How do you know if you need an annuity plan... is an annuity plan reserved for people who are approaching retirement or should younger people also consider investing in it? If these are some things you are pondering about, continue reading to find out.

Everyone can benefit from having a regular income post retirement to manage their expenses. That said, I’ve bucketed certain segments of the population that will find annuity plans particularly helpful.

People with dependants

The key advantage of an annuity plan is that it offers you a guaranteed fixed income for the rest of your life. And if your family includes members who are financially dependent on you for their financial needs, investing in an annuity plan would help you take care of their expenses even after you’ve stopped earning the regular income.

For instance, if you have children who are still dependent on you, or if you have a dependant spouse or your parents, the regular income that an annuity plan provides helps you manage their expenses even when you don’t have a primary source of income.

Fixed recurring liabilities

Even if you don’t have any members who are financially dependent on you, there may be a possibility that you may have certain fixed recurring expenses to meet on a regular basis. Such as house rent or an EMI that needs to be paid off.

As you would no longer have a regular stream of income, post-retirement it could get difficult to meet such recurring liabilities.

Here’s where the regular income of an annuity plan comes to your aid. You could use the regular annuity payouts to meet these expenses with ease.

Unfunded working populace

Maintaining the same standard of living after your retirement is no easy task. When it comes to the post-retirement life, most of the working population is either unfunded or underfunded. If you find yourself in this situation, it could lead to one of two things — it may either force you to work longer, or it could mean a considerable reduction in your standard of living post retirement.

However, the regular stream of annuity income gives you a security cushion on which you can fall back without having to make any compromises to your lifestyle. That’s not all. If you are a part of the working population, you can even get an additional advantage by opting for the deferred annuity option that some plans offer. With this, you can choose to make regular or limited premium payments instead of a lump sum amount. This ultimately reduces your financial burden. You can also defer your annuity payouts by around 10 years or so, making sure that the payouts commence post your retirement.

The soon-to-be-retired

One of the good things about annuity plans is their flexibility. Many plans come with a minimum entry age of 40 years and a maximum entry age of up to 85 years, giving you access to quite a large window to make your annuity purchase.

So, even if you are a part of the segment that is fast approaching their retirement or the segment that has very recently retired, you can still purchase an annuity plan and enjoy its benefits.

In fact, you could use your other retirement benefits such as the provident fund, pension, and gratuity payments that you may receive upon completing your work tenure to invest in a good annuity plan.

With the immediate annuity plan option, your payouts start as soon as you have made the lump sum premium payment, thereby allowing you to reap benefits without any deferment. This makes it a preferred option for individuals who haven’t put enough thought into their post-retirement plans.

Leaving behind a legacy

Globally in general, and in India in particular, parents often want to leave behind a legacy for their children.

With an annuity plan, you’ll find that creating and leaving behind an adequate legacy is easier than ever. By choosing options like ‘Return of Purchase Price’, you can ensure that your beneficiaries receive the capital of the annuity plan in the event of your demise. This way, you would be leaving behind a legacy that could be used by your beneficiaries.

Looking for joint protection

Most annuity plans come with a joint life option. This means you can choose to add your spouse for a joint life payout and create a strong financial security for your lifetimes. In a joint life annuity, payouts are first made to the primary annuitant.

In case of the primary annuitant’s demise, their spouse, who is the secondary annuitant, continues to receive the annuity payouts. This way, you can be assured that your spouse can meet her/his post retirement expenses even in your absence.

Taking all of the above points into consideration, one thing is clear that having a suitable annuity plan is a must for most individuals, irrespective of the life stage or the phase of their working career. Further, the surging living and healthcare expenses along with improved life expectancy makes it imperative to have a regular income for your post-retirement life.

The writer is chief financial officer, Bajaj Allianz Life