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 retirement annuities are available, but one that has been growing in popularity recently is the immediate annuity. Immediate annuities 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 the SPIA and how they can help you secure your retirement!

An immediate annuity is the original and most basic form of an annuity. A single initial payment to the insurance company secures a guaranteed income stream for a set amount of time or for the duration of your life. The immediate guaranteed income stream can start within 12 months.

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.

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

What Is An Immediate Annuity?

How Do Immediate Annuities Work?

An immediate annuity is a type of insurance product that can be used to generate income in retirement.

Here’s how immediate annuities work: You choose an insurance company and give them a one-time deposit. In exchange, the company agrees to make regular payments to you for the rest of your life. The size of the payments depends on several factors, including your age, gender, health, and the insurance company’s claims-paying ability.

Immediate annuities can be a good option for people who want to guarantee a stream of income in retirement. However, it’s important to remember that you generally cannot get your money back once you purchase an annuity. So it’s essential to consider all your options before deciding carefully.

When Are Contributions To An Immediate Annuity Made?

Contributions to a single-premium annuity are provided once upfront in a single deposit.

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 SPIAs, 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.

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

Immediate Fixed Annuity Calculator

Use our immediate fixed annuity payout calculator to estimate monthly payments for your retirement planning needs.

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

Lifetime Income RidersAnnuitization
Guaranteed income for lifeGuaranteed income for life or a fixed period of time
Flexibility to start/stop income stream No flexibility; Irrevocable payments
Potential paycheck increases for inflationPotential higher payouts
Costs range from no cost to 1.25% annuallyNo additional fees
Potential to earn interestEarns approximately 1% interest
Can be surrendered or cashed inCan not be surrendered; No refunds
Lump-sum death benefitNo death benefit or series of payments
Standard liquidityNo liquidity
Help with long-term care costsCan not help healthcare costs


  • 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 annual 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.
  • The current interest rate environment makes SPIA rates 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 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 income 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 an immediate, deferred annuity is 12 months. Deferred annuities offer accumulation periods longer than one year for future payments.

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

SPIA rates change weekly. I publish sample annuity rates each month to give readers an idea of what income can be generated from an income annuity. To find current rates with the best insurance companies, request an immediate annuity quote below to view your options. Then, 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 A 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. Then, 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. Contact us for a free quote/

How Do Immediate Annuities Work?

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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 income 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 one-time deposit, providing guaranteed income payments for the annuitant’s lifetime (or for a specified period).

What is an immediate variable annuity contract?

An immediate variable annuity is an insurance contract in which the annuity payments begin immediately after the annuity is purchased. The annuity’s payout rate is based on the performance of underlying investments, which may include stocks, bonds, and mutual funds. Because the payout rate can fluctuate, immediate variable annuities are considered higher risk than fixed annuities. However, they can also offer higher potential returns. Therefore, immediate variable annuities can attract investors willing to take on more risk.

Related Reading

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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