The Single Premium Immediate Annuity

In the previous Annuities post, THE SINGLE PREMIUM DEFERRED ANNUITY (SPDA), we discussed how that type of annuity can be funded and we also looked at its tax-deferral basis. Now we’re going to take a look at the Single Premium Immediate Annuity (SPIA).Much like a Single Premium Deferred Annuity, a Single Premium Immediate Annuity is funded from a lump sum contribution. Unlike the SPDA, which defers withdrawals until a later date, a SPIA begins paying a monthly income immediately after the contribution is made.

There are four payout options available with a SPIA:

1. Lifetime Income – This payout option, which offers the highest monthly income, offers a stream of income throughout the lifetime of the annuitant. All payments will end upon the death of the annuitant.
2. Lifetime Income with Period Certain – This payout option guarantees payment throughout the annuitant’s lifetime. In addition, payment is guaranteed to the annuitant’s beneficiary for a certain period of time if the annuitant should die too soon.
3. Period Certain Income – This payout option allows the annuitant to choose how long payments will be received. However, when the end of the period certain is reached all payments will end (even if the annuitant is still alive).
4. Joint and Survivor Income – This payout option provides a lifetime income throughout the lives of two annuitants. Upon the death of one annuitant, the surviving annuitant will continue to receive a lifetime income. All payments cease upon the death of the second annuitant. A period certain can also be added to this payout option.

Next up … the Equity-Indexed Annuity. See you then!