What is an Immediate Annuity?

Shawn Plummer

CEO, The Annuity Expert

What is an immediate annuity? A single premium immediate annuity (SPIA) is a retirement insurance plan most often used for an immediate income stream. A consumer provides a lump sum of money to an insurance company in exchange for a guaranteed income stream for life, a fixed period of time, or both. The income stream is irrevocable.

A SPIA offers security to retirees who want to supplement their retirement income. In particular, it may be used for clients who retire early and are waiting for Social Security benefits to begin.

Single premium funds can come from various sources, including a 401(k), 403(b), IRA rollover, or other retirement savings.

The state lottery typically uses an SPIA as the payout option when collecting winnings.

Immediate annuities can also be referred to as an income annuity, instant annuity, ordinary annuity, life annuity, pension annuity, a lifetime annuity, single premium annuity, and Medicaid Annuity.

A primary characteristic of an immediate annuity is that the contract is irrevocable, which means there’s no turning back after you start the policy, so be careful when deciding. The term “annuitization” or “annuitize” is used to describe this irrevocable income stream. With SPIA’s, you can either start receiving your annuity checks within 30 days or defer up to 12 months

You can purchase a Deferred Income Annuity or a QLAC if you want to defer the income longer than 12 months.

If you’d prefer the retirement income for life, but want more flexibility and control, check out a Guaranteed Lifetime Withdrawal Benefit. The income rider will provide similar benefits as the SPIA annuity but all-around better results.

You can find immediate annuities here. Use our immediate annuity calculator to run a quote.

YouTube video

Who should consider an Income Annuity?

Immediate Annuities (SPIA) and Deferred Income Annuities (DIA) are considered Income Annuities.

Single-Premium Immediate annuities are not a good retirement plan for many people for several reasons but can help a specific type of person, primarily retirees living on a fixed income. If you’re planning to live on a fixed income in retirement, an SPIA might be a good option to “layer” another stream of a steady income in addition to social security.  

Only purchase an immediate fixed annuity if you have plenty of liquid assets to withdraw from in the case of emergencies.  Remember, you’re going to be stuck with the annuity provider.

Key Takeaway

Consumers buy immediate annuities for a guaranteed income paycheck to complement their Social Security income. Retirees layer the immediate annuity’s income on top of the SSI to create a monthly cash flow as if they were still working.

Income Annuities At a glance

Fixed Index
Principal ProtectionNoYesYesYesYes
Access To PrincipalYesYesYesNoNo
Control Over MoneyYesYesYesNoNo
Tax-Deferred GrowthYesYesYesNoNo
Guaranteed GrowthNoYesYesNoNo
Guaranteed IncomeYesYesYesYesYes
Inflation ProtectionYesYesNoYesYes
Death BenefitYesYesYesYes/NoYes/No
Long-Term Care HelpYesYesYesNoNo

Immediate Annuity Pros and Cons

Income Riders

  • Guaranteed income for life
  • Flexibility to start/stop income stream
  • Potential paycheck increases for inflation
  • Costs range from no cost to 1.25% annually
  • Potential to earn interest
  • Can be surrendered or cash in
  • Lump-Sum Death Benefit
  • Help with long term care costs
  • Standard liquidity



  • A SPIA annuity might generate higher income paychecks than a Fixed Indexed Annuity or Variable Annuities with an income rider.
  • The income annuity guarantees regular payments based on contract terms, similar to a pension plan.
  • You can choose how often you collect your steady retirement income on a monthly, quarterly, semi-annually, or annually basis.


  • The income payouts are irrevocable, which means once you turn on the income, there’s no turning it off. There’s no refund.
  • No access to your original principal in case of emergencies. No liquidity.
  • Immediate annuities have no cash value and offer no growth potential.  One can expect to earn between 1% – 1.5%  interest rate annually.
  • Single premium immediate annuity rates are very low due to the current interest rate environment.

If flexibility and access to your funds is an issue for you, check out a Fixed Index Annuity with a Guaranteed Lifetime Withdrawal Benefit.

SPIA Myth’s

A common misconception about an immediate payment annuity is zero death benefit if the annuity owner dies on all SPIAs. This is not true. 

If you choose a Life Only Based payout option (single-life annuity or joint annuity), there will be no chance of death benefit if the annuity owner(s) pass away hence the term “Life Only.”

