The Single-Premium Immediate Annuity

Shawn Plummer

CEO, The Annuity Expert

A retirement annuity is a contract between an individual and an insurance company in which the individual receives a series of payments, usually monthly, for the rest of their life. Many types of retirement annuities are available, but one that has been growing in popularity recently is the immediate annuity. An immediate annuity can give retirees much-needed peace of mind, knowing they will have a steady income stream each month. This guide will discuss the benefits of immediate annuities and how they can help you secure your retirement!

What Is An Immediate Annuity?

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 single lump sum payment 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.

An 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), individual retirement account (IRA rollover), or other retirement savings.

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

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

Related Reading: Are annuities a good investment? They can be a good choice if you are looking for …

When Are Contributions To An Immediate Annuity Made?

Contributions to an immediate annuity are provided once upfront in a lump sum.

When Does An Immediate Annuity Begin Making Payments?

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. “annuitization” or “annuitize” describes 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 future payments 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 to the SPIA annuity but better results.

Use our immediate annuity calculator to run a quote.

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. For example, suppose you’re planning to live on a fixed income in retirement. In that case, an SPIA might be an excellent 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 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



  • An 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.
  • Fixed immediate annuities have no cash value and offer no growth potential. However, one can expect to earn between 1% – 1.5%  interest rate annually.
  • Due to the current interest rate environment, single premium immediate annuity rates are meager.

If flexibility and access to your funds is an issue, 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 expected income annuity payouts. Then, go more in-depth with our annuitization guide.

Life Income

With an immediate lifetime annuity, 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 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 annuitant’s death and the contingent annuitant’s.

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 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 Ordinary Annuities or Period Certain Annuities.

Life Income with a Guaranteed Period

You are guaranteed 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.

Suppose the annuitant dies before receiving the total annuity payments equal to the initial purchase price. In that case, 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. Deferred annuities offer accumulation periods longer than one year.

A Split Annuity

A split-annuity refers to “splitting” an annuity owner’s money into two annuities, an 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. Layering the two annuities will increase cash flow as the retiree gets older.

Immediate Annuity Rates

Immediate annuity rates change weekly. I publish sample annuity rates each month 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. Use our immediate annuity calculator to get up-to-date payment estimates.

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

Use Our Free Annuity Calculator

Calculate how much income you’ll have in retirement. Get quotes from top annuity providers. Then, sleep easy knowing you’re taken care of in retirement.

What Do My Beneficiaries Receive When I Die?

Immediate annuities may or may not offer a death benefit to beneficiaries. If a death benefit is offered, a series of payments is the standard method of distributing the proceeds.

Helpful tip: Life insurance might be a better option if you want to leave money to your beneficiaries. In some cases, you don’t need to take a medical examination. Instead, use our quoting tool to determine how much life insurance is. Coverage starts at $9.37 per month.

Next Steps

If you are considering purchasing an immediate annuity, do your homework first. Request a quote from different insurance companies and compare the benefits and features of each plan. Make sure you understand all of the terms and conditions before making a decision. Immediate annuities can be a great way to provide guaranteed income in retirement, but they are not for everyone.

Use our free immediate annuity calculator to estimate your payout.

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Frequently Asked Questions

What is an immediate annuity, and how do immediate annuities work?

An immediate annuity is an annuity that pays out immediately after it is purchased. When you purchase an immediate annuity contract, you make a lump-sum payment to the insurer in exchange for regular payments that begin immediately and continue for a specified period of time, typically for the rest of your life. Because the payments are made immediately, immediate annuities are often used as a source of retirement income.

What is an example of an immediate annuity?

The lottery is one example of an immediate annuity contract. When someone wins the lottery, they usually receive their winnings as a lump-sum payment. However, if they choose to receive their winnings as anniversaries, they will get regular payments over time instead of one lump sum.

What are the disadvantages of an immediate annuity?

There are a few disadvantages to immediate annuities. First, they are not very flexible. Once you purchase an immediate annuity, you are locked into the payment schedule. You cannot make changes to the payments, and if you need access to the money before the end of the payout period, you will likely have to pay the penalty. Second, immediate annuities are not very liquid. If you need to cash out your annuity early, you will likely have to pay a surrender fee.

Do Immediate annuities have fees?

Immediate annuities do not have fees, but lower payment amounts for the annuitant if a benefit or rider is added to the contract.

How can I get out of an immediate annuity?

There are a few ways to get out of an immediate annuity, but it typically requires giving up some of the payments you would have received. One way to get out of an immediate annuity is to sell it in the secondary market. This can be done through a life settlement broker, who will find a buyer for your annuity and help facilitate the transfer.

Do immediate annuities earn interest?

Immediate annuities earn little to no interest because the income payments begin immediately after the annuity is purchased. If you want your money to grow, you may want to consider a deferred annuity instead. With a deferred annuity, your money is invested and grows tax-deferred until you start taking income payments, which can be at any point in the future.

What is the best immediate annuity?

There is no one-size-fits-all answer to this question, as the best immediate annuity for you will depend on your circumstances and financial needs. However, some factors that you may want to consider include the payment options, the length of the payout period, and whether or not inflation protection is offered. Additionally, it’s essential to compare the costs and features of different annuities before deciding.

Are immediate annuities worth it?

Immediate annuities can be a great way to secure a stream of income in retirement, but they are not suitable for everyone. When deciding whether an immediate annuity is right for you, you must consider your unique circumstances and financial needs.

What is the best age to buy an immediate annuity?

There is no one-size-fits-all answer to this question, as the best age to buy an immediate annuity will depend on your circumstances and financial needs. However, some experts recommend waiting until you are 60 before purchasing an immediate annuity.

Are immediate annuities taxable?

Immediate annuities are generally taxable as ordinary income.

Is an immediate annuity a good idea?

Immediate annuities can be a great way to secure a stream of income in retirement, but they are not suitable for everyone. When deciding whether an immediate annuity is right for you, you must consider your unique circumstances and financial needs.

What does SPIA stand for?

SPIA stands for Single Premium Immediate Annuity. SPIA contracts are typically funded with a lump sum payment, providing guaranteed income payments for the annuitant’s lifetime (or for a specified period).

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. 

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