Annuity Plan – Different Benefits & Types of Annuities
- No regular income
- Bills and maintenance cost still needs to be paid
- Too much time on hand
- Desire and need to pursue lifelong dreams and hobbies.
Overcome these obstacles of financially free retirement life and enjoy doing what you want to do with no tension as to income flow. An annuity plan is the best plan for retirement planning. Annuities are investments made
(a) as a lump sum payment
(b) in instalments as monthly or yearly payments.
This payment is then liquidated or disbursed to ensure a regular inflow of income either immediately or at a differed date and time.
Though Annuity Plans provide income for the rest of the survivor’s life, it is different from a pension plan. Pension is the amount you get once you have completed your working tenure with a company. A pension may be got as a one-time payment in cash or cheque. Whereas to start an annuity plan, you need not wait for retirement but can start anytime. The payout will be given lifelong and not just as a lump sum.
Different benefits of an annuity plan:
- Life long income
- Guaranteed returns
- Freedom to follow your dreams and pursue your hobby
- Income to travel, meet family and friends
- Creates a long term income if taken at an early age
- . The principal amount invested is protected against inflation
- Leave behind a lump sum corpus for the beneficiary or nominee
- Provides tax advantage
- Annuity Plans experience less volatility to market fluctuations
- Add diversity to savings and retirement
- Ability to pay for caregiver at your retirement age or to cover up for the medical expenses that arise due to age
Type of Annuity Plans:
- Immediate Annuity
- Differed Annuity
Immediate Annuity: Regular income can be credited as early as a month of the plan
Payouts can be monthly, quarterly, half-yearly or annually. An immediate annuity is chosen when the retirement days are closer.
The payout can start immediately, but since the principal amount is not kept too long to benefit from the compounding effect, the payout amount will be less as compared to Differed Annuity.
Differed Annuity; When the income is received after 5 to 10 years after starting the plan. That is, the income differs to a later date. If there are a number of years for retirement, the deferred annuity would be the better choice.
The payout for differed plans are usually higher since the premium is kept for a longer time. The number of payouts received, though, are less.
Annuity Plans are to be kept simple, and riders of health benefits and such others should be avoided. This is because the purpose of annuity plans are to provide regular income to meet the recurring needs and expenses at a later age. Besides, getting additional riders will add to the premium cost.
So if you are interested in early retirement, safeguarding your money against inflation, freedom to do what you want and spend as you like when you are not working, Annuity Plans are the ones to consider.