Insurance 

Know All About Annuities

If you dream of a comfortable retirement where not only your needs are met without any hassles, but your financial worries are also far and few, you ought to have financial arrangements in place. A comfortable retirement cannot be achieved without an effective retirement plan.

If the thought of retirement planning makes you fret, know that there is little reason to worry. An annuity plan can help you get started on a financially-sound retirement phase, irrespective of how close you are to becoming a pensioner.

Here is all you need to know about annuity plans.

Introduction to Annuities

Annuities, like pensions, are regular payments that an annuitant will receive from the insurer. You can choose to receive these payments monthly, quarterly, or annually. Using an annuity calculator, you can get better estimates of how much can you receive from the plans.

Different Types of Annuities

There are a few different types of annuity policies that you can choose from. The availability of these plans, and their specific features, may vary across insurance providers.

Here is a look at the types of annuity plans.

  • Immediate Annuities

These plans are suitable for someone closer to retirement, has already retired, or wants their annuity payments to start immediately. Immediate annuity plans can be purchased now, and the annuity pay-outs will begin at the next cycle of chosen frequency. For example, choosing monthly payments on immediate annuities will start your pay-outs next month.

  • Deferred Annuities

Deferred annuity plans, as opposed to immediate ones, start at a later time. You can choose this type of plan if you do not want to begin receiving your annuities immediately.

There are two phases of deferred annuities you should know about.

  • The accumulation phase is the period from your plan purchase till the time your pay-outs begin.
  • The vesting phase is when you start receiving your annuities, and beyond.
  • Fixed Annuities

These are types of annuities where the annuitant does not face the market-related risks on their returns. If you would like a fixed sum regularly, this is the option you would have to choose.

  • Variable Annuities

In this case, the annuitant is willing to bear more risk to increase their chances of higher returns. The annuity may vary per cycle.

While these are fundamental types of annuities that you should know about, these are not standalone plan types and are not entirely separate from each other. For example, you could get fixed and immediate annuities if they suit your needs.

Moreover, plan availability differs across insurance companies. Most companies simplify this terminology and dissolve them into more consumer-friendly terms, so you can choose a plan you like rather than spend effort on figuring out the types.

How do Annuity Plans Work?

Annuity policies are usually market-linked. Once you buy a plan, you don’t have to worry about where the lump sum is utilised. You can rest easy and enjoy your golden years.

You can also include your spouse in your plan. In this case, the survivor will continue to receive annuities after the death of the spouse. Some plans may also offer a premium return to your nominees in case of the death of the annuitant/s.

Annuities are not limited to pensioners, even though they are directed towards them. You can still be employed and start receiving annuities as a secondary income, which you can put to use as per your preference.

Retirement planning does not have to be an uphill battle. Instead, educating yourself early on about your options and staying financially sound can help you make the process much simpler. Plans like annuities are accessible and can offer a range of benefits that you may not find through other means.

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