Annuities are a popular financial product designed to provide a steady income stream, primarily during retirement. Understanding what an annuity is can help you make informed decisions about your retirement planning.
What is an Annuity?
An annuity is a contract between an individual and an insurance company, where the individual makes a lump sum payment or a series of payments in exchange for periodic disbursements. These disbursements can start immediately or at a future date and are designed to provide a stable income stream.
Annuity – Key Features
Income Stream: Provides regular payments over a specified period or for the lifetime of the annuitant.
Tax-Deferred Growth: Earnings until withdrawal achieve tax-exempt growth.**
Customisation: Offers various payout options and investment choices.
Types of Annuities
Understanding the different types of annuity plans is crucial for selecting the right product to meet your financial goals.
An immediate annuity plan begins payments almost immediately after a lump sum payment is made. This type of annuity is ideal for individuals who are retiring soon or already have, and are seeking an instant income stream, typically starting within a year of the investment.
A deferred annuity accumulates money for a specified period before payouts begin. This type is suitable for those who want to grow their savings over time and start receiving payments later, often after retirement. Deferred annuity options are rather suitable for individuals who are looking to invest early on in their career and receive the benefits later.
A fixed annuity provides guaranteed payouts, offering a predictable and stable income. The insurance company assumes the investment risk, making it a low-risk option.
A variable annuity offers payouts that vary based on the performance of the chosen investment options. This type of annuity carries higher risk but has the potential for higher returns.
Benefits of Annuity Schemes
There are several benefits that make annuity schemes attractive for retirement planning:
Guaranteed Income: Provides a reliable income stream, reducing the risk of outliving your savings.
Tax Benefits: Earnings grow tax-deferred, which can result in significant tax savings over time.**
Customisation: Offers various options to tailor the annuity to individual needs and preferences.
Survivor Benefits: Some annuities offer benefits to a spouse or beneficiary after the annuitant's death.
Understanding what annuity is and what are its different types can help you choose the right product for your retirement needs. An annuity plan can provide financial security and peace of mind by ensuring a steady income stream during retirement. By exploring the various annuity schemes, retirement plans and their benefits, you can make an informed decision that aligns with your financial goals.
** Tax exemptions are as per applicable tax laws from time to time.
Disclaimers:
Disclaimers: IndiaFirst Life Insurance Company Limited, IRDAI Regn No.143, CIN: U66010MH2008PLC183679, Address: 12th & 13th floor, North Tower, Building 4, Nesco IT Park, Nesco Centre, Western Express Highway, Goregaon (East), Mumbai – 400 063. Toll free No – 18002098700. Email id: customer.first@indiafirstlife.com, Website: www.indiafirstlife.com. Fax No.: +912268570600. For more details on risk factors and terms and conditions, please read the sales brochure carefully before concluding the sale. Trade logo displayed above belongs to our promoter M/s Bank of Baroda and is used by IndiaFirst Life Insurance Co. Ltd under License.