Many Indian retirees underestimate the importance of converting savings into a reliable monthly income, with experts emphasising the role of annuities to avoid running out of money post-retirement.
Many Indian savers still make a familiar mistake at retirement: they treat a lump sum as if it were a salary. Ashok Manwani, vice-president for products at Go Digit Life Insurance, warned that a pension pot, gratuity, sale proceeds or other savings can all help, but they do not automatically solve the harder problem of turning accumulated wealth into a dependable monthly income.
That distinction matters because retirement planning is not only about building assets, but about drawing them down in a way that lasts. In India, many people spend years assembling a corpus and far less time deciding how that money will support day-to-day spending once pay cheques stop. Financial planners say that is where annuities can play a useful role, by exchanging savings for a regular income stream.
Annuities are sold by life insurers and can start paying immediately after purchase or at a later date, depending on the product. Industry guides from Niyam Fin, Fincart, Kotak Neo and HDFC Life all describe the basic appeal in similar terms: they can convert a one-off investment into predictable income and may help retirees avoid running out of money. But those same sources also note the trade-offs, including limited liquidity, weaker growth potential and exposure to inflation if payments are fixed.
Go Digit Life Insurance illustrated the point with a hypothetical example. Under a fully guaranteed option, a 45-year-old paying ₹2 lakh a year for 10 years would receive an annual payout of ₹2.55 lakh from age 61, according to the company’s illustration. In a version linked partly to the Nifty 50, the illustrative payout rose to ₹3.55 lakh assuming a 12% annual return, though the figure fell to ₹3.17 lakh at 10% and ₹2.86 lakh at 8%, underscoring that the higher-payout version carries market risk.
The broad message is that retirement planning should not stop once the corpus is built. Investors still need to decide how that money will be converted into cash flow, whether through an annuity, a government-backed savings scheme or a mix of products. As Manwani put it, the central question near retirement is not simply how much has been saved, but how those savings will keep paying every month after work ends.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
