Need Expert Advice?Our Gurus Can Help

What's the Best Lump Sum Saving Option with Monthly Returns for a Retired Teacher?

Milind Vadjikar |974 Answers |Ask -Follow

Insurance, Stocks, MF, PF Expert - Answered on Nov 29, 2024

Milind Vadjikar is an independent MF distributor registered with Association of Mutual Funds in India (AMFI) and a retirement financial planning advisor registered with Pension Fund Regulatory and Development Authority (PFRDA).
He has a mechanical engineering degree from Government Engineering College, Sambhajinagar, and an MBA in international business from the Symbiosis Institute of Business Management, Pune.
With over 16 years of experience in stock investments, and over six year experience in investment guidance and support, he believes that balanced asset allocation and goal-focused disciplined investing is the key to achieving investor goals.... more

Asked by Anonymous - Nov 28, 2024Hindi

Hello sir, what is best lum sum saving option with monthly returns. Returns wise as well risk wise? Is it MIS, SWP or annuity? I have little idea of Annuity? Could you please explain in detail?

Ans: Hello;

POMIS has sovereign assurance being a GOI scheme but it has interest rate risk, low tenure, investment limit.

SWP typically will have a higher risk(depends on the fund type) but still it's risk is higher than other instruments and may have a higher return, although this is not assured.

In case of income from annuity, returns may be lower but it offers you fixed income in retirement for longer tenures.

Mostly insurance companies invest annuity corpus in central and state government securities, PSU bonds, AAA rated corporate bonds etc so can't say 100% safe but highly secure and safe.

Here's a brief information about annuities:

Annuities are types of pension plans where you make a lump sum payment to a life insurance company and get a regular income for a certain period of time or for life.

There are primarily two types of annuities:

1. Immediate annuity
This is a type of annuity plan that provides you with a guaranteed regular income immediately after you pay the lump sum premium.

2. Deferred annuity
In a deferred annuity plan, your income starts at a later date and you can choose when you want the regular income to start.

Based on type of regular monthly payments annuities could also be classified as Fixed annuity and Variable annuity.

Below are the various options available in an annuity plan:

A. Life annuity: In this option, you receive annuity for life. The frequency of payments is usually pre-decided by you at the time of the purchase of the policy.

B. Joint life annuity: This is similar to a life annuity. In this option, you receive annuity payments for life. In your absence, your spouse continues to receive annuity payments for life.

C. Life annuity with return of purchase price: This provides you annuity payments for life. In case of an unfortunate event, your nominee will receive the amount you paid at the time of the purchase of the policy.

D. Annuity payable for a pre-decided term: This provides you the option to choose the duration for which you would want to receive annuity payments. The period can be 5 years, 10 years, or more.

Best wishes;

Asked on - Jan 20, 2025 | Answered on Jan 20, 2025

Dear Sir, Can you please suggest which are the better annuity plans currently in the market. Can you please share with calculations if I invest 15 lakhs (of my mother) how much can we expect monthly return for next 10 years? What happens to the principal amount. Please guide as I have limited knowledge about Annuity plans. Also advise if POMIS or SWP is a better option.

Ans: Hello;

In line with the mandate of this forum to maintain neutrality we are forbidden to take specific names.

The pro's and con's of these avenues for generating retirement income is discussed in the previous answer.

You can have annuity corpus returned to your mother after a certain predecided term or in case life annuity the base sum will be returned to the nominee of annuitant.

Best wishes;

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.