Annuity plans, decoded: a simple way to lock in retirement income

What’s an annuity, really?

An annuity is a deal with an insurer or financial institution: you pay them (once or over time), and they pay you back a fixed stream of income at regular intervals—monthly, quarterly, half-yearly, or yearly. Think of it as converting your savings into a personal pension.

Two phases you should know

There’s an investment (accumulation) phase, where you put in a lump sum or periodic premiums that the company invests. Then comes the payout (distribution) phase, where your money returns to you as scheduled income for a chosen period—or even for life.

Fixed annuity: for “no surprises, please”

Here, the income rate is locked on day one and stays the same throughout. Market swings don’t change your payout, which is why this suits conservative investors who value certainty over chasing extra returns.

Variable annuity: for market-linked upside seekers

Your payout can rise or fall with market performance. That means no guarantees on the amount, but potentially higher income over time. It’s for investors who can handle volatility and want growth to do some heavy lifting.

Immediate annuity: income starts now

No waiting. You invest a lump sum and the income begins right away. This is handy if you’ve just retired, have a corpus parked, and want monthly cashflows to start without delay.

Deferred annuity: plan today, draw later

You invest over years, then start the payouts at a future date you choose. Ideal if you’re still a few years from retirement and want to lock in a future income stream while you keep building the corpus.

How to choose what fits you

Match the product to your temperament and timeline. If you hate surprises, a fixed or immediate annuity can steady your budget. If you have time, a deferred annuity can set up income for later. If you’re comfortable with market risk, a variable annuity can add growth potential—just be ready for swings.

Frequency, tenure, and cashflow comfort

Decide how often you want the money (monthly works best for most household budgets) and how long you need it (certain period vs. lifetime). The sweet spot is a payout that covers essentials without forcing you to dip into volatile assets at the wrong time.

Use annuities as part of the plan—not the whole plan

Annuities are great at guaranteed income, not at beating inflation or funding big, one-off goals. Pair them with equity funds, debt, and emergency liquidity so your overall plan can handle inflation, health shocks, and market hiccups.

Quick buying checklist

Check the insurer’s claim record and solvency strength. Compare annuity rates across providers. Understand surrender/exit rules (most annuities are rigid). Clarify beneficiary options and what happens on death. Read the fine print on charges and any escalation features.

Bottom line

Annuities turn savings into steady paycheques. Pick the type that matches your risk comfort and timing, use them to cover your must-have expenses, and let the rest of your portfolio chase growth. That mix buys you calm—and choice—after 60.