Income Annuity Pricing: COLA Increases And Longevity Insurance

Income Annuity Pricing: COLA Increases And Longevity Insurance

Pricing for an Income Annuity with Cost-of-Living Increases

Another income annuity option we can price is an annuity offering a cost-of-living adjustment (COLA). Using a COLA requires a minor adjustment to what was shown in Exhibit 4.1. If the COLA is 2 percent, then rather than having a fixed income of $10,000 each year, the annuity instead provides an income which grows by 2 percent each year.…

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