An annuity is a financial product sold by life insurance companies to generate a fix regular income for rest of your life….(read more)
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What is an Annuity and How Does It Work?
Annuities are a type of financial product that can provide a steady income stream during retirement. They are popular among individuals seeking a reliable source of income once they stop working. In this article, we will delve into what an annuity is and how it works.
An annuity is essentially an agreement between an individual and an insurance company. The individual pays a lump sum or makes periodic contributions to the insurance company, known as the annuitant. In return, the insurance company promises to provide regular payments in the future, typically during retirement. These payments can start immediately or be deferred until a future date.
There are different types of annuities available, each with its own set of features and benefits. Fixed annuities guarantee a fixed amount of income throughout the annuitant’s lifetime. With this type of annuity, the insurance company assumes the investment risk and guarantees a specific rate of return.
Variable annuities, on the other hand, allow the annuitant to invest in various mutual funds or other investment options. The income payments from variable annuities depend on the performance of these investments. Though these annuities offer potential for higher returns, they also carry more risk compared to fixed annuities.
Another type of annuity is the indexed annuity, which provides a return based on the performance of an underlying index such as the S&P 500. These annuities typically have a minimum guarantee, ensuring that the annuitant won’t lose money even if the index performs poorly.
Annuities also have different payout options. The most common is the life annuity, which provides regular payments for the rest of the annuitant’s life. However, there are variations to this option. For example, joint and survivor annuities continue to pay the surviving spouse or partner after the annuitant’s death. Alternatively, annuitants can choose a certain period guarantee, where payments will be made for a specified number of years regardless of life expectancy.
While annuities provide a secure and regular income stream, it is important to understand their potential downsides. One major concern is that annuities are illiquid, meaning it can be difficult to access the principal funds once they are invested. Additionally, annuities often have high fees and surrender charges if the annuitant withdrawals money before a certain period of time.
Overall, an annuity can be an effective financial tool for retirees or those planning for retirement, as it offers a guaranteed income stream to supplement other sources of retirement income like Social Security or pension plans. However, it is crucial to carefully review the terms and conditions of the annuity contract and consult with a financial professional to determine whether an annuity is the right choice for your individual financial situation.
Kalua
ALTHOUGH ANNUITY IS NECESSARY BUT HAVING STEADY INCOME IS MORE CRUCIAL FOR YOUR RETIREMENT PLANNING. Big ups to everyone working effortlessly trying to earn a living while building wealth. I'm 40 and my wife 34. We are both retired with over $3 million in net worth and no debts. Currently living smart and frugal with our money. Saving and investing lifestyle made it possible for us this early even till now we earn monthly through passive income.
What if you purchase annuity for life but dies the next year after retirement?
What is the rate of tax on Annual return ? and any Income proof should I give to Insurer for my Investment ?( 1 lakh above ). Kindly explain
What happens to annuity plan after person's death?
Last year, I made a property sale and had over $1 million in proceeds. I allocated $400k to index annuities and put the rest in the trending High Frequency Trading style. So far I've more than doubled the annuity premium from the stock market and sure enough will not need an annuity for the rest of my life. However I won't discredit annuities in any way, they buy you peace of mind but then a lot of people buy them out of fear of what's yet unknown even when it's not the best decision for them. If you need growth, try other stuffs. Annuities should be a backup plan, just like an insurance. Concepts like HFT/ algo trading and diversification of assets can be of great help for growth oriented individuals while still retaining control of your money.
Hi ! What would be tax treatment when individual start receiving annuity.
Nice & informative video. Just have one query., When to select annuity scheme & service provider. While investing in NPS or at the age of 60 after the maturity of NPS.
As i want to invest in NPS, i am not getting option for selecting annuity related option.
Such a great session thank you
Annuities are garbage with their high fees, low ROI and lack of access to cash.
Great Video !!
Great video sir… I get selected in Hdfc retirement annuity … Where I sale annuity and please tell regarding job profile for sales manager which customer focus it
Thanking you
After nominee s death, what will be amount status. Is the family members eligible
If nominee Also got death along with pensioner, what about net annuity amount.
Agr kisi subscriber ko annuity options or annuity purchase, asp selection, exit form fill, or any others help related NPS can message me.. I will help those subscriber whether they are govt or private sector employees.
I entered video looking at the animation….your explanation didn't make me skip the video… thank you
Can you provide your contact please
Thank you:)))
Sir Which is best Annuity plan and company U have in your observation so far?
Concept is clear now sir….Thank u sir
How to apply Monthly pension after death claim process
AFTER DEATH CLAIM( 20 % LUMPSUM) PROCESS HOW TO APPLY MONTHLY NPS
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Well explanation sir
Please suggest for NPS government employee ,which return is best . I.e high monthly return to death, monthly income and assets return to nominee or forwarding of monthly income for family.
my money stucked into annunity , how to exit sir? Please explained it. Annunity rates are same as fixed deposits. And that was ruined my huge amount , my father scolded me why you bought insurance you idiot and scolded me. I am now in trap of annunity of LIC india. Can i close annunity? I already commuted 25% of jeevan suraksha plan -1 and i got only 90th commuted portain and other goes into annunity about 3 lak
Very well explained sir
Great explanation
Great!
whether annuity limited to fixed time period or perpetual?
Sir can we connnect this with compound interest
Isn't this a perpetuity?
Thank You Sir. It really worked out for me.
Since this is a taxable income, is there any way to have taxes removed before we receive it? Kinda like a paycheck from our jobs?
Why will anyone write away their capital just because they want fixed income? You can always created a ladder of FDs such that there is one FD that is maturing at the end of each month/quarter whose interest can be used as the "regular income" and then renewed.
Just divide your corpus into 4 and invest them in a laddered manner such a way that in each quarter there is 1 FD that matures. By doing this you will get
* 80C exemption for the amount invested (create a 1.5L FD for 5 years every April)
* 50k exemption for the interest amount received.
* Your principal is always with YOU and you can use it when ever you need it or pass it along to your loved ones.
Annuity is just plain BS.
Sbilife retire smart plan kaisa hai sir?
Great video – just a small doubt –
since, in this video its mentioned that the difference between annuity and FD is only on the basis of interest rates at which you are paid back ( FD would have it variable and annuity will give at a fixed rate) – what would be the difference between a variable annuity and an FD then?
i was very confuse about annuity though after ur explaination it clear to me.
Rupees??
annuities are a scam