waited till 70? Does it

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make more sense than turn it on to 65?"

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It's math. You have to factor in the 60

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payments that you missed while you're

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waiting to age 70. Same thing with cost

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of living adjustment increases or index

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annuity increases on your on the money.

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You have to factor in how long is it

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going to take for you to make up for

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that lowering of that initial amount.

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Now, there's two ways to do cost of

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living increases uh in inflation

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increases. Currently, at the time of

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this taping with annuities, a long time

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ago, not that long, but years ago, um

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some immediate annuities would have

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CPIU, consumer price index for urban

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consumers, one of their little indices,

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and it would increase by that, etc. But

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again, they lowered the payment. But now

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with with the median annuities, deferred

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income annuities, etc., you can attach

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what's called a COLA, cost of living

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adjustment. That's what COLA stands for.

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And you could choose your percentage

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amount that it's going to increase by.

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Sounds great, huh? Yeah, you could do

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that and they'll they'll give you that

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increase for the rest of your life as

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long as you're breathing. But they are

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going to factor in your life expecting.

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They're going to ratchet down severely

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that initial payment to make up for that

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increase. Typ typically it's a six to

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nyear break even point. So the question

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is, does it make sense for you to do

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that?

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I don't know. It's math. You have to

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figure it out. Or do you do a portion in

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the cost of living adjustment and the

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rest in just a static payment because

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you already own the best inflation

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annuity on the planet and that's social

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security, right? High-5. Yes. Now, on

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the index side or variable side or

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whatever being being pitched to you and

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they're saying, well, on the

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accumulation side, if that increases

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that increases the in the income writer

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amount, well, that sounds great in

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theory, but the fact is once again the

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annuity companies don't give that away.

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they just severely and drastically lower

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that initial payment as a compared to

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say an income writer that doesn't have

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that increase period.

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I think the bottom line is if it sounds

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too good to be true, it is every single

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time. Annuities

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for lifetime income dia spas das QAX

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income writers are not set up to track

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inflation are not set up to address

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inflation regardless of what you're told

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or heard at the bad chicken dinner

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expensive steak dinner seminar. It just

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doesn't exist. It doesn't work in its

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current form. Maybe in the future some

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genius will figure it out. But right

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now, annuity companies don't give

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anything away. There's no philanthropist

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annuity company that wake up wakes up in

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the morning go, you know what? I'm going

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to price this product against us and

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actually have it track inflation for the

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consumer. No, they don't do that. They

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just lower the payment. It's just math

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to them. It's math to the annuity

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company. Should be math to you. If it

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sounds too good to be true, it is every

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single time. So, you're saying, "Okay,

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wait a minute, Stan. You've popped the

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inflation balloon for annuities. Yes, I

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have. And I've done it factually and

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brutal, but in a nice way. So, what's

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your solution, Stan? You talk all this

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stuff and now, okay, then then what do

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you do? Then what do you do for

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inflation? Okay, here's what you do. You

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have an income floor in place and that

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is your social security, best inflation

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on the planet. You already own an

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annuity. hypocrites, anyone, pensions,

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if you're getting that, dividend stocks,

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whatever is creating that income floor

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that's coming in every month, rental

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properties, etc. Find out what you know

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what's that income floor need. What is

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it? What's the special? Let's just say

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it's $5,000 a month that you're getting

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now. And you say, Stanley, that's not my

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name, but you could say it because I'll

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let you. Stanley, I need an additional

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$1,000 to get us to $6,000 a month,

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which would make us happy and my wife

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would be happy, my spouse would be

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happy, and we would be happy, and we can

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go see the gr kids and grandkids and

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give the grandkids back when we're done

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with it. Then what we do is we run a

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reverse engineer quote solving for that

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$1,000 a month when you want that income

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to start. And that's how we do

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inflation. That's the smart way to do

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inflation. That's what really smart

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people do to inflation. And they do not

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buy a they do not buy a prepackaged

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product out of the damn blue, excuse my

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French, and say, "Oh, it's going to

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track inflation. My agent says it's

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going to track inflation." No, it's not.

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Okay. The way to do inflation is at the

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time you need that gap filled. Let's do

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a reverse engineer quote to solve for

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that specific gap at that specific time.

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Buying an immediate annuity and we can

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structure it so it's going to pay as

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long as you're breathing. And when your

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leg hits the mountain, 100% of any

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unused money does not go to the annuity

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company. It goes to your beneficiaries.

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So money doesn't go poof. It goes to

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your beneficiaries. We could structure

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it lump sum to them or in payment form.

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But that's inflation when it comes to

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annuity income. Don't buy the sales

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pitch. Don't buy the dream. Don't buy

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all that nonsense too good to be true

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stuff out there. These are contracts.

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Annuities are contracts. They're

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transfer risk products. And it's pure

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math, straight up. And you have to shop

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all carriers for the highest contractual

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guarantee. Period. And that and those

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quotes change like a gallon of milk.

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That's the reason I represent pretty

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much every single company. Why? Good

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question. Is because some companies

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reach capacity, they lower their

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guarantees not to not to attract you.

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And some need to attract you. So they

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raise their guarantees. That's the

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reason that buying annuity is like

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buying a plane ticket. So when it comes

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to inflation, two things I'm going to

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close with this. Number one, I've told

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you how to solve for it. I have. I've

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told you how to solve for it, which is

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reverse engineer the quote at the time

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you need that gap filled for your income

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floor. But here's the second one. I need

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you to listen very closely and lean in.

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If you have a lot of money, stop

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bitching about inflation. Okay? If you

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have a lot of money, realize there's six

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out of 10 people in this country have

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$400 in their checking account.

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Okay? Don't be arrogant about it. If you

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have worked hard, you still have those

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scars of scarcity and you still kind of

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act poor, but you're not poor. I need

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you to to get real with yourself and and

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realize you can afford the eggs and you

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can afford the gas and this is cyclical

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and you're going to make it. And don't

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obsess about inflation. But the way to

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solve it is contractually solve reverse

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engineer for it when needed. And that,

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my friends, is shooting it straight with

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Stan with one cuss word of which I

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totally apologize for, but you know, it

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kind of flowed. It wasn't offensive, so

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it kind of flooded. It was a dword. My

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wife is going to get on me about that. I

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understand. But that's Stan the annuity

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man. I'm riffing, baby. I'm telling you

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the truth. I'm shooting it straight

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because this is called shooting it

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straight with Stan. I'll see you next

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time.