Immediate Annuities Explained

What Is an Immediate Annuity?

Also called a Single Premium Immediate Annuity (SPIA), it's a contract where you exchange a lump sum for guaranteed income payments that begin within 12 months. Payments can last for a set period or for life.

How It Works

You hand the insurance company a single premium. In return, the carrier pays you a guaranteed monthly amount based on your age, gender, payment option (single or joint life, period certain), and current rates.

Why Retirees Choose SPIAs

Simplicity. They produce the highest guaranteed income per dollar of any annuity for someone who wants to start income now. Many retirees use SPIAs to cover essential expenses like housing, food, and healthcare.

Tradeoffs

Once you annuitize, the lump sum is generally no longer accessible. That's why most planners recommend annuitizing only a portion of total savings.

Is It Right for You?

If you're ready to retire and want maximum guaranteed income to cover essential expenses, an immediate annuity can be a powerful piece of the plan.