Pension vs Annuity: Which Retirement Income Option is Right for You
Planning for retirement is just as important as finding a good job when you are young. When you retire, your savings will help you live. However, you need a retirement income to have some luxuries, emergency funds, or even supplement some expenses.
An individual who is planned & prepared will be more successful in reaching his goals in comparison to an individual who does not.
To help you plan on which retirement income option is right for you, here is a guide on the pension plan vs an annuity plan:
Let us first understand what a pension plan is & what an annuity plan is.
A pension plan is a financial investment that helps you regularly invest your salary or earnings to accumulate wealth for your future. It comes in two phases, first, wherein you get wealth and second, is the vesting stage that is triggered when you retire.
An annuity plan is another type of retirement plan that helps you accumulate your savings, which serve as a retirement income for your future security.
Now that we have established a base level of understanding for a pension plan vs an annuity plan, let us dive deep into SBI Life Insurance Company Ltd’s Annuity plans & pensions plans.
Pensions Plan:
- It is a fundamental investment option to build a retirement corpus. Retiring with a substantial fund & accounting for the inflationary reduction in the value of money helps a lot. SBI Life Insurance Company Ltd offers a couple of straightforward retirement plans wherein you can start investing as early as 18.
- You can calculate your premium using the retirement calculator. It considers your age, gender, retirement corpus needs & whether or not you need a rider & then provides you with the details you need.
A pension plan is as easy as a traditional retirement plan. It also provides you with an option to avail some tax benefits.
Annuity Plan:
- An annuity plan comes with a lot of financial freedom, which helps you enjoy your retirement life with financial freedom. It also provides a regular income to help you meet your expenses.
- In most cases, you must be at least 30 years of age to invest in annuity plans, which will help you avail & plan your retirement better. Your annuity can be annual, quarterly, monthly, or even half-yearly.
- Individuals whom the government employs will have to invest in NPS in a monthly mode to invest mandatorily.
Essentially both these retirement plans are better depending on what your needs are & what you want out of the retirement income. An annuity plan may be for you if you are looking for security against market volatility and tax-deferred growth. However, even these plans come up with several drawbacks.
It becomes crucial to compare multiple plans & options before investing in a retirement plan.
