You work hard for more than 35 years so you can live a secure and comfortable life after retirement. To have the life of your dream post-retirement, you must make correct investment decisions early in your life. One way to secure your future is by ensuring you have availability of regular funds after retirement. Retirement is the time when you would like to do things you love doing than worry about your income and expenses.
Retirement and pension plans help you achieve your regular income goal after retirement.
What are Annuity Plans?
An annuity plan is an investment option that helps you receive regular payment from a lumpsum investment. Life insurance companies provide multiple annuity plans you can use for your specific income goals. The best pension or annuity plans provide a safe investment space for your money and preserve your investment for a long time.
You can choose from the following annuity options:
I. Deferred Annuity Plans
Invest lump sum or regularly to build a corpus. Grow it for a few years, before you finally start receiving regular income. These annuities often give you the option to invest in equity as well.
II. Immediate Annuity Plans
These plans will start giving income immediately. If you have a lump sum pay out from a long term investment, you can convert it to regular income immediately with this option
III. Single or Joint Life Annuity
If you are the primary breadwinner in the family, a joint-life annuity will ensure income safety for your spouse after your demise.
Five Reasons you should Buy an Annuity Plan
Buying an annuity plan secures your financial future in many ways. Below are the top five reasons to get an annuity plan:
1. Safety Of Capital
When you plan for retirement, you look for an option that offers a stable and regular income and at the same time, protects your capital. Retirement is not an age where you would like to risk your life's savings by investing in equity. Or any other investment instrument that is market-dependent. During your working years, you invest in different financial instruments, depending on your risk capacity.
The risk capacity nears zero once you retire. Your top priority is the safety of capital, and an annuity plan gives you that. When you buy an annuity plan, the rate is set at the time of purchase which does not change during the payment period. You know how much you will receive post-retirement.
Life insurance pension and annuity plans offer guaranteed benefits even in the case of lifelong pension. Thus, you can rely on these annuity plans for the safety of your retirement funds.
2. Lifelong Income
As mentioned above, life expectancy will increase with time, and you need to invest in products that give life-long income to you. In an annuity plan, you invest a lump sum amount and start receiving annuity post-retirement.
If you buy an immediate annuity, the payment starts immediately, while in the deferred option, you get to decide when you want to start receiving payments. In both the options, you continue to receive lifelong income. Meaning, the annuitant (the person on whose name the policy is) will continue to receive annuity until death.
3. Leave a Legacy
When you buy a retirement plan, one important parameter to consider is - what happens if you die before the benefits start. Pension4Life by Canara HSBC Oriental Bank of Commerce Life Insurance has an option wherein upon your death, the purchase price is given to your beneficiary (purchase price is the value of your investment corpus at the end of the accumulation phase with which you purchased the annuity).
There are other options as well in this plan. For example, on your death, the balance of the purchase price is paid to the beneficiary. The balance gets calculated by subtracting the total annuity instalments paid till death with the purchase price.
4. Joint Holding with Spouse
You can also get an annuity plan as a joint account with your spouse. When you plan your retirement, it is not just about you. Your spouse will depend on you, even if they are independent and working now.
You need to plan your retirement such that even after your death, your partner continues to receive the annuity. The Pension4Life does exactly this for you. In this plan, one continues to receive payments till the death of the last survivor.
5. Critical Illness & Accidental Benefits
Life is full of unexpected events. Though you cannot predict events like critical illness, you can prepare for them. If you are prepared well, the damage will be less, at least financially. Annuity plans other than all the above benefits prepare you to handle critical illness and give you accidental benefits.
Annuity plans like Pension4Life return the purchase price when you are diagnosed with any critical illness, or you meet an accident.
Role of Annuity Plans in Retirement Goal
In India, it is crucial to have pension plans to meet the contingencies in the future. The life expectancy is likely to increase in the future, which means you will have a longer post-retirement life. You can invest in multiple financial instruments and create a huge corpus, but it may not last throughout your life. An annuity plan provides you with the surety that you will have a fixed source of income until your death.
When you plan for retirement, there are two important goals - the first is to fulfil your dreams like buying a holiday home, going on a world tour, etc. The second is to ensure you don't have to worry about the money and income. You should be able to enjoy every single day of your life without worrying about money. To meet the second type of goal, you can invest in annuity plans.
Canara HSBC Oriental Bank of Commerce Life Insurance offers a Pension4life Plan that frees you from the worry of income post-retirement.
Annuity plans could be the best investment decision for your retirement if you select them wisely. The right decision today will make sure you do not have to depend on somebody else in the golden years of your life and take the burden of finance.