Immediate Annuity Payouts

An immediate annuity consists of a series of income payouts. Below are brief descriptions of common income annuity payouts. Then, go more in-depth with our annuitization guide.

Life Income

You receive guaranteed income for as long as the Annuitant lives, but with no payments after the Annuitant’s death. This option should not be chosen if you want someone to receive payments after the Annuitant’s death.

Joint and Contingent Life Income

Income payments continue for as long as either the annuitant or contingent annuitant lives. Thus, the joint-life income amount will be paid in full while the annuitant is alive.

If the annuitant dies before the contingent annuitant, payments will continue at the rate you requested in your application and be paid for as long as the contingent annuitant lives.

Payments will cease at the death of both the annuitant and the contingent annuitant.

Income for a Fixed Period

Payments are guaranteed for the number of years and months chosen in the application. If the Annuitant dies before the end of the fixed period, a death benefit, consisting of a lump sum amount equal to the commuted value, will be paid. The death benefit recipient may elect to receive the remaining guaranteed annuity payments, as scheduled, instead of the commuted value. Fixed period annuities can also be known as an Ordinary Annuity or Period Certain Annuity.

Life Income with a Guaranteed Period

You are guaranteed to receive income payments for as long as the annuitant lives. However, if the annuitant should die during the guaranteed period you selected, you or your beneficiary will receive the remaining guaranteed payments.

Life Income with Installment Refund

Your payments will begin on the income start date and are guaranteed to continue for the annuitant’s lifetime.

If the annuitant dies before receiving the total annuity payments equal to the initial purchase price, payments will continue to the named primary beneficiary until the sum of all payments equals the original purchase price.

Life Income with a Cash Refund

Your payments will begin on the income start date and are guaranteed to continue for the annuitant’s lifetime. However, if the annuitant dies before receiving total annuity payments at least equal to the purchase price, the difference will be paid to the named beneficiary in a lump sum.

Inflation Adjusted (Cost of Living Adjustment)

An optional feature in which you elect a lesser initial income amount with annual increases to keep up with inflation.

How Long is the Accumulation Period For Immediate Annuities?

The minimum accumulation period for a fixed immediate annuity is 30 days and the maximum accumulation period for a deferred immediate annuity is 12 months.

A Split Annuity

A split-annuity refers to “splitting” an annuity owner’s money into 2 annuities, a SPIA and a deferred annuity. The immediate annuity will supplement the immediate need for an income, and the deferred annuity will supplement an income in the future. By layering the 2 annuities, will manipulate an increase in cash flow as the retiree gets older.

Immediate Annuity Rates

Immediate annuity rates change weekly. Each month I publish sample annuity rates to give readers an idea of what income can be generated from an immediate annuity. To find current immediate annuity rates with the best insurance companies, request a quote to view your options.

PayoutAge 60Age 65Age 70
Single Life$5,016$5,688$6,588
Life with 10 Year Period Certain$4,944$5,532$6,300
10 Year Period Certain$10,515$10,515$10,515
20 Year Period Certain$6,053$6,053$6,053

Immediate Annuity Quotes

Contact Us


An immediate annuity is good for fixed income planning because the retirement paychecks are higher than a deferred annuity with an income rider. The best immediate annuity is the annuity providing the highest payout to the retiree. Still, you give up access to your original investment in exchange for that high payout.

SPIAs are irrevocable, so there’s no turning on and off or refunds.  If you are having financial difficulty, I wouldn’t recommend purchasing an income annuity for these reasons.

Most SPIA income payouts are within a similar “ballpark” of each other

If you need assistance finding the right annuity payout or today’s SPIA rates, feel free to ask. We have an immediate annuity calculator that updates daily.

Shawn Plummer

CEO, The Annuity Expert

I’m a licensed financial professional focusing on annuities and insurance for more than a decade. My former role was training financial advisors, including for a Fortune Global 500 insurance company. I’ve been featured in Time Magazine, Yahoo! Finance, MSN, SmartAsset, Entrepreneur, Bloomberg, The Simple Dollar, U.S. News and World Report, and Women’s Health Magazine.

The Annuity Expert is an online insurance agency servicing consumers across the United States. My goal is to help you take the guesswork out of retirement planning or find the best insurance coverage at the cheapest rates for you. 

Scroll to Top