By Anthony Webb

Insight Overview

IDEAS IN THIS INSIGHT YOU CAN PUT INTO ACTION

The studies reveal considerable dispersion in money’s worth (i.e.,the percent of premiums that annuity manufacturers return to purchasers as income), both across product types and between manufacturers. Relative to annuities that pay a level dollar benefit, inflation-indexed and escalating annuities have a lower money’s worth. But, annuity purchasers should not base their decision on money’s worth alone. Purchasers and their financial advisors also should consider the benefits offered. To illustrate, inflation-indexed annuities give households the certainty of being able to maintain their standard of living however long they survive, a certainty that is both valuable and prohibitively expensive to replicate by investing in financial assets.