Do you wish for a guaranteed stream of income after retiring? You are not alone; a majority of Indians prefer investing in avenues that open up income for them once they are in the sunset years of their lives. The one thing that you will not want is for your money to run out completely in your lifetime. In fact, this is one source of anxiety for many people, as you will find out. This is just where an annuity can be helpful in providing guaranteed income after you retire.
A Brief Look at Annuities
When you look to purchase an annuity, you will have to consider either an immediate plan or a deferred annuity. Immediate annuities start providing payouts right after you make a lump sum payment, with no waiting period. These payments can either continue for your entire life or for a predetermined period, based on your choice at the time of purchase.
For deferred plans, the annuity will only start after the accumulation phase is over and from a specific date. You can choose a fixed annuity, i.e. a plan which offers a fixed amount throughout the whole tenure. This will be chosen when you purchase the plan in question. The amount also remains unaffected by any fluctuations in the market.
Key Things to Know About Annuities
Here are some other vital things worth knowing about annuities.
- Immediate annuity plans offer guaranteed income after retirement once you invest a lump sum amount. These are not affected by market fluctuations and come with fixed payouts.
- Deferred annuities allow you to accumulate a retirement corpus, with the option to start receiving payouts at a later date. While the income generated during the accumulation phase is tax-deferred, it’s important to understand that annuity payouts are taxed as per your income tax slab when you begin withdrawals, meaning the tax obligation is not entirely eliminated but deferred.
- You can opt for life annuities where the payouts will come in until your demise.
- Another option is to choose a life annuity with the return of purchase price This means you will get annuity payments on a regular basis till your demise. Thereafter, the initial sum used to buy the annuity will be returned to your nominee for the plan.
- The annuity will be paid for a fixed period as per the agreement, even if the policyholder passes away in the interim. Annuities will either stop on the completion of this guaranteed period or the demise of the annuitant, whichever comes later.
- Joint life survivor annuities are also available, in which you or your spouse receive payouts until you or your spouse are
So, as you can see, annuities are excellent options for guaranteed post-retirement income. Evaluate your options carefully before investing.