Deferred annuity plans: Ensure retirement income with guaranteed return
Published by Business Standard
Abhishek Kumar's role: Quoted
Abhishek Kumar cautioned that fixed payouts may not keep pace with inflation and that steep surrender charges limit liquidity. He said these plans can suit people aged 45 to 55 with other savings, but not those without health cover.
What Abhishek Kumar said
Can a fixed annuity payout keep up with retirement costs?
Don't overlook what inflation does to your expenses in retirement. A fixed annuity payout stays the same year after year while the cost of living keeps rising, so the income may not keep pace with what you actually need to spend in the later years of retirement.
What happens if I need to exit a deferred annuity plan early?
These plans are not very liquid. If you surrender the policy early, steep surrender charges can cut deeply into the amount you get back, so I suggest treating money put into such a plan as committed for the long term rather than as savings you can dip into.
Who should consider a deferred annuity plan?
In my view, these plans fit people aged roughly 45 to 55 who want a steady income once they retire. They work well for those who already have other savings to fall back on and are unlikely to need to withdraw money early. If you expect to need the money before then, this is not the product for you.
Should someone without health insurance buy a deferred annuity?
I would advise against it. If you have no health cover in your retirement years, you could end up with a large part of your corpus tied up in annuities just when a medical emergency demands cash, leaving you short of liquidity. Put health cover in place before locking money into an annuity.
In our words, from what he said in the piece. General information, not personal advice.
More of Abhishek's views on insurance
The article explains deferred annuity plans, which build a corpus during working years and pay an income in retirement. It covers fixed-payout and market-linked versions, tax treatment, fees, surrender charges and payout choices, and who may find them suitable.
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Deferred annuity plans: Ensure retirement income with guaranteed return