Annuity options you can consider before planning for retirement

An annuity is a financial investment for retirement that provides you with a fixed and regular income. However, before you decide, you need to closely study all of the available options.

1. Pension with repayment on death

What it is: RoP (Return of Premium) is an annuity option that guarantees fixed annuity payments to the annuitant throughout their lifetime. Upon death, the initial amount paid to purchase the annuity goes to the annuitant’s nominee.

Who Should Buy: “For people with dependents who are concerned about the needs of their loved ones, an annuity with RoP will be an appropriate choice,” said Bharat Kalsi, CFO of Bajaj Allianz Life.

2. Joint and survivor pension

What it is: This type of annuity option covers an annuitant and their spouse. Under this option, an annuity is paid until at least one of the insured is alive.

Who Should Buy: Retirement is when earning capacity is low or zero, but living expenses continue, especially when you have dependents, including a spouse and children. This is where a life annuity option comes in handy, ”Kalsi said. The plan ensures that you receive regular income throughout your life and, upon death, your spouse will receive a lifetime pension. In addition, the life annuity also comes with a purchase price repayment option, which is again a very relevant feature, because on the death of both annuitants, the nominee gets the purchase price.

3. Increase in the salary pension

What it is: In this type of annuity plan, the payment increases at a fixed rate annually where the plan holder receives an additional amount predefined in the plan.

Who Should Buy It: “People who want to keep their lifestyle on par with increasing spending and market inflation should take this opportunity to avoid any financial problems. This gives the plan holder confidence that they will be able to manage their regular expenses and meet their responsibilities, but it is not directly related to the rate of inflation as it increases at a fixed rate and decided in advance by the insurance company, ”explains, Naval Goel, Founder and CEO, PolicyX.com.

4. Level annuity

What it is: A level annuity pays the same amount for life. This type of annuity is not indexed to inflation. Moreover, for this reason, it can be classified as a “reducing annuity” because over time inflation can erode the real intrinsic value given on regular payments.

Who should buy: Goel said, “If a person has invested enough in his annuity plan that he thinks it will be enough to sustain his life and meet all of his expenses despite any increase in prices or inflation, then he may opt for an annuity level. “

5. Life annuity

What it is: This is the simplest form of annuity where predetermined and regular payments are made to the annuitant for their life. Payments can be monthly, quarterly or annually, depending on the annuitant’s needs. The income from the annuity does not end until the annuitant dies.

Who should buy: Annuity plans are designed to provide guaranteed income for life in retirement in order to meet retirement goals. “The life annuity is the only financial product that can give a predetermined guaranteed income until one is alive (even beyond one hundred years),” Kalsi said.

A life annuity option allows the annuitant to receive a series of fixed future payments to maintain their lifestyle even after retirement, thus ensuring that the risk of a long life is financially guaranteed by the insurer. This annuity option is suitable for every individual, regardless of profession, age or gender, as it tends to yield higher returns.

6. Annuity payable for a guaranteed period

What it is: In this case, the annuity must be paid for a defined period, whether or not the person dies during that specific period. And the annuity ends either on the death of the annuitant, or at the end of the guarantee period.

Who Should Buy: People who are concerned about the risk of losing annuity payments due to premature death may choose this option.

7. Annuity with RoP on survival

What it is: This option gives the annuitant a life and survival benefit. Here, the annuitant has the option to start receiving RoP at a predetermined age.

Who should buy: The survival annuity ensures that the annuitant receives guaranteed payments throughout their life. After the specific retirement age, recovers the invested amount of the annuity through the purchase price return function, the annuity continuing thereafter. This annuity plan is also known as the survivor benefit and is popular with people who are past the retirement age. The survivor benefit of this annuity option can help them manage unforeseen medical costs associated with old age.