Simon Sinek once said, “The challenge of the unknown future is so much more exciting than the stories of the accomplished past.”
Needless to say, the thought of the future is a major motivation for most of us. And, it is exciting to think of all the great things it will bring in our life. However, life is unpredictable, and it is only wise to always remain prepared for the worst too.
Although most situations in our lives cannot be controlled, we can at least ensure that we have the means to live a happy life, even after retirement. This is only possible if we have a steady flow of income to meet not just our regular expenses but unexpected ones too. One way to plan for a financially secure future is by investing in the best annuity plans in India.
Are you worried that you are likely to outlive your savings? Did you know that there is an amazing long-term investment tool that is helping people secure their future in the best possible way? An annuity plan is a type of insurance policy that is designed to help policyholders accumulate assets that can provide them income after retirement.
The aim of suchschemes is to help people create a stream of income upon annuitization. The plan holder is allowed to the flexibility to invest either through a number of payments or in lumpsum, whichever is more comfortable for them. Your contribution or the purchase payments are then converted into periodic payments that become your income at maturity.
However, it is important to know that there are some limitations to these plans too. The main drawback is that the earnings are taxable, just like any other form of income. If you withdraw your investments earlier than the maturity date, you might also face penalties. Having said that, it should also be mentioned that these shortcomings are very minor compared to the benefits.
Different Types of Annuities
- Variable: In variable annuity, the policy holder is allowed to choose their investments and returns using an annuity calculator. This decision is basically taken on the basis of the individual’s investment goals and risk appetite. The performance of the investment is also taken into consideration to make a decision.
- Fixed:With a fixed plan, both the principal investment and the earnings are guaranteed. The policyholder receives a fixed income for the term of the contract.
Types of Annuity,Based on Payout Timing
- Deferred Annuity: In deferred annuity, the policy holder makes paymentstowards the policy for a set time period and can choose to delay their income and receive it in installment or as lump-sum payments. Payments are made when the investor elects to receive them.
- Immediate Annuity: If you use a lumpsum payment to create a guaranteed stream of income, immediate annuity is your go-to option. Here, you need to pay lump-sum amount to purchase the plan. The benefit is that the guaranteed income starts almost immediately. However, the plan becomes irrevocable once the payment starts. There might be some restrictions, in case you need to access the funds.
It is wise to choose one of the best annuity plans in India, such as those that come with death cover. This ensures the payment of a lumpsum amount to the nominee assigned by the policyholder.