What Is an SPIA?

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About John Stevenson

John Stevenson, a prominent wealth protection educator, has been able to help thousands of people successfully strategize for retirement. With retirees living longer and retiring earlier, having a retirement income that cannot be outlived has been a growing concern for many seniors. His clients include teachers, business owners, executives, doctors, and entrepreneurs, to name a few. Not a single client has ever lost money due to market fluctuations. John is also an expert in structuring Tax-Free Retirement Accounts, which help his clients build wealth safely and enjoy an extremely low tax burden or even zero taxes in retirement. His services focus on assisting people to Retire On Purpose, not just leave it to chance.

It’s easy to get confused by annuity terminology.

In some cases, the same kind of annuity may be called several different names. In other cases, you’ll notice that two different products have almost the same name.

Today, we’ll focus on clarifying SPIAs. Keep reading to learn more.

The Basics of SPIA Annuities

SPIA stands for single-premium immediate annuity. If you hear the terms immediate annuity, immediate payment annuity, or income annuity, those all describe the same thing.

An SPIA annuity is different from other annuities because it doesn’t have an accumulation phase. You simply pay in one lump sum from your 401(k) or investments.

The distribution phase (also known as the annuitization or payout phase) works the same way as any other annuity; you still get a regular stream of payouts. But instead of being deferred for a long time, an SPIA annuity typically starts paying out within a year.

Pros and Cons of an SPIA

Pros

SPIAs are attractive to folks with a substantial nest egg. They’re typically simple (you get a guaranteed payout monthly) and incur low fees, making it easy to know what you’re going to get each month. That not only simplifies budgeting; it also prevents nasty surprises.

You can get an inflation rider, also known as a cost of living adjustment (COLA), which protects your annuity payouts against the damage inflation can wreak on the value of the dollar. You’ll pay a fee and get lower initial payouts, but it’s still a decided benefit.

It’s possible to opt for an SPIA with variable payouts. The downside of being exposed to market volatility is that you could end up losing money; the upside is you could end up getting more than you otherwise would.

SPIAs allow one to make large contributions not subject to the usual limits on IRAs and 401(k) plans, and 401(k) plans can even be subsumed into an SPIA annuity.

The income from an SPIA acts as a supplement to Social Security and pension plans to ensure that one has sufficient retirement income.

SPIA annuities offer the option of a joint and survivor account, which pays out for two annuitants, and will continue to provide income even upon the death of one annuitant.

A period certain annuity is limited in terms of how long it pays out, and is sometimes used as bridging income until one is eligible for Social Security.

Cons

Many of the cons of SPIA annuities are related to the pros mentioned above. You don’t get something for nothing, which means that guaranteed income for life – or protection against inflation – comes with costs.

Payout amounts depend on initial lump sum investment, contract terms that guarantee income for life, and terms that allow heirs to be beneficiaries. Annuity providers also use actuarial life tables to assess your expected lifespan, to calculate how long it’s likely you’ll need payouts.

Get Professional Advice Today!

As with any investment vehicle, an annuity is affected by many factors.

Speak to an insurance company today to get the advice you need to make decisions regarding your financial future.

About John Stevenson

John Stevenson, a prominent wealth protection educator, has been able to help thousands of people successfully strategize for retirement. With retirees living longer and retiring earlier, having a retirement income that cannot be outlived has been a growing concern for many seniors. His clients include teachers, business owners, executives, doctors, and entrepreneurs, to name a few. Not a single client has ever lost money due to market fluctuations. John is also an expert in structuring Tax-Free Retirement Accounts, which help his clients build wealth safely and enjoy an extremely low tax burden or even zero taxes in retirement. His services focus on assisting people to Retire On Purpose, not just leave it to chance.

View The Best Annuity Rates Available Now

Annuities are a safe and reliable investment. They can transform your savings into a more predictable income. Speak with one of our qualified financial professionals today to find out how an annuity can offer you guaranteed monthly income for life.

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