How To Plan For Retirement According To Your Age?
Published On Feb 06, 2022 11:30 AM By InsuranceDekho
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It is important to perform appropriate retirement planning in order to have a stable source of income after retirement. The most important requirement for leaving in peace would be to have sufficient cash reserves to cover everyday costs as well as any unexpected expenses. Every individual's long-term objective is to build a robust retirement portfolio. It is critical to plan ahead of time and begin investing in retirement funds in order to build a robust retirement corpus.
The main concern of a retired person is having a steady income. An annuity is a form of financing that pays a set amount of money every month for the rest of the person's life. Annuities are becoming more popular in the market since they provide guaranteed income and consumers are looking for a better approach to manage their retirement assets. We quickly examined two alternative annuity choices in this post and what is a better choice for retirement planning. To know more about deferred and immediate annuity, read on.
About Deferred Annuity
In contrast to an instant annuity, a delayed annuity requires the policyholder to invest a predetermined premium on a monthly or annual basis for a certain period of time. The collected fund is being used to acquire an annuity when the policy's premium payment period has ended. A deferred annuity plan, on the other hand, allows the insured individual to take just 1/3 of the accrued cash, which is tax-free. The remaining 2/3 of the corpus is utilised to purchase an annuity, which will provide the insured with a guaranteed regular income after retirement.
About Immediate Annuity
Individuals who desire to invest in their later years might consider an instant annuity plan. In an instant annuity plan, the policyholder pays a lump-sum premium to the insurer all at once, and in exchange, the insurer begins making monthly payments to the insurer in the form of annuities. It's a good option for folks who are approaching retirement age and have the money to buy an annuity right away.
What Should You Look For When Buying Annuity?
An annuity is a lucrative financial product that aids in the retirement planning process. The payment of an annuity is determined by whether the individual has chosen a variable or fixed income. If a person is 30 years old and wants a monthly income of Rs.1 lakh when he retires at the age of 58, he will need to invest Rs.16,000 each month in a delayed annuity plan, assuming an annual rate of return of 8%. In an instant annuity plan, if a person is 55 years old and invests Rs.50 lakh in a lump sum, he will earn about Rs.4 lakh in monthly pension payments for the rest of his life.
Purchase of an Annuity Plan Has Tax Benefits
The money you put into an annuity is tax-free. The annuitant has the option of withdrawing 25-33 percent of the annuity, which is tax-free. The plan's income, on the other hand, is taxed at the appropriate income tax rate. If a senior citizen's income is well below the appropriate tax slab limit, no tax is due. If the older individual does have taxable income, however, advance tax laws will apply.
Retirement preparation is essential for a happy and secure retirement. With your present wages, an annuity plan can help you achieve this. You don't have to worry about your money since the insurance company invests it for you. Your goal should not just be to put money into a retirement plan, but to pick the best investment product to help you build a solid financial cushion for a comfortable retirement. According to experts, the best strategy to pick an annuity plan is to look at the annuity plan's track record rather than being swayed by the product feature of the advertising.