When we retire, our paychecks stop—but our daily expenses don’t. In fact, costs often go up, especially for healthcare. With inflation on the rise and people living longer than ever, it’s important to make sure we don’t outlive our savings. One way to help protect yourself from running out of money during retirement is by considering annuity plans.
Annuity plans may not be talked about as often as mutual funds or pension schemes, but they offer a unique benefit: a guaranteed income for life. This means even if you live to 90 or beyond, your annuity plan can keep giving you money regularly. It’s like setting up a personal pension.
According to Ashok Manwani, Vice President of Products at Go Digit Life Insurance, “If you want peace of mind and financial security after retirement, annuity plans are worth exploring. They offer steady income and reduce your dependence on others.”
So, what exactly is an annuity? And how can it help you live a stress-free retirement? Let’s break it down.
An annuity is a contract between you and an insurance company. You give them money—either all at once (lump sum) or over time—and in return, they promise to pay you a fixed income. This can start right away or after a few years, depending on the type of plan you choose.
Here are some of the key benefits of annuity plans:
Regular income: After retirement, this can feel like getting a monthly salary again.
Lifelong security: You receive payments for as long as you live—some plans even continue payments to your spouse if something happens to you.
Customization: You can pick the frequency of payments (monthly, quarterly, etc.), add inflation protection, and choose if your investment is returned after death.
Tax benefits: Some tax advantages apply when you invest in annuity plans, and your earnings may grow tax-deferred depending on the plan.
For someone nearing retirement—or even someone in their 40s or 50s thinking ahead—an annuity plan can act like a safety net. It ensures that no matter how long you live, your basic financial needs are covered.
There are different types of annuity plans in India, and choosing the right one depends on your needs, age, and how much risk you’re comfortable taking.
Immediate Annuity: If you’re retiring soon or already retired, this is a great option. You invest a lump sum, and the annuity starts paying you right away—either monthly, quarterly, or yearly. It’s perfect for people who want instant income.
Deferred Annuity: This is for people who are still working but want to plan ahead. You start contributing now, and the payouts begin at a future date (say, after 10 or 20 years). This helps build a good retirement corpus over time.
Fixed Annuity: This gives you a guaranteed return. The income is not linked to the market, so you know exactly how much money you’ll get. It’s great for those who don’t want to take risks and want peace of mind.
Variable Annuity: Your money is invested in market-linked products like mutual funds or stocks. This type carries more risk but also offers higher potential returns. It's best for those comfortable with market ups and downs.
Index-Linked Annuity: This one strikes a balance. It’s linked to a market index like the Nifty50 but still offers a minimum guaranteed return. It suits people who want some growth but also want safety.
Here’s a quick look at how they compare:
| Annuity Type | Best For | Income Starts | Key Feature |
|---|---|---|---|
| Immediate Annuity | Retirees needing income now | Immediately | Quick payouts |
| Deferred Annuity | Long-term planners | In future | Build a retirement fund slowly |
| Fixed Annuity | Conservative investors | Immediate/future | Predictable and stable income |
| Variable Annuity | Risk-takers | Immediate/future | Higher returns (but fluctuating) |
| Index-Linked Annuity | Balanced risk-takers | Immediate/future | Market-linked with some guaranteed returns |
Annuity plans are not for everyone—but they’re definitely worth considering. If you want a guaranteed income stream during retirement, and you don’t want to worry about market fluctuations or running out of savings, annuities can be a powerful tool.
Before picking one, think about your retirement goals. How much income will you need? How long do you expect to live post-retirement? Do you want to leave behind money for your spouse or children? And most importantly—how much risk can you handle?
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It’s also wise to talk to a financial advisor. They can help you match your needs with the right plan. As Mr. Manwani says, “Your post-retirement life depends on the choices you make today. Start early, choose wisely, and don’t ignore annuities just because they aren’t as flashy as other investment products.”
In short, annuity plans may not seem exciting, but they offer something priceless—stability, peace of mind, and dignity in your later years. That’s something worth planning for.
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