“Should I buy an annuity?” Depending on your needs and goals, you will get different answers to this question.
Are you looking for income sources that will keep going as long as you do? Is the idea of running out of money in retirement haunting you?
Then annuity is the right option for you as it’s an insurance product that turns your invested money into a stream of Investment with returns and ongoing income. It provides you with a secure income after retirement for the rest of your life.
Once you invest in the annuity, you receive the payments on series of future dates. The income can be received monthly, quarterly, annually or even as a lump sum amount. Being an insurance product that proves to be your regular investment with returns, an annuity can be used as part of your retirement strategy.
Following are the factors which make annuity a great choice as your investment vehicle:
Stable Rate of Interest
You know the annual interest rate of the fixed annuity from the moment you buy it. Hence it is easier to determine the exact worth of your investment at the end of the term as the rates are stable and do not fluctuate.
Regular Income Stream
An annuity is a low-risk investment stream as it is not subjected to the fluctuations of the stock market. A guaranteed reliable source of income is the most significant benefit of an annuity. There are some annuity plans which offer lifetime annuity with an option to increase the amount annually.
Buying an annuity is a safer option than bond or shares whose prices can fluctuate. However, buying a fixed annuity and holding it for the entire term is a safe and a conservative way to grow your savings.
Ample Investment Options
You can invest in different types of annuities as per your needs and investment goals. Fixed annuities offer a fixed rate of return for a specified period of time whereas variable annuities fluctuate with market conditions as they include a variety of investment options, like stocks, bonds, and other market instruments.
Provides Death Benefits
If a person who owns a fixed annuity dies, the entire money goes straight to the beneficiaries on the annuity contract. IN this way, you can ensure the financial security of your spouse after your death.
Tips to buy annuity:
- Compare various options and take your time to investigate the marketplace
- It is always a good idea to consult with your spouse or beneficiaries about your decision
- Remember not to put all your eggs in one basket,e. don’t invest everything into an annuity
Monthly investment plans are the best choice when it comes to your financial planning and getting good options for investment with returns. At the same time if you are a conservative investor, then these plans will help you earn marginally better returns than a debt-only portfolio.
‘Rupee Cost Averaging’ is one of the very significant reasons why investing in a monthly investment plan must be considered by every investor planning for his retirement. The rupee cost averaging factor takes out any market ups and downs in the long term, allowing you to gain maximum benefits over time. You can start investing with Rs 2,500 per month by allowing auto debit of the investment amount without worrying about missing out on any monthly investment. In case you die during the policy tenure, your nominee will get life cover and prevailing fund value as a lump sum amount. It means, you can secure your family’s future even in your absence.
An annuity is still the most popular way of turning your savings into a regular income source after retirement. While buying an annuity, make sure you shop around for one that’s right for you as it is a big decision.
Also, instead of putting all your money in an annuity plan, diversify your investment portfolios with options, like equity funds, ULIPs, PPF etc.