Inflation-Protected Annuity - IPA

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.