You have reached that stage in your life when retirement is just around the corner. A small bend and you will reach the end of your working career. Of course, if you are fit and capable enough, in today’s day and age, you would still be getting enough opportunities to work and earn money. But in any circumstances, your income earning capabilities may be limited. You would definitely want to save some money for your retirement, won’t you? You would want to have the stability of a secure amount that you would get when you are no longer drawing a monthly salary. How will you ensure that? With annuities.
What are annuities?
Annuities are life insurance plans that provide an assured income after a certain period for the rest of your life. The life insurer makes payment of a fixed income either monthly, quarterly or annually in return for a premium that you pay regularly till a certain period. So, in effect, you make payment of a fixed sum every year in return for an assurance that you will receive a fixed sum on retirement till the rest of your life. Annuities have two clear phases; first is the accumulation phase where premiums are collected, and second is the distribution phase in which the regular payouts are made.
This is the singularly outstanding feature of annuities. For retired people, having the assurance of a secure and stable monthly income is worth its weight in gold. Retirement means that you may not have the kind of income that you were earning during your productive years. Also, with your advancing age, an increase in medical expenses is highly likely. Considering all this, your lump sum savings may get depleted due to a medical emergency or perhaps you needing to get some major repairs done to your home etc. In such a scenario, it is imperative that you have something that gives you a steady income stream to meet your recurring expenses.
No re-investment risk
Annuities completely do away with the re-investment risk. It is highly possible that in the case of lower interest rate regimes, when you go for reinvestment of your principal proceeds, you may get a lower rate of interest. This happens typically in the case of short-term investments like bank fixed deposits, post office small savings etc. This is not the case with annuities as you are guaranteed payouts on a fixed rate for life. This offers you peace of mind as you know that whatever happens, you will be receiving a fixed sum every month for the rest of your life.
Annuities are perhaps the only instrument that can provide you with a lifetime income in exchange for an investment of yours savings. It provides the option of a guaranteed, secured, and assured payout on a regular basis for life. Log onto Planned Future for more information on our annuity and pension plans.