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Understanding The Benefits Of An Annuity Plan For Your Future

Annuity plans are long-term contracts designed particularly for retirement purposes, between an insurance company and a purchaser. The purchaser has to make one or more contributions to the plan. Now, the series of contributions are usually spread over a particular time period. It makes the insurance company obligated to start paying out to the purchaser periodically at a later date, usually at the time of retirement.

Annuities are an excellent investment for a safer and secured future in terms of financial/ monetary benefits. The benefits of annuity plans are as follows:

No Investment Caps To Restrict You

One of the prime benefits of the annuity plans is that there are no investment caps over them, as you might have seen in the case of the Post Office Monthly Income Scheme or the Senior Citizens Savings Scheme. The former has an investment cap of around INR 4.5 lakh, while the latter has an investment cap of INR 15 lakh.

But you don’t need to worry about that in annuity plans. There are no limits set on the amount of money you choose to keep in an annuity, irrespective of your income source. Thus, it is a more flexible investment option than the other choices you have in this regard.

Removes The Peril Of Reinvestment

The freedom from all reinvestment risks is another significant benefit associated with annuity plans. In this country, the insurance sector is structurally making a move towards low-interest rates. The problem is that someone thinks about reinvesting a principle; they will most likely get a lower interest rate.

Moreover, those short-term investment tools like Post Office Monthly Income Scheme come with major reinvestment risk. But, on investing in the annuity plans, you are assured of receiving a payout for your lifetime.

The Sense Of Long-Term Financial Security

Annuity plans give you a sense of assurance that you will keep on getting money for every month for the rest of the lifetime. Your insurance provider has the responsibility of going ahead with the financial aspect until you are alive. You do not need to worry about your future.

Furthermore, you can choose the frequency of your premiums, and similarly, decide for obtaining payouts. However, this time interval frequency has to be fixed a yearly, semi-yearly, quarterly, or monthly basis.

The Tax-Deferred Growth Of The Annuities

You will need to pay no taxes on your earnings from the annuity plans until you start receiving the periodic payments or making withdrawals. Keep in mind that any withdrawal before you reach the age of sixty might be subjected to additional taxes.

The Bottom Line

As you can see, annuities can be a great idea if you are trying to remove financial worries for life after retirement. However, in order to truly avail the benefits, you need the right annuity plan. So, take a look at all the viable options in the market, and opt for the one that suits you and your preferences the best.

Written by Shivam Bhateja

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