June 25, 2013 by Randy Timm
More than likely, your clients have relied on cost-of-living adjustments to their salaries to help offset the effects of inflation. But, have they accounted for cost-of-living adjustments in their retirement plans?
An inflation rate, as little as 3%, can have a significant impact on your client’s retirement savings. Assuming this 3% inflation rate, a $10,000 level income today would only equate to the purchase power of $7,441 in 10 years.
This example is not far from realistic. According to InflationData.com, the average inflation rate between 1913 and 2013 was 3.22%.1
To help your clients address inflation in their retirement plans, Aviva USA released the TargetBenefitSM with optional TargetPaySM and TargetPaySM Plus income riders. Both riders offer inflation-adjusted income.
Here’s how it works.
Claire, 50, has been working with her financial professional, Jane, to create a retirement strategy. Throughout her career, she has placed money in a savings account to help with retirement.
During an appointment, Claire tells Jane about her savings account. She also expresses concern that future inflation may affect the purchasing power of her savings account. After discussing possible options, Claire decides to purchase the TargetBenefit 15SM fixed indexed annuity. She also elects to add the TargetPaySM Income Benefit Rider to the annuity for an additional cost.
At age 65, Claire turns on income under the terms of the rider and elects the inflation-adjusted income benefit option. Her first annual income payment is $11,144. By choosing inflation-adjusted income, Claire’s future income payments have the potential to increase for up to 30 years based on Consumer Price Index movements.
In the unlikely event that inflation is negative or 0% for the next 30 years, Claire’s would receive guaranteed lifetime income payments of $11,144 each year.
To learn how you can offer TargetBenefitSM fixed indexed annuities to your clients, call Sales Support at 800.362.1097.
1McMahon, T. (2012, November 05). Average annual inflation rates by decade. Retrieved from http://inflationdata.com/Inflation/Inflation/DecadeInflation.asp
The above example is for hypothetical purposes only. The use of alternative assumptions could produce significantly different results.
Annuities are not FDIC insured; guarantees provided by annuities are subject to the financial strength of the issuing insurance company.TargetBenefit 10 Annuity [TBS10 (09/12)], TargetBenefit 10 Select [TBS10 (09/12) NB], TargetPay Income Benefit Rider [TBSIRF (09/12)], TargetPay Plus Income Benefit Rider [TBSIRI (09/12)] or state variations are issued by Aviva Life and Annuity Company, West Des Moines, IA. Product features, limitations and availability vary by state; see the Certificate of Disclosure for details. See the Certificate of Disclosure for a more detailed explanation, including definitions for the terms that are capitalized in this brochure. If you take a withdrawal of any type prior to starting Lifetime Income Benefit payments, your benefits will be reduced, and an updated statement will be sent to you. 19581 172263.