A Beginner’s Guide to Annuity Plans

A Beginner's Guide to Annuity Plans

An annuity plan is a safe investment. It ensures steady and guaranteed returns and is ideal for retirement planning. The best annuity plans in India are designed in a way to help an individual financially even when they have outlived all their savings. You can purchase a plan at any time. For example, mid-career or when you are nearing retirement.

The premiums are either systematic or in the form of a single lump-sum amount. Policyholders can pick according to their available corpus and current financial condition. Since you are new to annuity plans, here’s a guide that can help you understand how it works. Having a clear idea can help you make an informed choice.

What is Annuity?

An annuity plan is a contract made with an insurance company. Your money is invested in different assets, depending on the annuity type. For example, mutual funds are the most common option. This is called the accumulation phase. Now, the returns generated from the fund is paid back to you as a continuous stream of income.

Types of Annuities

There are multiple types of long-term annuity plans available in India. Each promises assured returns and comes with its own set of benefits.

  • Fixed Annuity Plan: Periodic payments are made on a fixed annuity. There are two types under this scheme:
    • Immediate Annuity Plan is the most basic plan. It starts working immediately after you have purchased it. Withdrawals can begin within a year. This is usually quite helpful for senior citizens.
    • Deferred Annuity Plan is where the pay-out is deferred till a specific period. It can be months or years, depending on the contract.
  • Variable Annuity Plan: Here you can decide where your payment can be invested. The most popular choice is mutual funds. The pay-out will depend on how the funds are performing in the market.
  • Indexed Annuity Plan: This is ideal for anyone who wishes to enjoy the security of fixed-income annuity and the freedom of variable annuity. This plan generally offers high returns when the market is doing well.

Make sure to check out the best bank to purchase your annuity plan. It will ensure security, reliability and flexibility to help you prepare for your retirement years. Use an annuity calculator to know the premiums to be paid to generate a specific income.

Advantages of Annuity Plans

The best annuity plan comes with several benefits to ensure minimum financial worries. The top insurance company will offer a range of options to choose from. Take a look at how you can benefit from these plans:

  • Fixed regular income to meet your daily expenses.
  • You can take your pick from Lifetime Income, Lifetime Income with Capital Refund and Lifetime Income with Capital Refund in Parts.
  • Users can enjoy income tax exemptions as per the applicable income tax laws in India. However, these are subject to change.
  • Different pay-out frequency options are available, like monthly, quarterly, half-yearly and yearly.

Before making a final choice, use an annuity calculator to choose the best annuity plans in India. Further, read the terms and conditions on the website brochure. You can also consult your tax advisor for details.

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