Looking for regular and guaranteed income? Investing your hard-earned money in suitable annuity product. Such products are specially planned to meet long-term retirement needs. However, before taking look at further details, let us first try to understand product itself. You can see types of fixed annuities. For more details types of annuity and their formula. Hence, see examples of annuities in real life.
What are annuity plans?
Most common type of annuity plan works like reverse of pure life insurance policy. In pure life insurance plan also known as term insurance plan. But when person pays premiums during policy period and beneficiary (often the family) gets sum assured under policy. In case insured dies during policy period.
However, in an annuity plan person pays either lump sum or regular installment in addition period. To gets regular payments as long as you lives or for fixed period. Life insurance covers financial risk of dying too young. It means leaving family needy an annuity plan covers financial risk of living too long without enough money for happy living.
How to choose among different types of annuities based on their features?
There are many types of annuity plans. Essentially they can be classified based on timing of benefit, variability and coverage of benefit. Hence, check three types of monthly income schemes after retirement
If you wants annuity payments to start immediately. You must buy an immediate annuity plan. Moreover, you want regular pension payments to start after particular period. You shall go for deferred annuity plan. This option depends on age at which you are deciding to buy. If you just started your career and is far away from retirement.
Then choose deferred annuity product to make more sense. Because, if you do not need regular pension payments as long as you earning monthly salary. Purchasing an immediate annuity will suit for just retired. And now you requires regular income stream in place of your salary. In such situation, you may consider using any lump sum that you get on retirement.
If annuity amount is fixed amount either guarantee or not guarantee is called fixed annuity. It varies on performance of underlying investment it is variable annuity. Fixed annuity is low risk and also returns are less. On market conditions variable annuities returns are depend. So there is higher risk but possibility of higher returns also.
An annuity plan can cover one life or two lives. Such as husband and husband and wife. If one person died and other person can continue to receive annuity payments for life time. In case of joint life annuity, primary annuity is first paid life assured. After death of primary person, second issuer (Spouse) continues to receive annuity. Hence, annuity payouts cease when second annuitant is demise.
You can choose anyone option. There are many other features and benefits. Like partial withdrawal facility, indexation benefits that can be added to annuity plans. Like in any financial product key parameters for annuity are safety, returns and liquidity.
Safety is top in annuities. But these are very long-run products. When you buy deferred annuity will keep saving regularly via premiums. And these premiums are paid to insurer for long time before retirement for 20-30 years. On retirement you will expect pay back to continue for another 20-30 years on an average. Hence, see Types of Annuities? (Not posted)
After safely returns play vital role. As annuity products are very long term. Most of companies are traditional in terms of giving returns. These companies do not fully pass on returns to customer. But it retain large portion of earnings as reserves to meet emergency. This traditional approach may be harmful to interests of older people who depend solely on annuity payouts to meet living expenses.
Liquidity is another aspect to choose pension policy. Due to their structure are not very liquid and cannot be encased whenever required in annuity products. Like fixed deposit, life insurance policy or mutual fund units. There can be financial emergency that make to go for such options.
How to go for right annuity product?
According to experts, best way is to look at past track record of annuity products. You need to see Industry track record, returns provide on past annuities. In addition, like current financial strength of company is some key factor to be careful before going for an annuity products.
Finally, see annuity plan example. Moreover, check annuity scheme calculator. In addition, see immediate annuity plan from LIC. However, view immediate annuity plan calculator. And for more details you can see compare immediate annuity plans in India. Hence, immediate annuity plan vs Fixed deposit.