What is Annuity? | How to invest in an Immediate Annuity Plan

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How to invest in an annuity plan

Insurance Basics & Financial Advice As living expenses mount and inflation hits your income, you may be starting to worry about the future. After completing all your family obligations, you wonder if you will have enough savings set aside for your retirement.

How to invest in an annuity plan

5 Minute |

How to Invest in Annuity Plan

As living expenses mount and inflation hits your income, you may be starting to worry about the future. After completing all your family obligations, you wonder if you will have enough savings set aside for your retirement. If your savings prove to be insufficient or you do not have any regular income after your retirement, you could face financial uncertainty after retirement but not if you invest in an annuity plan.


What is an annuity?


An annuity is an arrangement wherein an insurer pays a regular amount to you over a period of time, usually lifelong. This payment is in lieu of a lump sum payment made by you. The goal of annuities is to provide a steady stream of income post retirement.

It is a plan that secures your retirement years against financial uncertainty, so that your savings need not be disturbed and you don’t get into debt in order to continue your lifestyle.

The annuity plan does not prescribe a certain retirement age – you can choose to opt for an annuity plan as early as 40 or 45 and start getting the plan benefits. The plan assures you of an annuity for the rest of your life, moreover you can also ensure that your spouse is also covered by opting for a joint life annuity option. While the interest rates keep fluctuating, the biggest benefit of an annuity is locking in the rates for a lifetime.  Thus, you can retire with complete peace of mind with your daily needs taken care of by the annuity plan. This is how you can buy the best annuity plan for your future:

1 Pick the right annuity plan.

The kind of plan you pick depends on your potential age of retirement and the type of pay-out you want. There are two types of annuities: Immediate Annuity and Deferred Annuity.

In an immediate annuity, a person begins to receive the payments soon after the initial investment is done. In deferred annuity, the money gets locked in for a certain period of time before the payments are made. A person who is close to the retirement could opt for an immediate annuity while the deferred Annuity is suitable for someone who has some years to work before retirement.

2 Pick the right kind of annuity option.

Most insurers offer multiple annuity options to choose from. There are options that offer annuity for a single life (you) or joint life (you and your spouse). Also, there options to take annuity payouts and get a refund of the purchase price (full or part) and riders as well. The purchase price is the premium (lumpsum amount) paid by you to the insurer. Some plans also offer the flexibility to increase the annuity payouts annually.

You need to use the annuity calculators available online and check the pay-outs available for each scenario and choose the one that suits your requirement most.


3 Research the plan features.


The plan must offer a good mix of benefits for you. Broadly, it should have benefits for your partner in case of your untimely demise and the option to choose the pay-out method (Monthly, Quarterly, Half-yearly or Yearly).  An Annuity plan comes with comprehensive benefits such as:

  • Security with regular retirement income
  • Benefits to both the policy holder and the spouse
  • No limit on maximum annuity payout
  • Multiple annuity options to suit your needs
  • Incentives of higher annuity rates for large purchase price.
  • Flexibility to advance your Annuity payouts.

Thus, picking the right annuity plan can help you and your spouse live out your retirement years in peaceful contentment.


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