No. of Recommendations: 2
4% inflation

Do you work for the insurance industry? (Using an expected 4% annual inflation rate is an old insurance sales trick, as is multiplying all investment gains by the highest marginal tax rate in an attempt to show how tax efficient their annuity products are)

You can change the future value substantially by changing the assumed average annual inflation rate minimally. In this example, 2004 through 2018, the average CPI has been 2.09%. This would provide a cumulative future value through 2018 of $210.275, or $26,099 less than the fixed 15 year annuity.

I don't know if they're still out there, but several years ago some insurance company was offering an 'inflation protected' life annuity that provided a much better monthly payment than did all other inflation adjusted life annuities, but in reading the fine print, they calculated the inflation rate using an 'adjusted' CPI for retirees which is lower than the CPI-U, they put an annual cap on the inflation rate and a lifetime maximum cumulative CPI.

BruceM
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