Are you looking for a steady source of income in your golden years? Perhaps investing in an annuity plan is the solution. It is a fantastic way to safeguard your financial security after retirement. The policy guarantees you steady monthly payments for the rest of your life. Please continue reading to learn more about the best annuity plans in India and their various types.
What Are Annuity Plans?
An annuity is a contract signed by a policyholder and an insurer to pay a fixed amount of money each year after retirement. You can, however, obtain the annuity plans by making a one-time or recurring payment. The plan's goal is to provide a consistent source of income or supplement your income to live a carefree retirement.
Types of Plans
Let's look at the various forms of annuity plans available in India and what they have to offer.
- Immediate Annuity
The policyholder pays the premium for an immediate annuity plan in one lump sum. With this policy, he is entitled to assure and immediate payments as soon as the premium is deposited with the insurer.
This sort of annuity is appropriate for those individuals who will retire soon and require regular monthly income immediately. This annuity plan has no accumulating phase and is activated directly following the vesting step.
- Deferred Annuity
Unlike an immediate annuity, the deferred plan starts after a certain period. This policy has an accumulation and a vesting phase.
A policyholder begins developing a corpus during the accumulation stage, starting from the first premium payment. However, the payment does not begin immediately. During the vesting phase, the policyholder starts to receive a pension payout. It is suitable for individuals who do not need immediate rewards and wish to let the accumulated funds grow into a sizable amount to receive higher payouts later. An annuity calculator can help you determine the premium amount needed to reach your set target.
- Fixed Annuity
A fixed annuity plan involves a fixed initial investment that is based on a predetermined interest rate and payment tenure. It guarantees an individual a fixed sum of money after retirement that will not vary until the policy term. The policyholder's money is primarily invested in reliable, fixed-income securities. This strategy is perfect for risk-averse people.
- Variable annuity
A variable annuity does not guarantee the policyholder a fixed payout. Here, the insurer invests the initial corpus in a basket of mutual funds selected by the insured. Payouts are determined by the performance of these funds and can either remain constant or vary over the policy tenure. It is ideal for people who are comfortable taking risks.
How To Choose?
The following are the primary criteria for choosing an annuity plan:
- Safety
Since annuity plans are long-term investments, safety becomes a primary consideration. Therefore, it is critical to investigate the insurance company's track record from which you are purchasing the product. This will ensure that the company's future obligations are met.
- Returns
Most insurers are conservative in their annuity plan returns because they retain a portion of the earnings to cover contingencies. As a result, it is critical to select an insurer that provides superior returns to policyholders.
- Liquidity
Life is unpredictable, and you may require finances at any time of your life. As a result, it is vital to select an insurance company that allows for partial withdrawals in the event of an emergency.
Annuity plans are an excellent way to ensure a steady income stream after retirement. You can choose the best annuity plans for your needs based on the above features. This will help you to live a dignified retired life.
