Receiving guaranteed income during the retired years of your life is very peaceful for you and your family. An Annuity plan is a financial product that provides income to an individual after a certain period, mostly in requirements. This product is designed to fulfill an individual’s or his family’s long-term needs. It is a contract between the policyholder and the insurance company where the policyholder will make a lump-sum payment to a company for a specific period, and in return, they provide guaranteed periodic payment after your retirement.
Buying an annuity plan has lifetime advantages like regular payouts, a guaranteed stream of income, and provides tax-deferred growth. However, before investing your hard-earned money in an annuity plan, you must consider some factors which will help you meet your needs and needs. This article highlights the key consideration you should take before buying an Annuity Plan.
10 things to consider before buying an annuity plan
● Your Age and Category of Annuity
The category of annuity plan depends on the age of your retirement. You can get various annuity options in India, like deferred and immediate annuities. Annuity plans can be segregated based on when the payout will start. Each of these plans offers unique features and benefits. One must consider their retirement goals and financial obligations and finalize the plan.
● Deferred Plans
In a deferred plan, an individual accumulates until they reach retirement age. Once they reach that age, the insurance company pays the annuities regularly.
● Immediate Plans
In an immediate annuity plan, the payout starts immediately after the policyholder pays the lump sum amount.
● Choose the Right Annuity Option
The second thing a policyholder needs to consider is the type of annuity. One is a variable payout, and another is a fixed payout. Both have their pros and cons. Before investing in this plan, determine if you are okay with the variable amount or want a fixed amount. In variable payout, the monthly payout may fluctuate depending on the market scenario.
● Guaranteed Returns
Retirees must carefully consider the annuity plan, which provides a guaranteed pension regularly. If you can get better, then why settle for less? Look for a plan that serves a higher and guaranteed payout.
● Age and Health Requirements
Annuity plans may ask for age and health requirements, such as minimum and maximum age limits. Check various insurance companies’ criteria to know if you qualify for the annuity plan.
● Invest in a Trusted and well-established Insurance Company
Investing in a trusted and well-established insurance company also needs attention. Because the life insurance company will pay you a pension after your retirement. And one must be sure that investing in this company is safe. You can check the reviews and take advice from those who have already invested and received income after retirement. Selecting an annuity from a reputed and well-established life insurance company is important.
● Optimum coverage
In any unfortunate demise, some annuity plans also provide income to your spouse. If you choose 100% Annuity payable to spouse on the death of an annuitant’, your spouse will get the entire pension. As a result, you don’t have to worry about your spouse’s income after you.
● Tax Impact
Annuity plans allow tax-deferred growth. Once you start receiving the payments, you must pay income tax based on the salary bracket. One must understand the tax implications to know the cost and benefit of the annuity plan.
● Easy Liquidity
Most annuity plans don’t offer the privilege of redeeming the initial investments. We are unsure when we need money and when it is better to have money that can be used whenever required. So, looking for a plan that offers the facility to redeem your invested corpus in time of emergency is suggested.
Investing in an Annuity Plan is an important and big decision that will help an individual and his beloved relax after retirement. Hence investing in the right plan and the right company is necessary. First, consider all the above-mentioned factors and get a perfect annuity plan to fulfill your long term needs.