Many people aspire to have a predictable income. This aspiration motivates them to go the extra mile and save during their working lives. For working professionals who are accustomed to steady income inflows, the continuity, albeit at a lower level, provides a psychological boost and makes retirement more peaceful by alleviating financial worries.
The need to prepare for retirement has grown due to increasing life expectancy and rising cost of living. There is a lingering fear of outliving savings - an undesirable situation that can lead to anxiety and take a mental toll.
To address this need, insurance companies offer annuity products that provide steady income stream tailored to retirement needs. This product aims at assuaging fears of being unable to support oneself during retirement.
WHAT IS AN ANNUITY?
An annuity, a retirement product, is a contract between the insurance company and an individual, also known as the annuitant. In this contract, the insurer guarantees an income payout, either immediately or after the completion of the deferment period.
In an annuity plan, an individual can choose to invest a regular sum (resulting in an accumulation of corpus over the years), or make a lump sum payment as a single premium. The corpus will be managed by the annuity provider, who commits to providing a regular income based on the terms and conditions outlined in the contract.
An annuity is akin to a pension, which government employees receive after retirement. Most private sector employees are not provided pension benefits after retirement, which makes retirement planning vital.
The two basic features of available annuity plans include immediate annuity or deferred annuity.
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