Sinking your savings into an immediate annuity too early in life – for example, well before retirement – could be very dangerous for consumers, says Craig Lemoine, a professor of financial planning at the American College of Financial Services in Bryn Mawr, Pa.
That’s because the fixed payments from immediate annuities will lose value as consumer prices climb.
“Today, $2,000 a month seems reasonable” as a guaranteed income, Lemoine says, “but 40 years from now that’s going to be three cups of coffee and a doughnut.”
Lemoine was interviewed by Matthias Rieker, “A Monthly Check for Life? Don’t Forget Inflation,” which appeared in The Wall Street Journal, December 5, 2014.