Ever since you start working, you look forward to the time when you have enough money to relax and not have to work anymore. For most people, that time ends up being at a much later age. Hence, your wish of enjoying life eventually coincides with your retirement. For all the relief from retirement benefits, you would still need money to fulfill your basic needs. You need a steady flow of income to support yourself.
Annuity plans are something that can help you. It is a contract between the insurance company and you that involves a series of regular payments. It is a great choice for you if you want to have a steady income and enjoy your golden years of life.
What Are Annuity Plans?
Annuity plans are policies that ensure that the money you invest in them is divided across a long period of time to be returned to you. This emulates having a regular income and helps you use the money for a longer time. These plans require you to invest a lumpsum amount. The money is then invested into opportunities that have a higher chance to give returns.
Regardless of how your life is going, it is important to secure money for the future. At this point, you may be considering creating adequate retirement savings for the future. However, that corpus is for the purpose of supporting yourself during retirement and spending your money wisely. By this logic, investing money into an annuity plan serves both these purposes.
Features of Annuity Plans
Safe investment
Annuity plans are widely known as the best option if you want to invest for the future. While buying any plan, the provider will give you every detail of the plan and its working. Once you know that, you can make a smart and calculated decision.
Financial security
The basic idea of an annuity plan is to make sure that you have the right amount of money at the time you need it most. Hence, by offering a steady income in retirement, annuity plans secure you financially.
Payout flexibility
You are allowed to choose from a wide array of options when it comes to the payouts of an annuity plan.
Types of Annuity Plans
Deferred annuity
Under deferred annuity, the money has to be invested for some time before the regular payouts begin. It is ideal for people that are still working and have a small amount of time before retirement. Moreover, deferred annuity also has the option of life coverage. This means that in case of the death of the policyholder, a nominee is paid a lump sum amount.
Immediate annuity
As the name suggests, in an immediate annuity, you start receiving payments right after you make the initial investment. If you are close to your retirement age, an immediate annuity is the perfect option for you. If you have already bought a deferred annuity, you can still convert it into an immediate annuity. This way, you don’t have to wait for your payouts to begin.
Depending on the type of investment you make, immediate annuities can further be categorized into fixed and variable annuities. When the payout you receive is fixed for a certain number of years, it is known as a certain or fixed annuity. On the other hand, if the payout varies based on the type of investment or market conditions, it is known as a variable annuity.
Variable annuity
In the case of a variable annuity plan, the payout is not fixed. This means it can vary in different plans offered by various companies. This is completely normal. The payout that you would get in this case depends on how well the company is performing in the market. The plan is linked to the market and may be prone to a few risks.
Fixed annuity
As the name suggests, fixed annuity plans have a pre-determined amount as a payout. This amount remains the same for the complete duration of the annuity plan. The duration of annuity plans is fixed as well. Even if the policyholder dies before the term of the policy, the nominee receives the payout.
Make a note of the above-mentioned pointers to know the various types of annuity plans and its features to be able to make a well-informed decision.
