A guaranteed income stream post retirement

Millennials, who constitute the majority of India’s population, are finding it difficult to save for retirement. This was revealed in a survey conducted by Kantar in 2019, on India’s Life Goals Preparedness, where only two in five millennials were focused on retirement goals. In just a few decades, the number of India’s millennial population is soon to step into the aging segment who are preparing for retirement without a regular income stream.

According to a PFRDA- CRISIL report, by 2050, the percentage of Indian population above the age of 60 is likely to rise from 8.9% to around 19.4%. With the improved life expectancy, it is only essential to have a robust retirement plan, which will help millennials meet their living and health care expenses throughout their retirement life. This is where annuities stand out, as they offer guaranteed regular income as long as one is living. This is possible as the insurance plan locks the annuity amount at the time of buying the policy, and that stays fixed for lifetime.

Here’s a closer look at how an annuity plan can help millennials secure their post-retirement life with a guaranteed income stream.

Guaranteed income throughout your life

The periodic payouts that you receive upon purchasing an annuity plan continues till your lifetime, allowing you to continue to maintain your standard of living without any compromises
whatsoever. And the payouts in an annuity plan can be locked in at the time of buying the policy. This ensures that you receive a guaranteed and steady stream of income throughout
your entire life at a fixed rate of return. In some annuity options that offer joint life coverage, the annuity amount is received till the death of the second annuitant. This guarantees liquid
and reliable financial support for your spouse as well.

Immediate liquidity

Liquidity is an important factor to consider when it comes to planning for your retirement. Having all your funds tied leaves you with little to lean on to meet your everyday needs. In
addition to this, having all or most of your money tied up in illiquid instruments leaves you grossly underprepared to meet emergency expenses in life. Annuity plans can help take care of
this need for liquidity. With an annuity plan, you can pay the lump sum premium amount and choose to receive the payouts immediately thereafter. This immediate annuity option ensures that you don’t end up waiting around for your payouts to start. And it gives you a comfortable and convenient headstart to your post-retirement life, with a guaranteed stream of income to rely on even if you do not have your salary or income from your profession to fall back upon anymore.

Option to receive the purchase price back

Many annuity plans also come with a ‘Return of Purchase Price (ROP)’ option. Such plans make regular annuity payouts as per the policy conditions. In the event of your survival beyond a predetermined age, the purchase price is returned to you in the form of a survival benefit. In the event of death, purchase price will be returned to the nominee. This further adds on to the liquidity of annuity products.

While there are other ways of saving for retirement, investing in an annuity plan is one of the preferred option because of the guaranteed income stream on offer. The guaranteed source of income will ensure that you don’t outlive your assets and your post-retirement goals are backed by a financial corpus. Also remember, it is not just about building a large corpus but it is also about making sure the corpus lasts longer.

(The writer is Chief Agency Officer, Bajaj Allianz Life)