10 things that help you choose the right annuity plan
An annuity plan is one that helps you make regular payments after making a lump sum investment. To make the right investment in your annuity option, you should make use of immediate annuity calculator to understand how much amount to invest so you can live it off for the rest of your life. Let us look at the ten things that will help you choose the right annuity plan for you and your family.
- The earlier, the better - Always go for an annuity plan when you are in your prime. You can try deferred annuity plans India where you can make the payments at a stipulated time that you choose. The investor can choose to avail the income and investment when he elects to receive them.
- Invest in Equities - Equities can add significant value over time to the portfolios unlike bonds, fixed deposits or gold. If you are planning for retirement, make sure that you are investing in equity funds, stocks or unit-linked pension plans along with the other means of investment.
- Diversify your investment - Though fixed annuity seems secure, you should go for the means that allows diversification in the portfolio. Though equities perform well over longer tenures, you should mix it with the other assets to secure your assets and return-on-investment.
- Suitable options - You need to undertake an annuity plan that is suitable for you. For instance, the lifetime annuity option would guarantee annuity for a certain number of years regardless of the policyholder lives or not. So you would need to choose your annuity options carefully.
- Timing - If the person wants the payments to start immediately, the best option is an 'immediate annuity plan'. However, if he would like the pension payments to begin after some time, then 'deferred annuity plan' Is well-suited. The choice would depend on the age of the investor at the time buying the annuity plan.
- Coverage - The annuity plan can cover a single-life or two lives. In case of death of one, the other would continue to receive payments for a lifetime. The benefit of buying a joint annuity is that in case of the death of the primary annuitant, the financial dependent would continue to get payments.
- Returns - The returns are one of the most important things to check while getting an annuity plan. As the annuity products can provide the benefits for a longer period, most of the companies can be very conservative giving returns. These companies keep a substantial amount back as contingencies. They may be detrimental to the interests of older people.
- Safety - One of the aspects that is paramount in annuities is safety. A person who is buying a deferred annuity will regularly be saving through premiums paid to the insurer. He would expect the payback to continue for 20 to 30 years on average.
- Liquidity - Liquidity is another aspect that you should take into account while choosing the pension policy. Though these annuity plans are not very liquid and cannot be encashed as per your will, there can be financial contingencies requiring the customers to bail out. Partial withdrawal option can come in handy at such times.
- Variability - If the annuity amount is fixed, it is termed as a 'fixed annuity' plan. When the plan varies based on the performance of the underlying investments, it is termed as a 'variable annuity'. A person who has a lower risk appetite should choose a fixed annuity plan as in variable annuities returns will depend on market conditions.
These are the ten things that help you choose the right annuity plan.