With the increasing costs of living, ever-rising medical inflation and higher life expectancy, it has become important that you prepare for the post-retirement life carefully. And as far as India is involved, there have been some surprising predictions in an RBI report. It projects that over 50% of Indians above age 65 are seen depending on children instead of their own. If you don’t want to be an economic burden, you’d want to plan for your post-retirement income, and annuity plans are a great way to go do this.
Understanding Annuity Plans
Annuity plans expect you to make a lump sum or regular payments till you arrive at the pre-decided vesting age. When you retire, you are qualified to receive regular payments for as long as you are alive or for a pre-determined fixed term. Such payouts are used to meet financial commitments, thereby assuring that you live a happy retired life. You might also get capital appreciation, thanks to the power of compounding. Additionally, most plans offer tax deductions on the premiums paid, hence decreasing your taxable amount to a large extent.
Features to watch out for while choosing an annuity plan
Various types of annuity schemes come with different features and benefits. You should consider the five features below while choosing an annuity plan.
- Security
Given that annuities are long-term investment tools, it is crucial to choose a plan that provides a high level of safety. Make sure that the investment company is in an excellent position to meet its obligations. You should also consider changing circumstances like increasing the rate of inflation and decreasing rate of interest, among others.
- Return on Investment
The main objective of investing in annuity plans is to get high returns to meet your financial needs after retirement. Some investment companies are sceptical of providing high returns to their customers to increase their earnings. Therefore, choose an annuity plan that gives good returns and takes into consideration the potential rise in the rate of inflation in future.
- Liquidity
During certain emergencies, it might become important to have funds available at your disposal. Though it is not prudent to use the accrued amount, some conditions may demand withdrawals. Hence, you must choose an annuity policy that offers a certain degree of liquidity.
- Variability
You may either choose a fixed annuity or variable annuity plans, based on your demands. In a fixed annuity plan, you are qualified to receive fixed payouts regularly. Whereas, Variable annuity plans provide variable returns based on the performance of the assets and market conditions. Based on your risk appetite, you may assess both options and make the right decision.
- Coverage
Another circumstance to take into thought is the amount of coverage. To maximize coverage, you may choose a plan that secures the life of both you and your partner. In case of your death, your partner will get annuity payouts. This will help your family meet their financial obligations, even when you are not around.
While choosing the best annuity plans in India, you should take the points mentioned above into consideration. Do you research, compare plans and set your goals according to your and your family's requirements.