Everything you need to know about annuity plans

Annuities provide you with a secure income after retirement for the rest of your life, but they have their disadvantages too. During your working life, challenges in achieving your retirement goal have to do with saving and accumulating enough. But once you retire, the major challenge is how to invest your savings so that you are able to live the rest of your life without financial distress. Indeed, the risk you run now is that you may outlive your savings. A retiree should first concern himself with creating a regular income flow that will substitute his or her salary and provide for a comfortable life. Many investment options are available that help you create a monthly income stream - Post Office MIS (POMIS), Senior Citizens Savings Scheme (SCSS), and annuities which are sold by life insurance companies. The National Pension Scheme (NPS) for its part also requires you to utilize at least 40 per cent of your pension corpus to buy an annuity when you reach the age of 60. What are annuities? Annuities do not provide life insurance cover. Instead they offer you a guaranteed income either for life or for a stipulated duration. They are specifically designed to protect an individual against the risk that he may outlive his own resources. Instead this risk is borne by the insurance company. Types of annuities Depending on when you buy them, annuities can be divided into two categories: deferred and immediate. Deferred annuity: A deferred annuity requires yo

This article was originally published on May 28, 2020.