Single Premium Immediate Annuities
Lifetime income, starting soon.
A Single Premium Immediate Annuity (SPIA) can convert a lump sum of retirement savings into a stream of income designed to begin relatively soon after purchase and, depending on the payout option selected, continue for the rest of your life.
At Money Man 4 Integrity, our goal is to help you understand how SPIAs work, the payout options available, and the trade-offs involved before you make a decision.
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SPIA at a glance
Premium
Contract
Income
A SPIA may help create predictable income for a portion of essential retirement expenses while reducing dependence on market performance for that income.
What Is a Single Premium Immediate Annuity?
From one lump sum to scheduled income
A SPIA is an insurance contract designed to convert a lump-sum premium into income payments according to the terms of the contract.
Single Premium
One lump-sum purchase
You provide a single premium to an insurance company, and the insurer provides scheduled income payments.
Immediate
Income begins relatively soon
The “immediate” refers to income generally being designed to begin relatively soon after purchase rather than years later.
Long-Term
Potential lifetime income
Certain payout options can provide income for life. The trade-off is that access to the original premium may be limited depending on the contract and payout option.
A basic SPIA does not require you to actively manage investment subaccounts after the income contract begins.
How a SPIA Works
From lump sum to lifetime income
The process is relatively straightforward.
01
Choose Your Premium & Payout Structure
You decide how much money you want to use and select the payout structure that fits your goals.
- Life Only
- Life with Period Certain
- Joint Life
- Cash Refund
02
Transfer the Premium
The premium is transferred to the insurance company according to the applicable funding process.
- Personal savings
- IRA assets
- Eligible retirement account assets
- Qualified plan rollovers
- Other eligible sources
Tax treatment depends on the source of funds and applicable tax rules.
03
Income Payments Begin
Once the contract is issued and the income start date arrives, payments begin according to the selected payout option.
- Exact start date depends on the contract
- Income follows established contract terms
- Payment structure depends on your selected option
Choose Your Trade-Off
The four SPIA payout options
Different options balance current income with protection for a spouse or beneficiaries.
Life Only
Income generally continues for as long as the covered individual lives. Payments stop when that individual dies. Because there is generally no contractual payment guarantee for beneficiaries after death, this option may provide a higher initial income.
Life With Period Certain
Combines lifetime income with a minimum payment period, such as 10, 15, or 20 years. If the annuitant dies before the period ends, payments may continue to the beneficiary for the remainder of that period.
Joint Life
Designed for couples who want income to continue while either spouse is alive. Payments can continue after the first spouse dies according to the contract, although the payment may be reduced.
Cash Refund
Can provide a beneficiary with a payment if qualifying income received before death is less than the original premium, subject to the contract terms. Additional beneficiary protection can reduce the initial income.
Worked Example
How a $200,000 SPIA could fit into retirement planning
This hypothetical example illustrates one potential use of a SPIA.
Marcus's situation
- Age 65
- Approximately $1.2 million in an IRA
- Additional brokerage assets
- Social Security: $2,800/month
- Essential expenses: approximately $5,000/month
- Potential income gap: $2,200/month
- Considering $200,000 for a joint-life SPIA
Illustrative result
- Hypothetical quote: approximately $1,180/month
- Could cover part of the retirement income gap
- Remaining retirement assets stay outside the SPIA
- Other assets remain available for growth and flexibility
This example is hypothetical and illustrative only. Actual SPIA income depends on circumstances, insurer, premium, payout option, interest rates, and contract terms.
Use a portion of retirement savings to create predictable income while keeping other assets available for flexibility and growth.
The Potential Benefits
Why retirees consider SPIAs
Income
Income Can Begin Relatively Soon
Unlike deferred annuities designed to accumulate assets before income begins, a SPIA is specifically structured around near-term income.
Lifetime
Potential Lifetime Income
Certain SPIA payout options can provide income for as long as you live. A joint-life option can potentially extend income for as long as either covered spouse is alive.
Predictability
Predictable Payments
Once established, payments follow the contractual terms, which can provide greater predictability than relying entirely on portfolio withdrawals.
Simple to Manage
After the contract is established, there generally aren't investment subaccounts to manage or portfolios to rebalance within a basic SPIA structure.
Private Pension-Like Income
SPIAs are often compared with a privately purchased pension because certain payout options can provide income for life.
Less Market Dependence
A SPIA can help create predictable income for essential expenses without relying entirely on portfolio market performance.
The Potential Drawbacks
Understand the trade-offs before purchasing
Liquidity
- Once money is committed to a SPIA, you generally cannot simply withdraw the original premium like a normal investment account.
- Emergency funds and other liquidity needs should be considered first.
Inflation & Market Growth
- A fixed payment may lose purchasing power as prices rise.
- Some increasing-payment features can reduce initial income.
- A SPIA is primarily designed for income rather than direct stock-market participation.
SPIA guarantees are backed by the claims-paying ability of the issuing insurance company. They are not FDIC-insured bank deposits.
Who Should Consider a SPIA?
Who fits best?
A SPIA may be worth considering if several of the following describe your situation.
Another Strategy May Fit Better If
- You strongly prioritize liquidity
- You need access to the money for near-term spending
- Maximum investment upside is your highest priority
- You don't have sufficient assets outside the SPIA for emergencies
Building Your Retirement Income Floor
How a SPIA can work with Social Security and pensions
A useful retirement planning approach is to separate essential expenses from discretionary expenses.
Essential Expenses
Consider housing, utilities, food, healthcare, insurance, transportation, and other necessary expenses.
Guaranteed Income
Consider Social Security, pension income, and other lifetime income sources.
Identify the Gap
If essential expenses exceed guaranteed income, you have a potential income gap.
Keep Other Assets Flexible
A SPIA may cover part of essential income needs while other assets remain available for additional goals.
Other assets may remain available for
Common Questions
SPIA FAQ
How much monthly income does a $200,000 SPIA pay at age 65?
How quickly do SPIA payments start?
Can I change my mind after buying a SPIA?
What happens if I die soon after buying a SPIA?
Are SPIAs and immediate annuities the same thing?
Is a Single Premium Immediate Annuity taxable?
Can I buy a SPIA with my IRA?
What is the minimum amount needed to buy a SPIA?
How do I choose the best Single Premium Immediate Annuity?
Ready to Explore a SPIA?
See how a Single Premium Immediate Annuity could fit your retirement plan.
A SPIA can be a powerful retirement income tool when used for the right purpose. It may help create a predictable income stream while allowing the rest of your retirement assets to serve other purposes.
FREE TO EXPLORE — NO OBLIGATION
Important Information. The information provided on this page is for general educational purposes only and is not personalized financial, investment, tax, legal, or insurance advice.
SPIA income, guarantees, payout options, death benefits, fees, surrender provisions, minimum premiums, and other contract terms vary by insurance company, product, state, and individual circumstances.
All examples on this page are hypothetical and illustrative. They are not quotes, guarantees, or predictions of actual income.
Annuity guarantees are subject to the claims-paying ability of the issuing insurance company. Annuities are not FDIC-insured bank deposits.
Before purchasing a Single Premium Immediate Annuity, carefully review the applicable contract and disclosures and consider consulting qualified financial, tax, and legal professionals regarding your individual circumstances.