2024-05-14 5 Min read
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What if you’re left to handle your money matters all by yourself, but your family isn’t there to lend a helping hand? Well, for too many people in India, that’s a major worry, ranking in the top 5 concerns as per the PGIM Retirement Readiness Report of 2023.
Shockingly, a whopping 24% of Indiansend up depending on their spouse or family post-retirement. And we feel it’s almost time to wake up and smell the coffee, no?
By 2050, 1 out of every 5people in India will be over 60 years old. That’s what the ‘India Ageing Report 2023’ by the United Nations Population Fund (UNFPA) and the International Institute for Population Sciences (IIPS) reveals.
Considering today’s population of 142 crores, that’s roughly about 28.4 crore Indians crossing the 60-year border. That’s a lot!
But the silver lining is that 67% of the Indian population claim that they have planned their retirement already, per the PGIM Retirement Readiness Report of 2023
Alright, so here’s the deal – those who’ve got their retirement plans sorted were seen to get started around age 33. They’re proactive about it, you could say. Meanwhile, people who haven’t quite got around to it yet are thinking they’ll start figuring it out in their 50s
While so many Indians are prepared, how are they preparing and where are they investing? See, the list is long but the 2nd top category comprises Annuities and Insurances.
What is an Annuity?
If you search it on the web, it will give you two definitions –
1. It’s a fixed sum of money paid to someone each year, typically for the rest of their life.
2. It’s a form of insurance where you get a series of annual stipulated sums.
Simply said, “Annuity” is a term more frequently used in the life insurance industry. Basically, you give a lump sum or multiple payments, and in return, you get a stream of payments later on in the future.
But here’s the thing – there are lots of different types of annuities, each with its own perks. Deciding when to buy one depends on what you need and when you need it in your financial plan. It’s all about what works best for you.
1. It’s a fixed sum of money paid to someone each year, typically for the rest of their life.
2. It’s a form of insurance where you get a series of annual stipulated sums.
Simply said, “Annuity” is a term more frequently used in the life insurance industry. Basically, you give a lump sum or multiple payments, and in return, you get a stream of payments later on in the future.
But here’s the thing – there are lots of different types of annuities, each with its own perks. Deciding when to buy one depends on what you need and when you need it in your financial plan. It’s all about what works best for you.
What are the types of Annuity Plans?
Broadly speaking, there’s one type of annuity tailored to foster long-term, tax-deferred growth. These may suit individuals with extended retirement plans.
Conversely, another category of annuities prioritizes providing a guaranteed income stream, either immediately or at a set future date. These types might be more appealing to those approaching or already in retirement.
1. Immediate Annuity Plan
In an immediate annuity plan, the annuity payments begin promptly after you make a lump sum payment to the life insurance provider. You have the flexibility to select the frequency of annuity payments according to your preference, whether it’s monthly, quarterly, semi-annually, or annually.
2. Deferred Annuity Plan
In contrast to immediate annuities, deferred annuity plans don’t commence annuity payments immediately after your lump sum payment. Instead, you have the option to defer receiving payments until a later date.
This type of plan typically consists of two phases – the accumulation phase and the income phase.
● Accumulation Phase: During this phase, you have the choice to either make a lump sum payment or contribute through a series of smaller payments to the insurer. Alternatively, you can let your initial investment grow over time. This phase is focused predominantly on building your annuity fund.
● Income Phase: Once the accumulation phase concludes, you transition into the income phase. Here, you start receiving regular annuity payouts based on the accumulated funds. This phase provides you with a steady income stream to support your financial needs.
In both options, you can choose to receive either a lump sum or regular payments. In the event of an untimely death, the insurance provider will refund all or a portion of the initial investment to the nominee specified in your annuity plan, as per the terms and conditions of the chosen option.
Conversely, another category of annuities prioritizes providing a guaranteed income stream, either immediately or at a set future date. These types might be more appealing to those approaching or already in retirement.
1. Immediate Annuity Plan
In an immediate annuity plan, the annuity payments begin promptly after you make a lump sum payment to the life insurance provider. You have the flexibility to select the frequency of annuity payments according to your preference, whether it’s monthly, quarterly, semi-annually, or annually.
2. Deferred Annuity Plan
In contrast to immediate annuities, deferred annuity plans don’t commence annuity payments immediately after your lump sum payment. Instead, you have the option to defer receiving payments until a later date.
This type of plan typically consists of two phases – the accumulation phase and the income phase.
● Accumulation Phase: During this phase, you have the choice to either make a lump sum payment or contribute through a series of smaller payments to the insurer. Alternatively, you can let your initial investment grow over time. This phase is focused predominantly on building your annuity fund.
● Income Phase: Once the accumulation phase concludes, you transition into the income phase. Here, you start receiving regular annuity payouts based on the accumulated funds. This phase provides you with a steady income stream to support your financial needs.
In both options, you can choose to receive either a lump sum or regular payments. In the event of an untimely death, the insurance provider will refund all or a portion of the initial investment to the nominee specified in your annuity plan, as per the terms and conditions of the chosen option.
