Retirement is Inevitable, is Annuity Plan on Your Mind?

Every investor is concerned about the risk factor when planning for retirement. As we near retirement then we often worry if savings are enough to support for the future, with all the family responsibilities over if this will be enough. As unexpected expenses increase and inflation further distorts your planning you may want to keep some fixed amount for regular future income to help, but if you don’t have a reliable source of income you can consider enrolling in an Annuity Plan.

Most of us are busy meeting our current financial needs and responsibilities from business running expenses, family education, and weddings that we have thought little about retirement savings. Early investment is always a good practice, however, if you are the one who plans on retiring early and also has financial security then in making this hurdle-free, Deferred Annuity may be an option.

Understanding what an Annuity Plan is?

An annuity plan is basically an insurance product. It is a legally binding agreement between the individual and life insurer. The investor pays the lump sum premium which is later invested by the insurance company, there by transferring the risk of your life long risk of fear of insufficient savings to the company.Basically, the goal of Annuities is to get a consistent income post retirement.

In times when you have financial turbulences, it provides a plan so that you are not short of savings resulting in debts intoeep up your current lifestyle. An annuity is customisable and it’s more beneficial if this is a long-term rather than a short-term plan.

There is no particular retirement age specified by the annuity plans, however, you can choose to opt for the plan as early as you plan. The plan can assure annuity to investors for the rest of their life but can also cover your spouse by choosing a joint-life annuity plan.

Whereas the interest rates keep fluctuating, the greatest advantage of an annuity is locking within the rates for a lifetime. Thus, you’ll resign with complete peace of mind together with your day-by-day needs taken care of by the annuity arrangement.

Typically how you’ll be able to purchase the finest annuity arrange for your future?

 

Choosing the Right Annuity Plan

This will depend upon the need and age of the individual when he wants to retire and when the individual wants the income to start coming in depending on his needs and circumstances.

The two most common types of annuities based on payout are :

Immediate Annuity:

As the name suggests, in this type of annuity plan the payment is made as soon as the initial investment has been made. In case you are nearing retirement and don’t have plans in advance, this is the option you can look at.

There are further classifications as such as fixed and variable depending upon the investment type. The customer then receives a fixed amount of sum for certain years it is called a fixed annuity where the annuity amount is certain.  In case you choose a guaranteed period annuity where the period is pre-decided then, even if the annuity holder is no more the payments are still made to the nominee for the remainder of the years.

Deferred Annuity:

In this case, the investment is made into a fund chosen by the annuity holder which grows for the specific period decided which can be anywhere from 10 years to 25 years. In case you have still some years of work life left then this option you may consider. Once the phase of Distribution starts then the annuity receives regular payments.

Choosing the Right Annuity Plan:

The annuity holder may be given a variety of options by the insurer to choose from. This can be single life or a joint life where you can cover your spouse.

As this is an insurance product and the company is protecting the annuity holder from the market and the risk of out livings your money.  The risk being transferred to the insurance company which charges certain fees it offsets the risk taken in form of Riders which are additional to customise your basic annuity contract and also Administrative fees.

There is the option of adding a beneficiary in case of death, the option of regular annuity payment and also getting back the purchase price in part or full.  Flexibility to add annuity payments annually. All this will come as per terms and conditions offered by the insurer company.

Alternatively, there are annuity calculators accessible online where you can key in your case and see the options to decide from based on numbers.

Research for information:

Now we know that there are many options to choose from for investors, the plan should meet your needs of regular money flow and also cover your spouse. Some of the key benefits of an annuity plan.

*assurance from a steady retirement income

*benefits for the policyholder’s spouse as well

*There is no maximum annuity payout cap.

*There are various annuity choices to meet your needs.

*Incentives for huge purchase prices, such as increased annuity rates.

*You have the freedom to advance your annuity payments.

Variety of Annuity Plan to Choose From:

In contrast to life insurance, several annuity alternatives operate in various ways and provide benefits throughout your lifetime.

• Lifetime Income
• Lifetime Income with Capital Refund
• Lifetime Income with Annual Increase
• Lifetime Income with Certain Period

Annuities do have their downside, it comes at a cost as fees. It will be beneficial if it suits your needs of a guaranteed minimum return for a lifelong and provides you peace of mind.

In exchange for certain guarantees and safety nets, such as guaranteed income for life, annuity holders will pay upfront fees and forfeit possible returns that could be achieved elsewhere. So it’s best to have a diversified portfolio.

Useful read on low-risk investments: Best Low-Risk Investment Options in India