Budget Smarter: Combat Inflation With Annuities
- fabilc109
- 2 days ago
- 3 min read
Life gets expensive fast and lately, it’s happening even faster. From grocery bills to gas, prices keep shifting, and so do our routines. Creating a solid, flexible budget has never been more important, especially if you're thinking long-term about retirement.
Financial experts agree on one thing: a budget that works in 2025 needs to protect your future, not just your monthly bills. That’s where a few lesser known tools like inflation protected annuities come into play.
What’s Eating Your Budget?
It’s no surprise that inflation is the main culprit behind shrinking savings. According to the U.S. Bureau of Labor Statistics, prices have risen nearly 20% over the past three years. If your income hasn’t kept up, your money buys less.
But here’s a stat that might be more eye-opening: a recent study by the Insured Retirement Institute found that only 26% of Americans feel confident they’ll have enough retirement income to last through their lifetime. And most are not accounting for inflation when they budget for the future.
So, What Can You Do Right Now?
Let’s skip the generic advice (like “cut out lattes”) and get to practical things you can actually apply.
1. Make Your Budget Dynamic
A good budget should move with your life not freeze it. That means setting up flexible categories that shift when expenses change. One way to start is by using a percentage model (like 50/30/20) but updating it quarterly, not just once a year.
Need help? Download the free income planning worksheet from Penny Lane Financial. It’s designed to help you map out income sources and expenses, including how they may change over time.
2. Consider Inflation-Protected Annuities
If you're budgeting for long-term stability, inflation-adjusted annuities can offer predictable income that increases over time. These annuities often come with inflation riders, which means the payments adjust to keep up with rising costs. They’re especially useful if you're thinking about how to stretch your money through 20–30 years of retirement.
They're not a fit for every situation, but they do offer something valuable: a buffer against unpredictable inflation. People often ask, “How much retirement should I have at 50?” or “How much retirement income do I need?” A better question might be, “How much will I need in tomorrow’s dollars?” That’s where these annuities can help provide clarity.
3. Don’t Wait to Plan Income
Most people focus on building savings—but figuring out how to use that money is just as important. Understanding your monthly income needs in retirement, and how to cover them without stress, should be part of your current budget planning.
Think about your must-haves: housing, food, healthcare. Then look at how steady your income sources will be. Social Security? Pension? Annuity? Building a plan around stable income streams helps protect against economic swings later on.
And if you’re wondering things like “How much retirement should I have at 40?” or “How much retirement income do I need?”, those answers become clearer when you lay everything out on paper. Again, this worksheet is a good place to begin.
4. Separate Fixed vs. Flexible Expenses
Not all costs are created equal. Your mortgage or rent likely won’t change much month to month. But groceries, utilities, or travel? They fluctuate. Breaking these apart helps you know where you can adjust when inflation hits.
Fixed costs should ideally be covered by guaranteed income sources—like annuities for inflation protection. That way, even if prices jump, the essentials stay covered.
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