With people looking for smarter investment options, annuities are coming into the fore. Annuities would be one way to ensure a set income for life. Which addresses one of the most important concerns in retirement. When you start investing and when you want annuities is the key question and answers to which will determine the kind of annuity you pick up. Which works best for you? Some details are given below which can help you with your decision. Team RetyrSmart
Annuity that works best for you
Types of annuity
Annuity can be bought at any time in your life. Some people choose to buy it when they are close to their retirement age, while some people prefer it during their mid-career who wish to secure their assets. In life insurance, there are products that help you accumulate a corpus with which you can buy annuity later, but if you have ready corpus, you can buy annuity immediately. These are called deferred and immediate annuities, respectively.
Deferred annuities essentially help people to save for the future where they let you invest regularly to first build a corpus and one you retire you get pension from this amount. It requires customers to pay premium which plans can be systematic or one lump sum premium. When the tenure period ends, the accumulated money is used to buy an annuity, although in deferred annuity plans, only 1/3rd of the corpus can be withdrawn tax free and the remaining 2/3rd will be have to be taken as compulsory annuity turning into steady monthly income. It is always advisable to invest in your early stage so that one has enough corpus for the future. The longer you leave your investment, the better it will grow. For instance, Rohit is 35-year old and is planning to have a financially secure future for his later years. If he pays Rs 6,000 as monthly premium for 15 years, the fund value he will get will be around Rs 17,00,000 at the return rate of 8%.
Immediate annuity plans are for people who want to invest at a later stage of life. With an immediate annuity, you hand over a lump sum cash to the insurance company and in an exchange the company starts making you monthly payment like an income stream. It is a great choice for those people who are near their retirement stage and have a corpus ready with them to buy an annuity immediately. They differ from deferred annuities as they do not have an accumulation period. After an annuity is chosen, the distribution begins 12 months after the purchase.
As per the table below if at the age of 55, if you invest Rs 50 lakh as a lump sum amount, you will get will be around Rs 4 lakh as yearly pension till the time you are alive.
The goal is not just to invest for your retirement plan; the goal is to choose the right product for your golden years which is specially designed to meet your needs and help you build a secure future. According to experts, the best way is to buy annuity is to look at the past track record of the annuity provider than being carried away by product features or promotions.