5 reasons you need a guaranteed income plan in your portfolio

During retirement years, it is not always possible to have the same level of income as compared to when you were younger. At such times, the payouts from certain plans may substitute your primary income and help meet your everyday needs without any financial strain.

For many people, it has become quite difficult to maintain financial stability, especially since the pandemic. Experts say individuals want to secure their life and money, with rising health and life risks and a volatile economy.

Many have been opting for guaranteed income plans to add to their portfolio. These plans cater to risk-averse investors, offering life insurance along with maturity benefits and regular guaranteed payouts. These types of plans offer regular income at a pre-defined percentage of sum assured selected by the policyholder at the time of buying the policy. Additionally, you also get the option to choose to receive the income either yearly, half-yearly, quarterly, or monthly.

Sameer Joshi, Chief Agency Officer, Bajaj Allianz Life Insurance, says, “Before one makes up one’s mind about purchasing a guaranteed income plan, one needs to understand if it’s worth including in one’s portfolio.”

Here are 5 reasons a guaranteed income plan might be just what you need;

The payouts can substitute your primary income during retirement
During retirement years, it is not always possible to have the same level of income as compared to when you were younger. At such times, experts say, the payouts from a guaranteed income plan may substitute one’s primary income and help them meet their everyday needs without any financial strain.

You can meet any additional future expenses
Your income may be enough to meet your needs today, but in the future, there may be additional expenses to account for. Joshi explains, “One can take on some debts that need to be repaid, or perhaps, for medical expenses or any other financial obligations. A guaranteed income plan may help one set up a source of extra income to meet these additional expenses.”

He further adds, “Life cover offered by such plans is another advantage – In case of death of the life assured, the death benefit will be paid to family member/nominee so that they continue to maintain their standard of living.”

Customize the plan and its payouts- To fulfil your life goals
These plans can also be customized in various ways to meet specific requirements depending upon the product features. For instance, you can choose your premium payment term, the premium payment mode and the income payout period. In some income plans, you can even choose to defer the payouts by a certain number of years, so the income payments align with your needs better.

Joshi says, “the regular payouts from an income plan can help one pay the EMIs on a home loan, thus making it possible for one to realize one’s dream of homeownership. It can also help pay for other major life goals like child’s higher education, their wedding etc.”

The costs of living areas on a rise
Inflation is another reason you may need an income plan. With the costs of living rising steadily, your everyday costs will increase over time, even if you do not spend on any additional heads of expenses. Joshi points out, “one will need a higher income even to maintain the same standard of living that one currently enjoys. And this is where the payouts from an income plan can be of great help.”

The markets can be unpredictable
Your portfolio may include other market-linked investments like equity/stocks or equity funds. However, these assets come with a high degree of risk. “A guaranteed income plan, on the other hand, has none of these market-linked uncertainties because the payouts are guaranteed at the beginning.”

Experts say a guaranteed income plan can play a pivotal role in ensuring that you are financially secure in the long run. “It offers stability and proves to be a convenient way to earn regular income. The added benefit of this financial product is that the income received is exempt from tax u/s 10(10D) of the Income Tax Act, 1961, subject to conditions stated therein,” says Joshi.
So, you earn tax-free benefits that are guaranteed to help you retain your standard of living over the years.

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