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Make Your Retirement Financially Secure with Annuity Plans

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Make Your Retirement Financially Secure with Annuity Plans
January 22, 2024

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Retirement is an important phase of your life and planning for it correctly can help secure your financial safety. Inflation, increasing medical expenses, age, etc. is beyond our control and need to be considered for a stress-free second innings, with an investment that can support your lifestyle without any compromises. One of the options you can consider is an annuity plan. It gives you an option to pay a lump sum amount to the insurer to help build corpus which will be made available post retirement. You can also choose the payout as per your needs which can be monthly, quarterly, half-yearly, or annually.

What are Annuity Plans?

Annuity plans are pension plans where you get a regular income against a lump sum amount invested with an insurance company. The company invests this money and will pay you back the returns that are generated from it. The goal is not about earning a high return but to secure money, which will help you with everyday expenses and peacefully meeting financial goals post-retirement so you are not dependent on anyone else. If you choose to invest in the best annuity plans it will help you secure yours and your family's future for a lifetime.

Annuity plans are one of the better options to invest as they provide guaranteed income, the interest rates are locked-in, and have low investment risks involved. Also, unlike other retirement plans, investing in annuities has no investment cap. There are two types of annuity plans that you can choose from: Deferred Annuity and Immediate Annuity. You can use an annuity calculator to determine your expected returns and decide between the two types of annuity plans. 

Type’s of Annuities

  1. Deferred Annuity:

    If you are still working and have a few more years to retire, then you can choose the deferred annuity plan where the money is invested for some period of time before payments are made to the investor. Under this plan, you make a one-time investment with a lump sum amount and the payout is deferred until the time you retire. Once retired, you will start receiving a monthly income as a pension on the amount invested.

    One of the most important benefits of deferred annuity plans is that you can lock-in the rate of interest. For instance, if you are 55-years old and invest a sum of Rs 50 lakhs in a deferred annuity plan, you will start receiving a monthly pension once you turn 60 and retire, and on your death your nominee will receive the purchase price or the lump sum amount of Rs 50 lakhs. It also comes with an option of “Life Cover” where in case of the untimely demise of the insured, the nominee will be paid a lump sum amount.

  2. Immediate Annuity:

    Like the name suggests, in an immediate annuity, you will start receiving payments as soon as the investment is made, unlike deferred annuity that gives you the time to accumulate money and have a few more years before retirement.

    Here, instead of paying premiums for a predefined time, you can choose a plan to invest in that will later pay you a regular guaranteed payout for life. It is best for those who have recently retired and have a lump sum amount to invest to start receiving a monthly pension immediately for their retirement years.

    If you opt for a joint life cover, both you and your spouse will receive monthly income; upon your death, your spouse will still continue to receive this pension and if both you and your spouse die then the entire lump sum amount that was initially invested is given to the financial dependents.

Is an annuity plan a good investment plan for retirement?

Annuity plans are among the most trusted sources for a guaranteed fixed income for retirement because:

  1. You can choose to invest in an annuity plan at any time whether you are approaching retirement, mid-career, or already retired and have a lump sum amount ready to invest.

  2. You can lock-in your interest rate that will eliminate market and reinvestment risk. This allows you to have guaranteed income at the same interest rate for life, irrespective of whether the interest rates fall down.

  3. There is no cap on invested amounts unlike other schemes available for retirement.

  4. It brings stability and regular flow of income in your second innings and should be considered as a part of your retirement portfolio.

  5. It is a safe investment option that provides financial security with flexible payouts.

Annuity plans are available both offline and online but online investment comes with a host of benefits such as an extra payout, no commission, easy comparison, and no hidden charges.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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