Single Premium Immediate Annuities provide immediate income upon execution of the contract. The premise is that you take a lump sum of money and use it to purchase a stream of income. Once you purchase the SPIA, it cannot be undone. The lump sum of money is now exchanged for the promise of future periodic income. This is called annuitization. Annuitization is available as a feature in all annuities, but with an SPIA it is done as a one-time event at the purchase of this specific product.
Income payments can be taken monthly, quarterly, semi-annually, or annually. Payments can be guaranteed for one life or two. Payments can also be “period-certain,” instead of for life. Period certain payouts are typically structured for 10 years or 20 years, and if the owner passes before the end of the period, payments continue to a beneficiary for the remainder of the period. There is also a hybrid option that provides income for the life of the owner, but also a period-certain benefit for the beneficiary.
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Disclosure: The content on this web page is not intended to be a recommendation to purchase an annuity. A 10% IRS penalty may apply to withdrawals prior to age 59 1/2. Surrender charges may apply to withdrawals during the surrender period. The information in this material is not intended as tax or legal advice. Individuals should consult with their tax or legal professionals for specific information regarding their situations. All annuity guarantees are subject to the claims paying ability and principal strength of the annuity issuer.