Inflation & Annuities: Insights from New Jackson Research
Inflation is a big worry for many Americans, especially since it erodes their buying power and threatens their overall financial security.

A new report from Jackson highlights the growing anxiety among consumers about inflation and underscores the vital role annuities play in hedging against this risk. The better we understand these insights, the better we can help our clients protect their retirement savings. Here’s what you need to know.

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1. Consumers Are Pessimistic about Inflation

Consumers are overwhelmingly pessimistic about their financial security, according to the report. Over half of the respondents feel more pessimistic about their financial future than they did two years ago, with nearly 30% feeling much more pessimistic. This feeling is especially prevalent among women living alone or those who act as the primary financial decision-maker in their household.

We have to understand just how anxious our clients are about this issue. If we have calls and meetings with them and talk about their financial future without mentioning it, whatever we say is likely to fall flat. We have to address it because we know they’re thinking about it – and giving them strategies to cope is the best way to provide peace of mind.

2. Inflation’s Impact on Near-Retirees

According to the survey, prolonged inflation hits pre-retirees harder than current retirees. Many pre-retirees are already making significant lifestyle adjustments and saving less money since inflation began ramping up in 2021.

There’s also an increasing trend of people delaying retirement due to inflation, and with good reason. Even moderate inflation can significantly reduce the value of their savings over time. For example, an inflation rate of 3% per year can erode the purchasing power of your client's savings by nearly 50% over a 20-year period. If your clients plan to retire in their 60s, it’s likely they’ll live into their 80s – which means they need a plan in place to account for a potential 50% drop in spending power when they need it most.

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Cover of the Jackson report titled

3. Misconceptions about Inflation Rates

Jackson’s survey also highlights a significant difference in the way advisors and consumers view current and future inflation rates. The overall inflation rate in the U.S. was 3.4% as of April 2024, according to the U.S. Inflation Calculator. While lower than the peak of 2022, this rate is still a threat to your client’s savings, especially if they’re retired or living on a fixed income. However, that overall rate doesn’t tell the whole story. For example, housing rates experienced 5.5% inflation as of April 2024, and energy services rose 3.6%. (Bureau of Labor Statistics CPI data). These sector-specific increases can disproportionately affect your clients, depending on their location and living situation.

That being said, consumers overestimate how bad inflation is. According to Jackson’s survey, two-thirds of consumers overestimate current inflation rates and think they’ll only go up over time. This misconception is dangerous because it can lead to poor financial planning. A surprising 20% of consumers didn’t know what the current rate was. When you talk to clients, emphasize the importance of having a source for accurate information - preferably you!

4. Annuities Are a Hedge Against Inflation

The Jackson survey didn’t just ask clients what they felt about inflation – they also surveyed financial advisors. Over half of the advisors surveyed recommended fighting inflation with annuities, the only source of guaranteed lifetime income. Of advisors surveyed, 47% recommended annuities to protect against loss. In uncertain economic times, annuities create financial security and offer peace of mind. If your clients want stable, inflation-resistant options, you should be thinking about annuities.

Annuities are, in a word, booming. U.S. sales reached a record $385 billion in 2023, a 23% increase from 2022. The fourth quarter of 2023 set a new record, with annuity sales reaching $115.3 billion, a 29% increase from the same quarter in 2022. Within this period, fixed-rate deferred annuities hit $58.5 billion, marking their highest quarterly sales ever. (Source: You can thank high interest rates for that sales surge, as clients are eager to lock in guaranteed rates to help offset inflation. By doing nothing but leaving their money in an annuity, they have the opportunity to fight, offset, or even out-earn the current inflation rate. As for all the pessimism and fear we mentioned earlier, imagine being able to remove it from a client's financial landscape in one fell swoop.

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5. The Advantage of Working with Financial Professionals

Jackson’s survey also gives us a great marketing idea.

Less than 1/3 of the people surveyed worked with a financial advisor. But of those who do, 54% said they get suggestions and relevant guidance on how to deal with the current economic environment. People who work with a financial professional are better informed about inflation, better able to mitigate its impact, and less likely to make drastic lifestyle changes. You are valuable – and very much needed. We can play a critical role in helping our clients navigate periods of high inflation, providing financial security and peace of mind.

Inflation poses a significant threat to your client’s financial security, especially if they’re nearing retirement. Annuities are an effective tool to hedge against the damage inflation can do. It’s important that we talk about these solutions with our clients and emphasize the benefits of incorporating annuities into their retirement plan.