An annuity contract involves paying a large(ish) sum of money now in order to receive regular income at some point in the future. You are basically buying monthly checks in retirement by handing over a large sack of cash today.
The terms of the deal are usually spelled out in the annuity contract. One problem: you won't start collecting until years (or even decades) down the road. Things might be very different by then. Self-driving, flying cars. Robots to clean your house and cook your food and provide...other services. Also, inflation might be out of control. Who knows, right?
An inflation-protected annuity takes this risk into account (inflation risk, that is...they don't give you any protection against robots). The contract ensures that the payments will keep up with inflation. It guarantees a certain buying power in retirement, rather than just guaranteeing a certain dollar amount.
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Finance: What Is a Real Return?67 Views
finance- a la shmoop. what is a real return? like is there a fake return? you
know like the news? well kinda .real return refers to an [man frowns talking to camera]
investment return mapped against inflation. so let's say you invest in a
bond that pays five percent a year for ten years and then pays you back your
principal .boring but nice- you know like a good doctor visit. your nominal return
over that period was 5% but since inflation was 3% a year during that
period on average your real return was only 2% a year- meaning that the
performance of your investment only eked out a 2% net gain against the price of [equation]
milk gas and you know knocked off iPhones. so don't be a chump who thinks
that they're making more money than they really are, and you know keep on keeping
it real. [man sitting in chair, talks to camera]
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