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Video instructions and help with filling out and completing Simple ira compensation definition
You an annuity is a financial product are sold by life insurance companies to help you generate a fixed regular income for the rest of your life so let me explain how this works you pay a lump sum amount to the insurance company say 10 lakh rupees in return the insurance company will pay you let's say around 70 thousand rupees every year for the rest of your life of course you can choose to take the 70 thousand on a monthly quarterly half-yearly or on an annual basis now let me explain with the help of a pension plan and how it works in India so say at the age of 35 you buy a pension plan invests regularly for the next 25 years and at the age of 60 you have accumulated an amount of 24 lakhs as per the current rules of the insurance regulator you can only withdraw one-third of this amount for some urgent personal requirement so out of this 24 lakhs 8 lakhs can be withdrawn for some personal requirement at that time the rest of the 16 lakhs have to be invested in purchasing an annuity from the same insurance company you can of course choose to use the entire 24 lakhs to purchase an annuity from the insurance company now when you make this lump sum payment to the insurance company they fix an interest rate at which they will pay you on a regular basis so let us assume that you have a 7% interest rate on 24 lakhs at 7% interest rate they will make a payment of one lakh sixty eight thousand to you every year no matter what this interest rate doesn't change and that is the advantage of purchasing an annuity the insurance company makes money in case they can use the capital which you have invested to generate income greater than 7% so in case they've invested in some instruments which are generating 9% returns the 2% is what they make they of course stand to lose in case they make less than 7% on the money invested by you the annuities also offers some options the highest return option of course is one in which you invest a lump sum and they pay you a regular amount till the end of your life the second option is they pay you a regular amount plus return the amount which you have invested to your nominee the third option is after your are death they pay your nominee till her death so in case you have taken a policy after your death you are normally your wife spouse whoever it is continues to receive the pension till the end of that person's lifetime there may be a few more variations of these payouts which are made to you by different insurance companies so it is best to check which option suits you the best now coming to the part on interest rates different insurance companies.