One of the most vital stages of life is undoubtedly retirement. This is one time when we have to plan our finances carefully in order to maintain our lifestyles without any compromises. You will have to factor in that you will not be earning the same income every month anymore. The biggest question worth solving is whether you have enough to last you comfortably all throughout your retirement.
While making our retirement plans, we often consider investment choices like stocks, SIPs, and so on. Yet, when it comes to finding the right investment option for building a retirement corpus/fund, annuities are always the best choices. They ensure adequate financial protection and a steady income in the future. Here is a look at the concept behind an annuity and how it is ideal for your retirement blueprint.
Knowing More about Annuities
An annuity is basically a specific financial offering that will give you a steady income once you retire. The concept is not complicated at all; you will pay the insurance company a lump sum amount after retirement or make payments periodically throughout your working years. Once you have enough, the insurer will give you a guaranteed income for a specific period or your entire lifetime. You can choose payouts every month, quarter, or year, depending on your specific preferences.
Functioning of Annuities
You can always select annuity options from multiple insurance companies. It is possible to find a plan that is customized as per your requirements. For instance, these are some choices:
- Immediate- Income will be paid to you as soon as you purchase the annuity in question.
- Deferred- These annuities are given after a certain period or at retirement, as per your requirements. You have to build the corpus with payments to the insurer for a prolonged duration. Your money will first grow and then the plan will start generating regular income post retirement.
Some annuity plans are also linked to the NPS and other savings schemes in India.
Main Benefits of Annuities
Some of the biggest benefits of annuity plans include the following:
- Your income is guaranteed and you don’t have to worry about running out of money or depleting your savings. The annuity thus gives you a lot of mental peace.
- You can earn a fixed stream of income for a certain period or your lifetime, depending on your needs.
- The payout frequency can be customized as per your requirements, while you can also choose between immediate and deferred annuities in the planning stage.
- There are no worries relating to market risks or fluctuations, unlike mutual funds, stock market investments, and so on. Your income will always remain steady.
- You can get tax deductions for the premiums paid to insurers for premiums of annuity plans.
Conclusion
Choosing an annuity plan for your retirement portfolio will be a smart move without a doubt. It is akin to integrating an added layer of financial security for the future. It will ensure steady returns when you do not have an active income stream any longer. At the same time, there will be no market risks to worry about as well.
