Types Of Annuities Under Life Insurance Retirement Plans

Annuities help provide a regular income source when one retires. An annuity helps policyholders gather a substantial retirement corpus. This is important because retirement brings a stop to the active source of income that one has. To sustain a financially stable lifestyle, one must plan their retirement efficiently and save up for it. Having an annuity provides for the additional financial boost that one might need, besides their other savings and asset components. 

Types Of Annuities Under Life Insurance Retirement Plans

There are various types of annuities that are available under life insurance retirement plans. The following are the types:

1. Deferred Annuity

   In a deferred annuity plan, the policyholder builds a financial corpus by paying regular instalments over a certain period of time. When they retire, these funds are utilized to purchase annuities. This option is an affordable one. The earlier you start, the more you can contribute towards your retirement fund without a sense of urgency. However, it is not a great option if you are nearing retirement and would need funds immediately.

2. Immediate Annuity

   In an immediate annuity, the premium amount is paid in a lump sum. It is a one-time payment by the policyholder. The annuity is purchased within a comparatively shorter period of time as there is no waiting for funds to accumulate. The payouts are also started immediately. It is a great option for those who are about to retire soon and would require financial support. It is a lump-sum amount so you would require sufficient funds.

3. Variable Annuity

   Under variable annuity, there is no guaranteed payout of a single amount. The annuity payout varies due to the performance of the annuity in the market. This type even offers its varieties between two payouts. Sometimes the payouts might be more due to good returns but there is no assured degree of payouts under variable annuity which can make it a risky choice. 

4. Fixed Annuity

   Under this type, the annuity payout is essentially fixed throughout the entirety of the term. It provides a fixed income after retirement and ensures financial stability. Although there is not much development over what is initially put into the annuity fund and the returns are not very high, it is a safe and assured choice that will help you sustain your financial condition.

5. Lump-Sum Annuity

   Under a lump-sum annuity, the payout is given in a lump sum. Most annuity options offer regular payouts over a period of time. However, under this variety, you will be given out the entire sum in one go. However, there might be conditions involved according to the plan that has been chosen by the policyholder. This includes that the entire retirement corpus might not be available in a single payout.

Conclusion

Retirement planning is crucial if you want to ensure you have a hassle-free retirement life. The choice of the annuity depends on your age, that is how near you are to your retirement and also the amount of money you can afford to put down for savings. In general, it is always advisable to start saving for retirement at an early age. 

Also Read: Retirement Planning Guide For Working Women

EPFs V/S Retirement Insurance Plans

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.