How to Choose an Annuity Plan?

How to Choose an Annuity Plan?

Are you on your way to building savings that will give you lifelong financial security? Are you looking for a steady and predictable income even in your golden years? The best annuity plans in India could be a great choice for you. Here’s what you should know about annuity plans.

Which is the Best Annuity Plan for You?

These plans allow you to live a financially independent life after you retire. They require you to contribute a lump sum or make regular payments until you reach the predetermined vesting age. The money thus collected is then invested in various financial instruments, and the profits are distributed to the investors. You are entitled to receive regular payments for the rest of your lives or a set period. You may also benefit from capital appreciation as a result of the power of compounding, as well as tax deductions on the premium paid.

What Features Should You Look for in Annuity Plans?

The best plans are designed to cover all your expenses after retirement. Check for features such as:

· Timing

Depending on the age profile of the applicant, you can decide between two plans:

  • Immediate annuity plan
  • Deferred annuity plan

An immediate is appropriate for someone who has recently retired and is looking for a regular monthly income source (as a replacement for their salary). You can choose the plan by making a one-time payment. The deferred plan is typically used by young people who have many years of working life ahead of them. They can pay in monthly instalments and receive the funds upon retirement. You can use an annuity calculator to check the premium to be paid and make an informed choice of plan.

· Variability

Annuity plans are financial instruments that can provide the applicant with variable returns. Fixed annuities are suitable for people with a low-risk appetite. The returns are lower, but they are guaranteed. Variable annuity offers returns that are determined by the performance of the market’s underlying investments. There is uncertainty here, but the returns could be much higher.

· Coverage

Another feature that distinguishes the plans is the level of coverage. To maximize coverage, consider a joint annuity plan that protects both you and your partner’s lives. In the event of your demise, your partner will receive annuity payments. This will assist your family members in meeting their financial obligations even if you are not present. If you do not have any dependent family members, you can choose a single-life annuity. Here too, the best annuity calculators in India can help you choose a plan with an affordable premium.

What are the Criteria to Select an Annuity Plan?

The key parameters to select the best annuity plans are:

· Safety

Because annuities are long-term financial investments, it is critical to choose a plan that provides a high level of security. Based on the company’s track record, ensure that it will be able to meet its obligations in the future. Other factors to consider include falling interest rates and rising inflation.

· Returns

The primary goal of investing in annuities is to earn high returns that will help you meet your financial needs after retirement. Some businesses do not pass on the benefits to their customers and instead, keep the profits as a reserve. Small payments at an advanced age are of little use, therefore, choose a company that offers high returns.

· Liquidity

Always choose a fund that is liquid enough to allow you to make a partial withdrawal in the event of an emergency.

You can consider the aforementioned features when choosing the best annuity plan. Before making a decision, you should also consider the service provider’s track record and financial strength.

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