Why should you consider annuity products amid falling interest rates? Here are key reasons

livemint.com:

retirees prefer to receive regular guaranteed income which does not fluctuate. Knowing the cash-flows helps them to plan their lifestyle better. Let us understand this better with the help of an example.Mr.

Rao, on retiring at the age of 58 invests his savings in a fixed income instrument which gives him monthly income. However, a few years later, when his investment comes up for renewal, the interest rate has fallen resulting in a fall in his monthly income. This means he will have to compromise on his standard of living.Now, let’s consider a scenario where Mr.

Rao invests his savings in an annuity product. The rate of interest is locked-in when he purchases the product and this remains constant throughout his lifetime, irrespective of interest rate movements.Furthermore, if Mr. Rao chooses the ‘Joint-Life’ option in his annuity plan, this will ensure guaranteed regular income for his wife after his demise.

Notably, annuity products can also be used as a legacy planning tool if Mr. Rao chooses the ‘Return of Premium’ option. This will ensure the investment made is paid out to the nominee upon the demise of the joint holder, in this case.As India continues to stay on its journey of becoming a developed economy, interest rates are expected to drop.