When is the right time to buy an Annuity Plan?
Annuity plans are indeed a popular choice for securing a steady income during retirement. However, it’s crucial to understand that delaying the purchase of such plans until retirement age may not be the most prudent decision.
The optimal time to start an annuity plan is typically as soon as you reach the minimum age requirement specified in the plan, which is often around 40 or 45 years old. By initiating your annuity plan early, you get the first-mover advantage in building a reliable income stream for your retirement years.
The optimal time to start an annuity plan is typically as soon as you reach the minimum age requirement specified in the plan, which is often around 40 or 45 years old. By initiating your annuity plan early, you get the first-mover advantage in building a reliable income stream for your retirement years.
Why should you get an Annuity Plan?
● Now, one compelling reason to consider starting an annuity plan as soon as you’re eligible is the opportunity to leverage time in your favour. By investing early, you allow your funds to accumulate and grow over time, potentially resulting in larger annuity payments in the future.
● Moreover, if you happen to come into a windfall or have a lump sum of money available, investing it in an annuity plan immediately can offer several benefits. Not only does it provide a secure and guaranteed source of income, but it also ensures that your funds are safeguarded against market volatility. (It’s not just for people with a bag full of money lying in their backyard but for anyone who plans to invest in stipulated intervals can opt for the deferred option as well.)
● Annuity plans offer flexibility in terms of payment options. While some plans provide immediate annuity payments, others allow you to defer payments to a later date. This flexibility enables you to align your annuity payments with your specific financial needs and goals.
In essence, the key takeaway is that starting an annuity plan early offers numerous advantages, including the potential for higher returns, increased financial security, and greater flexibility in managing your retirement income.
To sum it up, annuity plans are your sidekick for securing an extra income stream in your retirement years. With a bunch of options to choose from, it’s like having your pick of the litter. Getting in on the annuity game early doors, once you’re eligible, is a critical move.
It’s all about laying down the groundwork for a comfortable retirement and giving yourself a pat on the back for being proactive about your financial future.
● Moreover, if you happen to come into a windfall or have a lump sum of money available, investing it in an annuity plan immediately can offer several benefits. Not only does it provide a secure and guaranteed source of income, but it also ensures that your funds are safeguarded against market volatility. (It’s not just for people with a bag full of money lying in their backyard but for anyone who plans to invest in stipulated intervals can opt for the deferred option as well.)
● Annuity plans offer flexibility in terms of payment options. While some plans provide immediate annuity payments, others allow you to defer payments to a later date. This flexibility enables you to align your annuity payments with your specific financial needs and goals.
In essence, the key takeaway is that starting an annuity plan early offers numerous advantages, including the potential for higher returns, increased financial security, and greater flexibility in managing your retirement income.
To sum it up, annuity plans are your sidekick for securing an extra income stream in your retirement years. With a bunch of options to choose from, it’s like having your pick of the litter. Getting in on the annuity game early doors, once you’re eligible, is a critical move.
It’s all about laying down the groundwork for a comfortable retirement and giving yourself a pat on the back for being proactive about your financial future.
Disclaimer
Star Union Dai-ichi Life Insurance Company Limited is the name of the Insurance Company and “SUD Life Smart Healthcare” is the name of the plan. Neither the name of the Insurance Company nor the name of the plan in any way indicates the quality of the plan, its future prospects or returns
Star Union Dai-ichi Life Insurance Company Limited | IRDAI Regn. No: 142 | CIN: U66010MH2007PLC174472
Registered Office: 11th Floor, Vishwaroop I.T. Park, Plot No. 34, 35 & 38, Sector 30A of IIP, Vashi, Navi Mumbai – 400 703 | Contact No: +91 22 7196 6200 | 1800 266 8833 (Toll Free) | Timing: 9:00 am – 7:00 pm (Mon – Sat)| Email ID: customercare@sudlife.in | Visit: www.sudlife.in | For more details on risk factors, terms and conditions, please refer to the sales brochure carefully, before concluding the sale. |Trade-logo displayed belongs to M/s Bank of India, M/s Union Bank of India and M/s Dai-ichi Life International Holdings LLC and are being used by Star Union Dai-ichi Life Insurance Co. Ltd. under license.
Star Union Dai-ichi Life Insurance Company Limited | IRDAI Regn. No: 142 | CIN: U66010MH2007PLC174472
Registered Office: 11th Floor, Vishwaroop I.T. Park, Plot No. 34, 35 & 38, Sector 30A of IIP, Vashi, Navi Mumbai – 400 703 | Contact No: +91 22 7196 6200 | 1800 266 8833 (Toll Free) | Timing: 9:00 am – 7:00 pm (Mon – Sat)| Email ID: customercare@sudlife.in | Visit: www.sudlife.in | For more details on risk factors, terms and conditions, please refer to the sales brochure carefully, before concluding the sale. |Trade-logo displayed belongs to M/s Bank of India, M/s Union Bank of India and M/s Dai-ichi Life International Holdings LLC and are being used by Star Union Dai-ichi Life Insurance Co. Ltd. under license.
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