Annuity plans have always been popular investment choices for people looking for a comfortable lifestyle even after retirement. Annuities are specific types of plans where customers make lump sum payments and then receive regular income for a specific duration. They help meet post-retirement aspirations and enable retirees to maintain their lifestyle comfortably without any financial worries.
However, with the multiple types of annuity plans available these days, choosing the right one may be confusing. Here is a guide that may help.
Types of Annuity Plans Available
Here are some of the most commonly available annuity plans that you can choose from.
- Immediate annuity—This plan provides guaranteed regular income just after paying the lump sum premium amount. If you are almost near retirement and are above the age of 58, then this plan may be highly convenient.
- Deferred annuity—In a deferred annuity, the income will begin later, and you can select when you want it to start. If there are still some years prior to retirement and one is between 45 and 58 years of age, then the annuity may be highly advantageous as well.
- Fixed annuity—This is an annuity type that is not impacted by market fluctuations. As a result, income remains fixed, and the sum is guaranteed while being pre-fixed at the time of buying the policy.
- Variable annuity- Variable annuity plans have premiums invested in varied instruments, including equities, mutual funds, and so on. Payments from these plans are dependent on fund performance. If the fund does well, then you will get higher returns, and if it does not, then your returns may be lower.
- Life annuity- These annuity plans offer annuities for a lifetime. The payment frequency is mostly pre-fixed at the time of buying the policy. It thus ensures a stable income source during retirement.
- Joint life annuity- It is quite similar to life annuities, where annuity payments are made for a lifetime. In case of your absence, your spouse will keep getting these payments for her lifetime.
- Life annuity with return of purchase price- This plan will offer lifetime annuity payments. In case of any unfortunate and unforeseen event, your family members will get the amount paid while buying the policy.
- Annuity payable for a pre-fixed tenure- You can select a duration for which you wish to get the annuity payments, i.e. 10 years, 15 years, and even higher. This has to be done while buying the policy.
How to Choose the Best Annuity Plans
You should carefully compare all the diverse kinds of annuity plans that are available before making a final decision. Do remember that these plans are low-risk options with fixed income. Hence, the returns may not be as high as considerably riskier and market-linked instruments.
Always decide based on your individual objectives and financial circumstances. The key aspects in this case should be your age, investment goals, and risk appetite. For example, a deferred annuity may be suitable for long-term growth, while immediate income should be taken care of with an immediate annuity. It all depends on the type of annuity plan that syncs with your needs and financial situation.