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Will Rising Inflation Eat Up My Annuity Payments?

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Will rising inflation eat up my annuity payments?

The honest answer is… it can… If you buy a bare-bones annuity with a flat payout and that’s your only retirement income, inflation will slowly reduce your purchasing power over time.

But here’s the good news:

There are very effective ways to structure annuities so you can fight inflation, protect your income, and still sleep at night.

Let’s walk through exactly how to do it.

Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)

Tip: See how much an annuity could pay you using our annuity calculator

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If you want to chat about purchasing an annuity and want unbiased advice and access to all top annuities, then I would encourage you to book a call with me!

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Why Inflation Is a Real Threat to Fixed Annuity Payments

Inflation doesn’t usually hit all at once.

It creeps in year after year.

If you start retirement at 65 earning $77,000 per year from an annuity, that might feel great. But at 75? That same $77,000 won’t buy nearly as much.

The income is guaranteed.

The purchasing power is not.

That’s where strategy matters.

💡 Pro Tip: Inflation protection isn’t about avoiding annuities. It’s about structuring them correctly.

👉 Want help designing an inflation-resistant annuity strategy? Schedule a free consultation.

Option 1: Stack Annuity Contracts Over Time

This is one of the most popular strategies my clients use.

Instead of putting all your money into one contract and turning income on immediately, you:

  1. Create a strong income base today.
  2. Keep some money growing elsewhere.
  3. Buy additional annuity contracts later.

For example:

  • You invest $800,000 at age 65.
  • You generate roughly $77,000 per year in lifetime income.
  • Then you purchase additional smaller contracts at 73 and 85.

Each new contract adds more income.

It’s like giving yourself a raise every few years.

Over time, your total guaranteed income increases, which helps offset inflation.

This strategy gives you:

  • Market growth potential
  • Flexibility
  • Increasing income over time
  • Lifetime guarantees

👉 Want to see what stacking could look like for you? Schedule a call here.

Option 2: Use an Increasing Income Rider (Indexed Annuity Strategy)

Another approach is choosing an annuity with an increasing income rider.

These are typically found inside Fixed Indexed Annuities (FIAs). Companies like Nationwide and Allianz offer strong options in this category.

Here’s how it works:

  • You start with a lower initial income.
  • Your income increases over time based on index performance.
  • Even if your account value hits zero, income continues for life.

The tradeoff?

You start lower.

For example:

  • A level payout might start at $48,000.
  • An increasing payout might start at $40,000.
  • It may take 6-8 years to surpass the level option.

Some retirees love the automatic increases.

Others prefer higher income today and plan to stack later.

There’s no universal “best.” It depends on your goals.

💡 Pro Tip: Most retirees choose higher level income and then add new contracts later instead of starting lower.

👉 Curious which approach fits your retirement better? Schedule a call with John Stevenson.

Option 3: SPIA or DIA with a Guaranteed COLA

You can also use:

These allow you to add a guaranteed Cost of Living Adjustment (COLA) — often 2% to 5% annually.

The benefit:

  • Guaranteed annual increase.
  • No market dependency.

The downside:

  • Much lower starting income.
  • Often requires more upfront premium to match other payout options.

Example:

  • Without COLA: ~$41,000 per year.
  • With 3% COLA: Lower starting income, but guaranteed annual increases.

The question becomes:

Do you want higher income now… or guaranteed gradual increases?

Sometimes the better strategy is:

  • Keep some money growing in the market.
  • Strip off gains every 5–10 years.
  • Buy additional income contracts.

That often produces stronger long-term results with more flexibility.

👉 Want help comparing SPIA, DIA, and Indexed strategies? Schedule a call here.

What’s the Best Way to Beat Inflation with Annuities?

There are really only two proven approaches:

1️⃣ Start High and Stack Later

  • Buy a strong level income base.
  • Keep other assets growing.
  • Add contracts over time.

2️⃣ Start Lower and Increase Automatically

  • Choose an increasing income rider.
  • Or choose guaranteed COLA.
  • Accept lower starting income.

Most of my clients prefer stacking because it gives them:

  • More control
  • More flexibility
  • More upside potential

But every retirement is different.

Should You Avoid Annuities Because of Inflation?

Absolutely not.

Inflation is a planning issue — not an annuity flaw.

Annuities solve:

  • Longevity risk
  • Sequence of returns risk
  • Income certainty

Inflation is solved by:

  • Smart structuring
  • Asset allocation
  • Timing of contracts

When designed properly, annuities can provide both stability and increasing income over time.

Conclusions

Rising inflation can eat away at poorly structured annuity income.

But when you:

  • Stack contracts
  • Use increasing riders
  • Combine growth assets with guaranteed income

You can protect purchasing power and maintain lifetime security.

You don’t have to guess.

You don’t have to DIY it.

Need help with finding the best annuity for your retirement?

Click here to schedule a call with me.

On the call, I can help you:

  • Determine what type of annuity is best for you
  • Find the highest paying annuities for your unique situation
  • Answer any other questions you may have

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