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Facts About the Single Premium Immediate Annuity

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Single Premium Immediate Annuities, which are also known as SPIAs, are an excellent resource for your retirement planning. They are actually the oldest kind of annuity and date back to the Roman Empire, where they were used to pay back soldiers for their service.

What Is a Single Premium Immediate Annuity?

SPIAs are contracts with insurance companies. The investor pays a set amount of money up front, and the insurance company promises to pay a certain amount back on a regular basis (yearly, monthly, etc.) for the rest of the consumer's life. They differ from deferred annuities in that they begin payout out immediately. Because of this, SPIAs are also known as immediate annuities, immediate payment annuities, immediate payout annuities, lifetime annuities and income annuities.

Variable vs. Fixed Immediate Annuities

Single premium immediate annuities can be variable or fixed. A variable SPIA means that the payout is dependent on the performance of the mutual fund the annuity is tied to. A fixed SPIA means that the payout is set in stone. Some fixed single premium immediate annuities even have payouts that adjust each year for inflation. Variable SPIAs can be complex and expensive while fixed are pretty straightforward. You'll want to speak with a financial advisor to decide which is right for you.

Why Choose a SIPA

What makes a single premium immediate annuity valuable for retirement planning is that they provide regular income and allow for a higher withdrawal rate than many other typical retirement investments. Potential investors are allowed to make large contributions to SPIAs without the limitations that come along with IRAs, 401(k)s and other retirement vehicles.

Selling an Income Annuity

Income annuities are eligible for sale, and one of the things that make income annuities great is that, unlike structured settlements, they do not need a judge's approval to do so. Since the consumer bought it, the consumer can sell their payments at any time, for any reason.

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