by Sanjeev Kumar Gopalakrishnan, Investing
03 Nov , 2018

Annuity products - An Option Worth Considering during Retirement Planning

Retirement planning has become more a necessity than an option, with increased life expectancy, changing social norms forcing a nuclear family form of living, and increasing lifestyle diseases. Most people in their 30s and 40s are concerned about leading the extended post-retirement life and about their spouses after their lifetime. With a certain standard of living that we are used to, we would definitely need a sizeable monthly income to lead a reasonably healthy retired life. But most of the investment plans focus on delivering a certain sum around the retirement age and they hold no guarantee of lifetime returns. Annuity products come with the promise of long-term benefits in terms of a lifetime of confirmed income not just for you but also for your spouse. These products are steadily increasing in popularity, with many organizations transferring a portion of the employee’s superannuation money into annuity products.

There are lots of questions about the annuity products. Are these pensions? Are there any options within these products to choose from? Let’s find out.

What are annuity products?

Annuity  refers to a regular payment that you and your spouse receive at predefined intervals  based on a lump sum that you invest earlier on in life or immediately.  These become a regular source of income for your and your spouse’s lifetimes. Pension is a type of annuity. Annuity has many benefits. It gives you the assurance that your money will be beneficial to you for your and your spouse’s lifetime. You have the option to decide when you need this income – right away or after a specific period of time. You can also choose when you the period until which you would want to defer this payment and how often you would want to receive the payment. Most types of annuities are not influences by fluctuating market situations.

What are the types of annuity products?

There are many types of annuity products based on their length of coverage, the format of returns, and many other parameters.

A lifetime annuity product delivers on the promise of income for your lifetime, but at the interest rates prevailing at the market during the time. A variant of this product delivers income until the person is alive. The entire capital is provided to the nominee after the person’s lifetime.  A guaranteed annuity product provides consistent and guaranteed income for a predetermined period of time.  After this period, if the person is living, then it converts to a lifetime annuity. In certain products, the guaranteed income increases by a definite value over a period of time. You can choose an immediate annuity if you start on the plan late.  In this case your get the guaranteed income depending on the frequency you choose as soon as you take up the annuity. Depending on the type of deferred annuity you choose, you might get a predetermined income or an income that depends on the market value at that time. But if you start at a younger age and are looking for a post-retirement income, go in for a deferred annuity. In this case, while you pay the initial lump sum earlier, your income will start after a pre-determined number of years.

Invest in annuity products today

Annuity products are one robust option you have to ensure that you have a stable source of income at a definite frequency for the rest of your life. This form of guarantee secures your retired life to a great extent, and for your spouse after your lifetime. But before blindly investing in a product please do check with an expert financial advisor or an investment advisor about the different options and types of products available and their possible benefits and drawbacks.

PrognoAdvisor is your trusted online financial planning service from India, with extensive expertise in understanding your specific financial and life goals and guiding you achieve these goals with confidence. Connect with our financial advisors at to understand how you can simplify the entire process of personal financial planning.


 About The Author

Sanjeev Kumar G, an IBS Chennai Alumni, is a Certified Financial Planner (CFP) from India, since 2005. He has 22 years of experience and is an expert in various personal finance areas like portfolio construction, investment research, life insurance and financial planning.


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