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Kiplinger: What Retirees Need to Know About 3 High-Cost Financial Products

Annuities

Inflation could erode your payouts. Henry "Bud" Hebeler, a former Boeing executive and author of the book Getting Started in a Financially Secure Retirement, retired from Boeing in 1989 with a pension that pays out the same amount every month. During the first ten years of Hebeler's retirement, his monthly payments lost 30% of their purchasing power, and those were years of relatively low inflation.

If you expect to take payments for more than ten years, Hebeler says, you should buy an annuity that's adjusted for inflation. Your initial payouts will be lower, but you'll protect yourself against a surge in prices. Some immediate annuities provide an annual increase in your payments of between 1% and 5%; others tie payments to annual increases in the consumer price index. In exchange for this protection, your initial payments will be 25% to 30% lower than you'd get from an annuity that doesn't adjust for inflation.

(iStock)

More From Kiplinger:
QUIZ: Are Annuities Right for You?
10 Least Tax-Friendly States for Retirees
10 Things You Must Know About Social Security



The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.

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