Devendra was worried about having a steady source of income post-retirement. He was already 55, and wished to retire early to focus more on several priorities on his personal front. But, he was worried about getting a steady source of income in the post-retirement years. He also wanted to maintain the same standard of living, which he had taken for granted for several years. As discussions with his wife and friends proved futile, Devendra was unable to reach a decision. Then one day, his brother-in-law, Roshan, who was a financial consultant, visited their home. Roshan advised Devendra about investing in an immediate annuity scheme, which would ensure that the latter lived a life of comfort and ease even after taking early retirement.
What is immediate annuity?
Annuity is a legal contract between an individual and an insurer, which ensures that the subscriber is entitled to a regular income post-retirement until the time of death. Basically, there are two types of annuities: deferred and immediate. Deferred annuity means that the subscriber’s money is invested for a period of time until the individual is ready to start taking withdrawals, like in the case of post-retirement. Immediate annuity, however, means that the insurer starts to receive payments soon after making the initial investment.Immediate annuity is more popular of both the annuities.
What is the difference between an Insurance plan and an immediate annuity plan ?
There is a significant difference both these plans. Unlike term insurance plans, which ensures that the subscriber’s family is taken care of after the individual's death, immediate annuity plans are geared more towards ensuring comfort of living while the subscriber is still alive. Immediate annuity is frequently an option sought as a retirement plan, since it ensures a fixed income that can go a long way in keeping the individual’s living standards unchanged even after retirement.
Why should an individual go for immediate annuity plan?
As compared to other plans and schemes, an immediate annuity plan provides a slew of benefits, especially when an individual is looking for a steady source of income after retirement. Some of the benefits are:
Protection from market risks: Funds invested into immediate annuity schemes are safe from fluctuations in the market, unlike equity and debt funds whose returns are completely subject to market risks. Immediate annuity schemes will provide the same amount of income during its lifelong tenure, as has been agreed to between the insurer and the insured. There is no market exposure to the investment, which means that the investment will never go down. Thus, investing in an immediate annuity is protected from market risks.
Fixed source of income: Unlike debt and equity, investment into an immediate annuity plan ensures that the individual receives a fixed income. The income that is being provided to the individual can not be altered or curtailed at any point of time. So it helps provide a fixed source of income to individuals after retirement. This fixed income can be easily used by the individual to maintain the same lifestyle even after retirement.
Lifetime guarantee: An immediate annuity plan ensures that the individual will receive the fixed amount throughout his lifetime. Not only does it help a subscriber with a steady flow of income to cover the regular expenses, it provides the individual with an opportunity to transform the post-retirement years into a journey of self-discovery. As the income is guaranteed for life, the subscriber does not have to worry about finances in the golden years of life.
Simplest form of investment: Unlike investing in a variety of investment instruments across different platforms, an immediate annuity scheme allows an individual to maintain only a single account for a fixed source of income. The subscribers are saved from the hassle of maintaining different accounts, besides making separate payment of premiums, across platforms, to receive a regular income.
Thus, immediate annuity schemes are the most secure manner of ensuring a regular income in the post-retirement years. Gift your future self with the safety of a steady income today.