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Choosing The Ideal Inflation Protecting Annuities For Future Care

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by: mujanejack
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Date: Wed, 27 Jul 2011 Time: 2:43 AM

There are two major issues in any retirement financial plan – the first is the lack of protection from inflation and the second is the danger of outliving your assets. However, inflation-protected annuities or IPAs are designed to solve these issues. Many people kept talking to me about Swiss annuities. I did some research on them – they seem to make a lot of sense. Inflation Protected Annuities (IPAs) work in the same manner as regular annuities; however, in this case, payments are indexed at the rate of inflation. People tend to underestimate their own life expectancy. They compare themselves with present-day retirees. The fact, however, is that with development in quality healthcare, life expectancy has been improving. Inflation is a silent and overlooked threat that is detrimental to your retirement portfolio. As an investor, you are always looking forward to supposed returns and not real returns. It is the real returns that are significant to the investment portfolio.

 IPAs are ideally suited to the requirements of individuals who are close to their retirement, and you would consider that they must be quite popular among retiring investors. However, the fact is that they are not as popular as you may think, because of lower starting payments and relative pricing. Due to low demand, the relative pricing is weak as compared to regular annuities. The reason for initial lower payments is because the value of the invested money increases along with inflation. With inflation, it gets compounded annually and the difference between starting payments and later payments can be quite wide.

In a global economy where Inflation Protected Annuities are not gaining popularity for the wrong reasons, Swiss Annuities are your ideal choice in increasing your purchasing power against the erosion continued by inflation. Swiss Annuities are designed with additional security, such as inflation protection, in order to fulfill the income goals of your retirement age. When planning your retirement, the retirement plans sponsored by your employer play a crucial role; however, the contribution to such plans is restricted.

Realistically, these plans would not be able to add a sufficient amount to your income after retirement. This is more of a problem if you started saving for your retirement late or if there were some interruptions in the contribution, because of certain responsibilities or job changes. On the other hand, an immediate annuity helps to protect you from outliving your assets. You should invest in defined-benefit pension plans that offer income after retirement for the rest of your life. Immediate annuities are the only other structure that offers continuous income indefinitely.

You may consider buying Long Term Care Inflation policies that enhance the benefit amount to compensate inflation and the enhanced cost of care. Inflation protection, when included in policies, also increases the premium. At the same time, it helps you save for future rates. Buying inflation protection in Long Term Care insurance is not necessary, but with medical expenses increasing every year, it is very important to include the option of inflation protection. If it is not purchased along with the insurance policy, only a marginal part of the future care expenses is paid by the insurance firm.

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