Actually, TIPS (Treasury Inflation-Protected Securities) and I-Bonds (Inflation Indexed) are possible alternatives to annuities so consider them also.
And, believe it or not, since stocks are based, in part, on earnings they also are useful to keep your portfolio in pace with inflation. Stocks and bonds though will go down in value with high interest rates. So, with moderate inflation where interest rates stay reasonably (historically) low they do keep pace. Stocks historically average about 5-6% higher than inflation, bonds average 2-3% above inflation.
Annuities do also. Splitting annuities is an alternative:
(1) Buy a single premium fixed, immediate annuity to provide you the monthly extra income you desire ($50,000 in 2009 will get you about $250-$300 per month)
(2) Buy a deferred annuity for a fixed period - for example, 10 years - that grows at a minimum rate based on your expectations of inflation (a fixed or variable annuity could do the trick, though I would consider allowing your stock/bond portion of the portfolio cover the next 10 years, or even laddered CD's possibly).
(3) In 10 years, then, purchase another annuity to augment the first one and cover the additional amount needed for inflation (if inflation were at 3% you would need 50% more in about 10 years, or in this example, another $125-$150 per month).
The combination are endless.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.