Inflation Risk

Understanding Inflation Risk and the Role of Fixed Indexed Annuities in Mitigating This Risk

Inflation risk is the potential for the purchasing power of money to decrease over time due to rising prices of goods and services. As the cost of living increases, retirement savings may not stretch as far as anticipated, posing a significant challenge for retirees seeking to maintain their desired lifestyle. 

The Impact of Inflation on Retirement Savings

To illustrate the impact of inflation, consider the following example: If an item costs $100 today and the annual inflation rate is 3%, the same item would cost $103 after one year, $106.09 after two years, and $134.39 after 10 years. Over a 20-year retirement, the cumulative impact of a 3% annual inflation rate would result in an 81% increase in the cost of living. 

This erosion of purchasing power can significantly impact retirement plans as the real value of savings diminishes over time. According to a 2020 study by the Employee Benefit Research Institute, a retired couple with median drug expenses needs $270,000 to have a 90% chance of covering their medical expenses in retirement. However, when accounting for a 2% annual inflation rate, this figure jumps to $365,000, highlighting the importance of planning for inflation risk. 

Fixed Indexed Annuities (FIAs) as a Solution

FIAs offer a unique combination of features that can help mitigate inflation risk in retirement: 

  1. Growth Potential: FIAs provide the opportunity for growth based on the performance of selected indices, such as the S&P 500 or Nasdaq-100. This growth potential can help retirement savings keep pace with inflation over time. 
  1. Principal Protection: FIAs safeguard the initial investment against market downturns, ensuring that the contract value does not decrease due to market volatility. This protection is crucial for preserving the purchasing power of retirement savings. 
  1. Guaranteed Lifetime Income: Many FIAs offer the option to convert the contract value into a guaranteed lifetime income stream. By providing a reliable source of income that can last throughout retirement, FIAs can help retirees maintain their desired lifestyle even as the cost of living increases. 
  1. Inflation-Adjusted Income Options: Some FIAs offer income riders with built-in inflation adjustments, which can help ensure that the purchasing power of retirement income keeps pace with rising prices. 

Oceanview's Harbourview Fixed Indexed Annuity

The Harbourview FIA, offered by Oceanview Life and Annuity Company, provides several features that can help address inflation risk: 

  • Potential for Growth Linked to Market Indices: The Harbourview FIA offers multiple index crediting strategies tied to well-known market indices like the S&P 500, Nasdaq-100, and Russell 2000. If these indices perform well, your annuity value can grow, potentially outpacing inflation. 
  • Protection from Market Downturns: While the Harbourview FIA allows you to participate in potential market gains, your principal is protected from market losses. This means even if the market experiences a downturn, your annuity value won’t decrease, safeguarding your retirement savings from the negative effects of inflation during those periods. 

Conclusion

Inflation risk poses a significant threat to the purchasing power of retirement savings over time. Fixed Indexed Annuities, such as Oceanview’s Harbourview FIA, offer a combination of growth potential and principal protection that can help mitigate this risk. By incorporating FIAs into their clients’ retirement strategies, financial professionals can help retirees maintain their desired lifestyle in the face of rising costs. 

Why Choose Oceanview? 

  • Strength: Oceanview has an “A” Excellent rating from A.M. Best, reflecting our stability and reliability. 
  • Transparency: We believe in clear, straightforward communication. Our products are easy to understand, helping you make informed decisions about your financial future. 
  • Competitive Rates: Our special introductory rates on select crediting strategies provide an added incentive to start your retirement journey with us. 
  • Supportive: Our dedicated team is committed to providing exceptional customer service and support throughout your retirement journey. 

Take the Next Step Toward a Secure Retirement

Don’t let retirement risks jeopardize your financial future. Schedule a consultation with your financial professional today to learn how Oceanview’s Fixed Indexed Annuities can help you build a retirement plan that weathers any storm. With competitive rates, excellent financial strength, and a commitment to your success, Oceanview is your partner in retirement security. 

To learn more or to schedule a meeting with an Oceanview Life representative, please contact:  

Oceanview Life and Annuity Company
(833) 656-7455

Disclosures:
This material is a general description intended for general public, educational use. Oceanview Life and Annuity Company is providing investment advice for any individual or in any individual situation, and therefore nothing in this should be read as investment advice. Please reach out to your financial professional if you have any questions. May
not be available in all states. Policy form numbers and provisions may vary. Rates are guaranteed depending on the guarantee period selected at policy issue. Within 30 days prior to the end of the Initial Interest Guarantee Period, we will send our contract holder a notification informing them the date the Guarantee Period is ending and provide the renewal rate and Surrender Charges in effect for the subsequent Guarantee Period. Excess withdrawals are subject to a Surrender Charge. The IRS may impose a penalty
for withdrawals prior to age 59 1/2. All annuity features, risks, limitations, and costs should be considered prior to purchasing an annuity within a tax-qualified retirement plan. Annuities issued by Oceanview Life and Annuity Company, 1819 Wazee St, 2nd Floor, Denver, CO 80202. www.oceanviewlife.com.

Oceanview Life and Annuity Company nor any of its representatives may provide tax or legal advice. While care was taken in compiling this information, the Company reserves the right to correct any typographical errors that may exist. In California, doing business as Oceanview Life and Annuity Insurance Company.

HARBOURVIEW ANNUITIES ARE PRODUCTS OF THE INSURANCE INDUSTRY AND NOT GUARANTEED BY ANY BANK NOR INSURED BY FDIC OR NCUA/NCUSIF. MAY LOSE VALUE. NO BANK/CREDIT UNION GUARANTEE. NOT A DEPOSIT. NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY. MAY ONLY BE OFFERED BY A LICENSED INSURANCE AGENT. GUARANTEES ARE SUBJECT TO THE CLAIM PAYING ABILITY OF THE ISSUING INSURANCE COMPANY.