Lynn O'Shaughnessy

Inflation has spooked Wall Street. Fearful of inflation, the stock market has lost its traction and is behaving like a kid careening down a slip and slide. These inflation worries have prompted plenty of 60-somethings to wonder if a box of Raisin Bran will someday cost them $49.99.

Not everyone, however, is perspiring at the prospects of price spikes. The inflation willies have opened up a new marketing opportunity for investment firms and insurers that would like retirees to embrace a type of annuity that until now has been relegated to corporate sub-basements. Insurers are eager to introduce retirees to an immediate annuity that offers peace-of-mind inflation protection.

These inflation-protected annuities aren't new. In fact, they've been around, but widely ignored, for at least two decades. For many years, the percentage of customers who bought the immediate annuities with an inflation rider never inched up higher than 2 or 3 percent. Their unpopularity is actually a good thing because these inflation-fighting annuities deserve to remain in the cellar. While insurers will tell you that they combat inflation, what they may really do is fight your ability to pay your bills in retirement.

Before you can understand why these inflation-adjusted annuities should be avoided, you need to appreciate why purchasing a plain vanilla immediate annuity could make you feel like a member of Mensa. Immediate annuities can be a godsend for anybody with iffy financial skills. Not sure if you fit into this category? Ask yourself this question: Can you round up the money in your 401(k), your Individual Retirement Accounts and any other cash stashed away for retirement and invest it in a way that will provide a reliable source of income for 30 or more years - without ever running dry? If mastering Mandarin would be an easier task, you might want to make some inquiries.

Fortunately for novice investors, immediate annuities are refreshingly straightforward. You sink money into one and, in return, you start receiving monthly income for the rest of your life. Even if the money you originally invest runs out, the insurance company is obligated to keep mailing you checks.

One of these annuities can be especially helpful for those who retire without a pension and will only have Social Security checks for dependable income. If Social Security will cover only half your monthly expenditures, for example, you might want to consider buying an immediate annuity that will take care of the rest.

Lynn O'Shaughnessy

Lynn O'Shaughnessy is the author of Retirement Bible.

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