An easy-to-browse ready reckoner for everyone, with lots of easy tips
LOOK BEFORE YOU LEAP INTO ANNUITY PLANS
1. Transparency in cost of a product refers to the details available to the investor with respect to his investment that goes into meeting its costs through declared charges, the amount that is invested, and the rate of return earned by his investment corpus to enable him to decide the value of the product.
2. A major problem with annuities from insurance companies is the measly returns of 6-7% which they offer, as the availability of long-term corporate bonds, which can generate better yields, are limited.
3. Besides the low returns, there is abject lack of transparency in the annuity market, as insurance companies are hesitant in divulging their annuity rates.
4. Many don’t have this information on their own websites, let alone the possibility of a single window comparison of the rates across insurers.
5. Unlike other financial products, in annuities investors have to consider the impact of service tax, as well as withdrawal being a taxable income.
6. A smarter way of planning a pension for your retirement years is to invest in long-term mutual funds to generate sufficient retirement corpus, so that you can easily do without annuity plans.
7. Having done so, use the facility of Systematic Withdrawal Plan (SWP) to receive a tax-free monthly pension for life.
8. Of course, an annuity plan may still be suitable if you do not have sufficient time left for building a healthy mutual fund portfolio as your retirement corpus for meeting your monthly expenses. 9. However, the fixed income annuity is not inflation-linked. 10. Their returns tend to be much lower than the Senior Citizen Savings Scheme (SCSS) or Post Office Monthly Income Scheme (POMIS).
2. A major problem with annuities from insurance companies is the measly returns of 6-7% which they offer, as the availability of long-term corporate bonds, which can generate better yields, are limited.
3. Besides the low returns, there is abject lack of transparency in the annuity market, as insurance companies are hesitant in divulging their annuity rates.
4. Many don’t have this information on their own websites, let alone the possibility of a single window comparison of the rates across insurers.
5. Unlike other financial products, in annuities investors have to consider the impact of service tax, as well as withdrawal being a taxable income.
6. A smarter way of planning a pension for your retirement years is to invest in long-term mutual funds to generate sufficient retirement corpus, so that you can easily do without annuity plans.
7. Having done so, use the facility of Systematic Withdrawal Plan (SWP) to receive a tax-free monthly pension for life.
8. Of course, an annuity plan may still be suitable if you do not have sufficient time left for building a healthy mutual fund portfolio as your retirement corpus for meeting your monthly expenses.
9. However, the fixed income annuity is not inflation-linked.
10. Their returns tend to be much lower than the Senior Citizen Savings Scheme (SCSS) or Post Office Monthly Income Scheme (POMIS).