Annuities: You plan, you save, you hope. Retirement is the moment you trade a steady paycheque for something quieter, something earned. But that quiet doesn’t have to be uncertain.
You’ve built your life one salary at a time. Now, you need something that brings the same stability. That’s where annuities step in. Not flashy. Not risky. Just consistent income, delivered on time.
What Is an Annuity?
An annuity is a formal agreement between you and an insurance company. You pay them a lump sum or make payments over time. In return, they give you regular income either right away or in the future. It’s not complicated. You invest money now, and the insurer ensures you get payouts later when you need them the most.
Annuities appeal to people who do not have access to a pension or want a secondary source of income post-retirement. They provide structure and predictability when regular employment ends.
Types of Annuities in India
In India, annuities usually come in two main formats. Each caters to different stages of life and financial goals.
Immediate Annuity
You make a one-time payment. The payouts start almost immediately, usually within a month. This option suits people who are retiring now or have already retired. It’s quick and efficient.
Deferred Annuity
This type lets you invest gradually or with a lump sum. The payouts begin after a few years. It works well for working individuals. It helps lock in a steady income stream for the future.
Beyond these, there are variations in how the payouts work. Some plans offer:
- Lifetime annuity: You receive income for the rest of your life.
- Annuity with return of purchase price: Your nominee receives the invested amount after your passing.
- Joint life annuity: You and your spouse continue receiving income until both of you pass away
Why Consider an Annuity?
Here are a few reasons why annuities are gaining attention among Indian retirees.
- Stable Income: The payouts are fixed. Market changes don’t affect them. That kind of reliability is hard to match, especially when stock markets feel unpredictable.
- Predictable Returns: Annuities are not meant to beat inflation or deliver high growth. They’re built for people who want regular, known amounts to manage their monthly needs.
- Custom Payout Options: You can select how often you receive payments: monthly, quarterly, or annually. You can also choose whether the plan covers only you or includes your spouse. But remember, once selected, these choices are usually locked in.
- Tax Considerations: Income from annuities is taxable as per your income slab. However, if the annuity is purchased through a pension plan, you may claim a deduction under Section 80CCC. This falls under the overall ₹1.5 lakh limit allowed by Section 80C of the Income Tax Act.
A Few Things to Keep in Mind
Annuities do not offer inflation protection. Your payout stays the same even as the cost of living increases. Over time, what feels like a comfortable amount today might fall short tomorrow.
Also, once you invest in an annuity, the money is usually locked in. This means it may not suit people who need high liquidity. It will be helpful to access emergency funds too.
Government schemes like the Pradhan Mantri Vaya Vandana Yojana (PMVVY) are structured like annuities. They can be useful for senior citizens seeking guaranteed income.
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Conclusion
Annuities aren’t complex. They don’t promise massive returns. But what they do offer is far more important to many retirees.
You don’t have to be nearing retirement to evaluate your choices. The earlier you start, the more confident you’ll feel about the future. Read each plan carefully. Look at what suits your lifestyle. And if you’re unsure, speak to a financial advisor.
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