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Investing Blog Roundup: Lifetime Annuities — With or Without Inflation Adjustments?

On a number of occasions we’ve discussed the concept that boring/simple lifetime annuities can be a very useful tool for those who are concerned about longevity risk (i.e., outliving their money). We’ve also discussed the fact that annuities with a fixed COLA not only fail to protect against inflation, they do worse in inflationary environments than regular (no-COLA) annuities do.

David Blanchette recently looked at annuities with actual inflation adjustments and came to the conclusion that, at least right now (as offered by the single insurance company selling such annuities), they are not a good deal.

Zvi Bodie and Dirk Cotton provide a counterpoint this week, arguing that nominal annuities (those without inflation adjustments) are “a speculative bet on future inflation rates, a bet that is imprudent for retirees and, indeed, one which many would make unwittingly.”

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