Single premium immediate annuities or SPIAs are fixed annuities that are purchased with a single deposit amount and start making payments immediately. Investments in SPIAs are ideal for providing an immediate income in retirement.

SPIAs can provide the buyer with security because they guarantee payments for the length of the contract, which can be the rest of the holder’s life. Also, single premium immediate annuities typically offer higher rates of return than CDs.

There is no investment risk with SPIAs. Payouts from SPIAs will allow a retiree to have a portion of their income that is stable and predictable. In addition, SPIAs offer the investor simplicity. Once the initial contract is set up, the buyer does not need to monitor the markets and actively manage his investments. The income stream from SPIAs is guaranteed and predictable.

Another advantage is that if the premium is made with the earnings from a “tax-deferred” annuity that was immediately rolled into the SPIA then the payment of taxes can be postponed until the actual payments from the SPIA are received.

SPIAs do provide simplicity to the holder.

However, it is still important that the proper research is carried out prior to initiating the annuity contract. It is important to consider all of the contract’s options when initiating a SPIA policy.

For example, the SPIA contract can be set up as a lifetime payout. In this case, the purchaser usually forfeits their rights to withdrawal the funds or cancel the contract. Certain SPIA contracts can also be set up as life-plus-five or life-plus-ten contracts. This means that the payments will continue after the holder’s death.

It is important to understand that the payouts will be higher if this option is not selected.

Finally, some companies allow for a “life income with lump sum refund” option. This means that in the event of the holder’s death, the beneficiaries will receive the remaining value of the policy minus the payments already received.

Investors can fund SPIAs from a variety of sources. Some of the common sources of premium payments are as follows:
• Sale of property
• Inheritance
• Earnings from mutual funds or other investments
• IRA rollovers
• 401(k) plan payouts

One area that investors are making use of SPIAs is for planning techniques. For example, funds can be removed from a person’s estate by purchasing a SPIA. This may be important to the buyer if he is trying to meet the minimum requirements to qualify for a program, such as Medicaid, or is looking for protection from creditors. A professional should be consulted before an annuity is purchased for this reason.

Payments made from SPIAs vary depending on the specifics of the contract involved. However, typically the payments take the following factors into consideration:
• Premium amount
• Current interest rate
• Term of the contract
• Age of the investor

Single premium investment annuities can be the right tool to provide a guaranteed stream of income in retirement. However it is important to remember that the contract cannot be changed once it is initiated. Those considering SPIAs should research all of their options thoroughly before committing to the investment.

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