Should You Buy An Annuity At 60 Or Wait Until 65?

A 60-year-old retired bank manager just closed out thirty-two years on the job, and ₹50 lakh sits untouched in his retirement corpus. Everyone around him says the same thing: convert it into an annuity now and start drawing a pension right away. But a former colleague who retired three years back did the opposite. She waited until 65, and now insists her monthly payout is noticeably higher for a similar corpus size. That leaves him with one question: does locking in income today beat holding out a few more years?

This article works through that exact question with real numbers, not the usual advice to “just buy an annuity when you retire.”

What Happens If He Buys An Annuity Right At 60?

Buying immediately converts the ₹50 lakh into a fixed stream of income starting the same month. Using a rate of roughly 6.6%, which is a typical starting point for a 60-year-old annuitant, that works out to about ₹3.3 lakh a year, or close to ₹27,500 a month. The income begins immediately and never depends on the market after that.

What Happens To The Same Money If He Waits Five More Years?

Here comes the exciting part of the comparison. If the same ₹50 lakh continues to be invested for five more years, with a consistent return of 7% and without being converted into annuities, it will grow to approximately ₹70 lakh by age 65. Applying the same 6.6% annualized rate on the higher amount, which is a very conservative estimate because rates tend to improve as one ages, his monthly annuity will come out to be approximately ₹38,500, which is an additional amount of ₹11,000 per month for life just because of waiting!

Do Annuity Rates Actually Improve With Age?

Yes, and this strengthens the case for waiting even further. Annuity rates can rise from around 6.6% at age 60 to close to 11.6% by age 70, since insurers price a shorter expected payout period at a higher rate for older annuitants.

That means the 65-year-old version of this decision likely benefits from a better rate on top of a larger corpus, though the exact rate at 65 depends on the insurer and plan at the time of purchase and should always be confirmed with an actual quote rather than assumed from a broader trend.

Use the calculator below to compare your own immediate and deferred annuity payouts before deciding.

So How Long Does It Take For Waiting To Actually Pay Off?

Waiting has a cost. Five years of the ₹27,500 monthly income forgone adds up to roughly ₹16.5 lakh in total payouts missed by not starting at 60. Against that, waiting delivers an extra ₹11,000 a month for the rest of his life. Divide one by the other, and the breakeven point lands around 12 to 13 years after turning 65, somewhere in the high seventies.

If he expects to live well beyond that, which is increasingly common given rising life expectancy in India, waiting comes out ahead over a full retirement. If health history or family circumstances suggest a shorter runway, taking the income at 60 makes more practical sense.

Is There A Way To Bridge The Five Years Without Losing Income Entirely?

For someone who needs at least some cash flow between 60 and 65 but still wants the benefit of a larger, later annuity, a deferred annuity plan is built for exactly this. Instead of an all-or-nothing choice, part of the corpus can go into an immediate annuity for modest income now, while the rest continues growing in a deferred structure until 65. This avoids the extremes of either forgoing income for five years or giving up the higher future payout entirely. Anyone still unclear on how the mechanics of accumulation and payout phases actually work can look at what is annuity plan for the basics before comparing specific structures.

Who Should NOT Wait Until 65?

Waiting is not automatically the better choice for everyone. It’s probably not worth it if:

• Monthly income is needed immediately to cover essential living expenses, with no other savings or support to bridge the gap
• Health conditions or family history suggest a shorter life expectancy, which shortens or eliminates the breakeven advantage of waiting
• The corpus would otherwise sit in a low-return instrument during the wait, since the five-year growth assumption depends on genuinely productive investment, not idle cash

What About The Tax Treatment On Annuity Income?

Contributions to annuity plans in India are deductible under the Income Tax Act, typically under a combined limit shared with other retirement products. When the annuities start paying, the annuity income is usually taxed at slab rates, but a standard deduction may be allowed depending on the plan design.

With the change in the tax regime in India from FY 2025-26 onward, this is not something to assume without checking. A quick conversation with a tax advisor can confirm what applies before any decision gets locked in.

So What Did He Decide?

With his health in excellent condition, as well as more savings to make up for any shortfalls, the bank manager chose to go with a mixed strategy, putting some money into an immediate annuity to get his initial income, while letting his other savings grow until he reaches 65 to receive his deferred annuity. It is important to calculate your numbers before making such a decision because the right option is based primarily on your personal financial situation and life expectancy.