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Retiring soon? Here’s why buying annuity plans may make sense

If you want to retire early one of the major areas, you'll need to work upon is supplementing your income once you retire. An annuity plan helps you do just that. Click to know more.

  • 2,437 Views | Updated on: Jan 15, 2024

People don’t dread the thought of retirement anymore. In fact, many now look forward to early retirement for several reasons. More often, the burn-out is not the apparent reason. There are instances of people thinking of early retirement even when they are doing well in their career and have a lot of growth potential.

Whether it is to follow your dreams, passions, give more time to a hobby, or just a desire to opt-out of the proverbial worldly race, there can be various reasons to consider and plan for early retirement.

However, planning an early retirement isn’t easy. Meticulous planning and ruthless execution are essential to living your golden years to the fullest. One of the major areas you’ll need to work upon is supplementing your income once you retire. An annuity plan helps you do just that

Why it Makes Sense to Buy an Annuity?

1.Fixed-income Source

The salary credit message is arguably sweeter than any romantic message that you ever received. So, apart from your workplace buddies and the tea breaks, you are going to miss your monthly salary the most.

Therefore, it is vital to arrange for a fixed and regular source of income that can replace your salary on retirement. An annuity plan can help you plan a lifetime of guaranteed monthly income that can take care of your daily expenses without breaking into your savings.

2. Multiple Payout Options

You can choose from multiple annuities payout options depending upon your requirements. You can choose the immediate annuity option to start getting a pension immediately, or you can select the deferred annuity option to grow your investments during the deferment period and start receiving a pension after the deferment period is over.

You can also choose from multiple payment sub-options as per your need.

3.Locking the Existing Interest Rates

The interest rates on the bank FDs are on a perpetual decline in the last few years. Therefore, your monthly income based on such FDs will keep decreasing with every cut in interest rates. 

However, the interest rates on your money in an annuity plan are locked in for life. So even after 20 or 30 years of buying your annuity, you will keep getting the same pension amount. This nullifies the effect of frequent interest rate cuts on your monthly income. 

For example, consider you bought an immediate annuity plan online at the age of 45 years. Now, if you start receiving a monthly pension at the rate of 5.6%, you will keep getting the same interest rate even when you are 70 years old. You would not have to worry about the declining interest rates on the bank FDs.

Retirement planning should always comprise diverse investment options. However, annuities should be an integral part of retirement planning that can mitigate the risk and uncertainty of meeting daily expenses by providing a stable source of income. Therefore, it is advisable to allocate a substantial fund from your retirement portfolio to the annuities and reap the benefits in your sunset years.

- A Consumer Education Initiative series by Kotak Life

Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.

Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Kotak Life Time Income Plan

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  • 6 Plan Options
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