Immediate Annuity ? A Better Option for Retired People

Posted by Sonia Nagpal on January 5th, 2016

Retirement is the age when one should be able to relax and enjoy the fruits of one’s labour throughout their life. However, relaxation and enjoyment are not terms one would associate with retired people. In fact, there is considerable stress over regular income, healthcare costs, education of their children, their marriage and so on. Very few individuals manage to build a corpus that allows them to live an affluent life and not worry about finances.

Retirement also means old age and problems associated with health and fitness. Problems like hypertension, heart disease, strokes, etc. are far more common among the elderly. Uncomfortable as it may be, it is also the time when one must seriously consider and plan for their near and dear ones after one’s demise, especially when they are the only source of income. However, one can easily be free of such qualms and hesitation regarding their financial future. There are several investment options designed for retired individuals that provide a viable and decent source of income and financial stability. Immediate Annuity Plans are one such instrument that has gained a lot of popularity of late.

In simple terms, an immediate annuity is a form of contract that starts paying a guaranteed income almost immediately, without the accumulation phase of regular annuities. As opposed to other forms of annuity or regular income investments, an immediate annuity plan is purchased with a single lump sum payment. These plans offer several advantages for retired people, as outlined below.

•             Flexible Payout Options: Annuities allow for regular payouts at a frequency of one’s choice. The options are monthly, quarterly, half-yearly and yearly

•             Higher Returns on Annuities without Return of Corpus: If an individual is in good health, they can opt for annuities without the option of return of corpus on death. Such plans have higher rates of return than those that return the remaining corpus to heirs or beneficiaries upon death of the annuitant, which offer returns that are only marginally higher than a savings account

•             Assured Pension: Annuity plans, often marketed as Assured Pension Plans for a fixed duration, continue to pay the pension after the term expires. Such plans are relatively uncommon but are a good option if they suit your needs

•             Transfer of Annuity: Some annuities allow the pension to transfer to their spouse upon death. This can be useful in some scenarios

By only themselves, annuities are not the most favourable form of investment and nor do they provide tax benefits. However, they are a viable investment for a regular pension where regular income is more important than liquidity. As such, it is recommended that one invests in an immediate annuity plan in addition to other options like fixed deposits and debt funds.

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Suggestinsurance.com is the online identity for IRDAI approved insurance broker – S B Insurance Brokers Pvt Ltd. On SuggestInsurance.com we offer quotes from leading insurance companies and let the customer explore the insurance plans, get their details, view and study brochure and other documents, compare features and benefits of these plans side by side and then take a decision.

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Sonia Nagpal
Joined: January 5th, 2016
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