What is Deferred Annuity?
A deferred annuity is a life insurance plan designed specifically for your retirement that offers you a fixed income from a future date chosen by you. Deferred annuity plans enable you to save money during your earning years and earn income during your retirement. This income helps you stay financially prepared to fulfil your post-retirement goals such as buying a house, traveling, pursing a hobby, starting a new venture, and more.
How do Deferred Annuities Work?
Deferred annuity plans provide you with fixed income during your retirement. In regular pay deferred annuity plans, you pay premiums for a certain number of years and, depending on the plan option, may or may not have to wait for a certain period post which your income begins and continues for life. In Single pay deferred annuity plans, this premium is paid by you all at once post which your income begins after a certain waiting period also known as deferment period. Depending on the plan you choose, you may invest money in the plan monthly, half-yearly, yearly or all at once as per your convenience.
The income that you will receive from the plan is fixed at the time of purchasing the plan. This keeps you assured and allows you to plan your financial goals accordingly. The income from the plan is free from market conditions. This ensures that your hard-earned money is secured.
Deferred annuity plans offer multiple plan options, allowing you to customise the plan as per your requirements. You may choose to cover your spouse and your loved ones as well. You may also choose to get your premiums back at the end of the plan.
Benefits of Deferred Annuity
Choice of Deferment Period
Deferred annuity plans offer you the option to choose when you wish to start receiving regular income, at a later age
Deferred annuity plans are low-risk, safe investment instruments for retirement. They offer a fixed income for life, free from market-related volatility. This helps you plan for your post-retirement goals.
Deferred annuity plans offer tax benefits under Section 80C of The Income Tax Act, 1961. The premiums paid under the policy are eligible for tax deductions under Section 80C.
You may consider buying a deferred annuity plan if you want a safe and reliable source of retirement income. Deferred annuity plans offer the flexibility to choose when and how you receive your income. These plans can be considered if you have some years left to retire and do not need money right away. However, if you are looking for immediate income for your retirement, you may benefit from immediate annuity plans.
It is important to carefully consider your retirement needs and goals before deciding which type of annuity is right for you.