What Is A SPIA?

Shawn Plummer

CEO, The Annuity Expert

When planning for retirement, many options are available to individuals to ensure a secure future. One such option is the Single Premium Immediate Annuity (SPIA). This financial product has been gaining popularity due to its unique features and benefits. But what is an SPIA, and how does it work? In this guide, we will explore the basics of SPIAs, their features, and the pros and cons of investing in them.

Understanding SPIAs

To understand SPIAs, it is essential to know what an annuity is. An annuity is a financial product that provides regular payments to the holder for a fixed period or the rest of their life. For example, an SPIA is a type of annuity where the investor pays a lump sum of money upfront, and in return, they receive a fixed income stream for the rest of their life. SPIAs can be especially beneficial for those who want to supplement their Social Security income in retirement.

How SPIAs Work

After purchasing an SPIA, the investor will receive regular payments from the insurance company that issued the annuity. These payments can be set up to last for the rest of the investor’s life or a set period. The payment amount is determined by several factors, including the initial lump sum payment, the investor’s age, and the current interest rates.

Types of SPIAs

There are two types of SPIAs, Life Only and Life with Period Certain. Life Only means the payments will continue for the investor’s lifetime. In contrast, Life with Period Certain means payments will be made for specific years, regardless of whether the investor is alive.

What Is A Spia

Pros of SPIAs

SPIAs offer several benefits that make them attractive to individuals planning for retirement. Here are some of the pros of investing in an SPIA:

Guaranteed Income for Life

One of the significant advantages of an SPIA is that it provides a guaranteed income for life. This means the investor can have peace of mind knowing they will receive a fixed income stream regardless of market conditions or their life expectancy.

Protection Against Longevity Risk

SPIAs protect against longevity risk, which is the risk of outliving one’s savings. This is especially important for retirees who do not have a pension or who have not saved enough for retirement.

Fixed Payments

SPIAs provide fixed payments, meaning investors can better budget and plan their expenses. This is particularly beneficial for retirees who need a predictable income stream to cover their living expenses.

Cons of SPIAs

While SPIAs offer many benefits, there are also some drawbacks to investing in them. Here are some of the cons of investing in an SPIA:

Inflation Risk

One of the significant drawbacks of an SPIA is that the income stream is fixed and does not adjust for inflation. This means that over time, the purchasing power of the income stream may decline, which could be problematic for retirees who need to cover rising expenses.

Loss of Control Over Assets

When investors purchase an SPIA, they give up control over the lump sum payment they made to the insurance company. This means that the investor cannot access those funds if they need them in the future.

Limited Flexibility

SPIAs provide limited flexibility in accessing funds or changing the payment structure. Once the investor has purchased the SPIA, they cannot change the payment amount or frequency.

Next Steps

SPIAs are a popular option for individuals looking to secure their retirement income. They provide a guaranteed income stream for life and protection against longevity risk. However, they have drawbacks, such as inflation risk and limited flexibility. Therefore, before investing in an SPIA, investors need to understand the advantages and disadvantages of this product so they can make an informed decision.


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Frequently Asked Questions

What are the benefits of an SPIA?

Guaranteed income for life.

What is the best age to purchase an SPIA?

Age 65 or older.

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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