#Retirement Plans | 12 MIN READ

Enhance your retirement security with an Annuity Plan

Financial prudence is advocated at every stage of life but is of utmost importance during one’s retirement. Retirement is when an individual stops working to generate a regular flow of income. And while the income stops, the expenses continue as before and may even increase. So, to keep going, the individual either needs to manage from his or her savings or find some way to generate money without working. Either way, it is essential to be able to handle regular expenses as well as be prepared for any contingencies in life.

An annuity plan is an ideal financial instrument for retirement as it helps you use your savings to generate a regular flow of income for life. And though this is possible even if one were to invest the savings in fixed return instruments like a bank fixed deposit or Post Office savings schemes, annuities are usually a more popular choice given their advantages. For one, annuity plans are financial tools that are custom designed for retirement and hence, boast of features and benefits that best suit the intended purpose.

An annuity plan is a contract between the buyer and the insurance company wherein the buyer invests a lump sum amount and, in exchange, receives regular payouts during a specified time. The key advantage of investing in an annuity plan is that it insures you from the eventuality of outliving your savings. An annuity plan helps maintain financial discipline by locking in the savings and using them to provide fixed and steady payouts. As mentioned above, it is possible to take this approach by investing the savings and then using the interest earned on them as income to manage expenses. However, it is not as simple as it might sound.

There are a plethora of financial instruments in the market. Each has its pros and cons, risks and benefits, and terms and conditions. Financial planning requires knowing about the different investment options available, understanding each option in detail, identifying the ones that best suit your needs, and then defining the investment strategy in terms of the proportion allocation across the financial instruments shortlisted. And the work does not end here. Making investments and then keeping track of these investments; planning and making redemptions to run expenses and all the while ensuring that your planning stays on track to keep life going comfortably is one demanding task. And when it comes to retirement planning, there is little margin for error as your life’s savings are at risk, and so is your future.

Another risk associated with self-managing the retirement corpus is that it can often lead to emotional squandering or, worse financial abuse of the elderly. For example, consider a retired couple who decide to gift a chunk of their savings to their son to help him buy the car or the house he desires. When such a decision is made on a purely emotional basis and without any calculations on whether they can afford it given their own needs, it is either a case of emotional squandering or financial abuse. In the latter, the elderly are forced to part with their savings by family or friends, as opposed to the former, where they spend unwisely but of their own free will. However, in either case, the retirement corpus gets eroded over time, leading to the risk of financial insufficiency and consequent challenges. With annuity plans, the invested corpus can usually not be withdrawn; else is allowed only for defined emergencies like a medical urgency.

Annuity plans help mitigate many post-retirement risks like the early death of a spouse, a critical or lengthy illness, economic volatility – increasing inflation and decreasing interest rates, and other such exigencies that can often derail retirement planning. Having an annuity plan helps bring security and stability to your retirement years as you are assured of a fixed income for life.

Most annuity plans also offer a joint life option wherein the payout continues for as long as one spouse is alive. Annuity plans also come with several other features like ‘return of premium’ wherein the retirement corpus invested in the annuity plan is paid out to the beneficiary after the death of the retiree(s). This finds favour with people who wish to leave a legacy behind for their families. There are more such features available across different annuity plans that have been designed keeping retirement needs in mind. All in all, annuity plans ensure financial security and peace of mind in the golden years of life.

So, secure your retirement and live #FutureFearless with Annuity Plans.