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Benefits of Annuity Plan Investment

With an annuity plan, you’ll mostly be required to invest a lumpsum amount and receive regular income post-retirement for the rest of your life. Here is more you need to know.

  • Dec 22, 2021

Most individuals would want to live their retirement years following new hobbies, pursuing their dreams, travelling, and spending more time with their families and friends. But the rising medical inflation, cost of living, and life expectancy have made it necessary for people to start planning their retirement as early in life as possible. As a result, people as young as in their 20s and 30s are now concerned about retirement planning.

A regular stream of income post-retirement is one of the best ways to live a financially independent life after you bid goodbye to your professional life. Annuity plans are created with the sole purpose of fulfilling this objective.

Check out four reasons that make annuity plans a smart choice for a worry-free retirement-

1. Steady Source of Income

With an annuity plan, you’ll mostly be required to invest a lumpsum amount and receive regular income post-retirement for the rest of your life. Policyholders are free to choose the age after which they’d like to start receiving annuity and even the payment frequency from options like monthly, quarterly, half-yearly, and yearly.

The income assurance that an annuity plan provides brings in a sense of security and helps you live a more confident and stress-free life.

2. No Risk of Reinvestment

India is steadily moving towards a low-interest rate structure. The falling FD rates are an excellent example of the same. With most other investment options, there is always a reinvestment risk of getting lower returns at the time of reinvesting the principal amount. The unstable rate of returns is not ideal for something as critical as retirement planning.

Annuity plans do not have any reinvestment risk. You invest a lump sum amount, and the insurer guarantees to pay the annuity for the rest of your life at the same rate.

3. Safe and Guaranteed Returns

Most popular long-term investment options such as equity come with a significant level of risk. While investors should always focus on building a diversified portfolio with multiple asset types, one should always have at least a few investments that deliver guaranteed returns irrespective of any market condition.

An annuity plan could be that investment option as the payouts are fixed and free from market movements. Alternatively, some of the insurers also offer annuity plans with a variable annuity. Here, the payouts depend on the company’s performance and are not fixed. Informed buyers can also consider this option.

4. Immediate and Deferred Annuity Option

Most insurers also allow the investors to choose between immediate and deferred annuity options. With an immediate annuity, the payouts begin almost as soon as a lumpsum payment is made to the insurer. Deferred annuity plans are focused on people who want to start saving for the future. In these plans, the payouts start after a certain age.

If the policyholder wants to start receiving payouts sooner, there is also an option to convert deferred annuity into an immediate annuity.

Add More Stability to Post-Retirement Life with an Annuity Plan in India

Several reasons make annuity plans an excellent choice for retirement living. The regular fixed payouts from the plan could function as a steady source of income for the policyholder, making it more practical for them to live the retirement life of their dreams.

Look for a top insurer to know more about annuity plans and choose one that best meets your requirements.

Kotak Life Time Income Plan

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  • 6 Plan Options
  • Tax benefits ^
  • Higher annuity rates for higher purchase price
  • 4 Annuity Modes

Ref. No. KLI/23-24/E-BB/1052


- A Consumer Education Initiative series by Kotak Life

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