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Can you imagine not earning any income for a few months? It’s a horrifying thought, considering all the expenses that need to be met and the responsibilities you shoulder, isn’t it? But once you hit retirement, that’s how life will be. That’s why you need to look into an annuity plan. Building a retirement corpus alone may not ensure smooth sailing in your retirement years. An insurance annuity plan pays a certain amount of money regularly over a period.
You get to select two important things related to time. First, for how long you want these regular payouts. You can choose the lifetime option such that the annuity plan pays you regularly from your retirement to demise. This will help ensure that neither you nor your family faces any financial troubles after you retire. Second, you get to choose when you want to start receiving the insurance annuity plan benefits. It can be as early as 45.
Now that you can see just how beneficial an annuity plan is, here’s how you can invest in an insurance annuity plan.
To select the annuity plan best suited for your needs, you first need to know the different types of annuity. Broadly, annuity plans are of two types - immediate annuity and deferred annuity. In an immediate annuity plan, you start receiving the annuity payments as soon as you’ve made the initial investment. This type of annuity plan is best if you’re close to retiring.
As for the deferred annuity plan, there is a certain period between your initial investment and annuity payments where the money gets locked. This is better suited if you’re younger and still have time before your retirement.
Instead of opting for an annuity plan that only offers annuity for you, you can select an insurance annuity plan that covers you and your spouse - a joint-life annuity plan. This way, you don’t have to change your standard of living and can truly enjoy your golden years.
Another thing to consider in an annuity plan is the option to get a refund of the full or part purchase price. In such an option, the initial investment amount is paid to your nominee, such as your spouse, in the event of your demise. You still receive the payouts for as long as you’re alive. It just has the added benefit of providing your family with financial support in your absence.
When picking an insurance annuity plan, you need to choose one that provides you benefits such as flexibility. Some annuity plans provide the option to increase the payouts annually. As for the annuity investment rate, they remain locked for the period of your plan, so you don’t have to worry about fluctuations.
When choosing the plan, look for one that allows you the flexibility to select a payout schedule that will work the best for you - monthly, quarterly, half-yearly, or yearly. Another benefit to look for is no maximum cap on the payouts.
After considering the above factors, buy an annuity plan that you feel is the best for you and your spouse. Tata AIA Life Insurance offers a Smart Annuity Plan that is designed considering all your needs. You have the flexibility you like, from selecting the annuity payout term, premium payment term, a deferred or immediate annuity plan, etc.
With the Smart Annuity Plan, you can also avail of a loan against this policy to meet emergencies that may crop up. There’s also a top-up option to increase the benefits you receive under this plan.
If you’re confused about the difference between an annuity plan and a life insurance plan, that’s understandable. Both annuity and life insurance plans are issued by insurance companies, but each serves a very different purpose.
With life insurance, the policy is designed to provide benefits to your family after your demise. So, there’s a death benefit, and there may be a maturity benefit, depending on the type of life insurance plan you pick.
Conversely, an annuity plan is designed to provide you benefits while you’re alive. The basic purpose of an annuity plan is to provide a regular stream of income on retirement. Depending on the type of annuity plan you select, there may be a capital refund benefit, where the initial investment made by you will be paid to your loved ones in the event of your death. Hence, this particular feature may overlap with life insurance. However, these two plans satisfy different financial needs in different scenarios.
If you look at annuity investment as an investment for financial stability during retirement, you can think of it as a good investment. But if you look at it purely from the perspective of wealth creation, that’s not the right lens.
Annuity investment isn’t an investment concerned with making you money or growing your wealth. Its primary purpose is to offer you regular income once you stop working. Additionally, if you opt for an insurance annuity plan with a death benefit, it can supplement your life insurance policy and offer more financial support to your family.
Hence, when you build your investment portfolio, you have to consider various benefits of an investment, such as wealth creation, tax*-saving, retirement planning, and securing your financial future.
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This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
*Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfillment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implication mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.