What is a Single Premium Immediate Annuity (SPIA)?

In the Roman times, the dutiful Roman soldiers laid it on the line to expand and protect the empire. They were fearless warriors. Because of their commitment, the Roman government guaranteed a lifetime income stream for the soldier and their family. The Latin word “annua” means payment, which is where the word annuity originates. This income guarantee to these Roman soldiers and their family were the firs Single Premium Immediate Annuity (SPIA) on record. It worked back then, and it still works now.

SPIAs have been purchased in the United States for hundreds of years, and are a simplistic transfer of risk pension plan. Income can start as soon as 30 days from the policy being issued, and as far out as 1 year.

Payments are primarily based on life expectancy at the time you start the income stream. Interest rates play a secondary role. You can customize the payment structure the guarantee a lifetime income stream of payments that you can never outlive. You can also choose to have those payments pay only for a specific period of time (i.e. Period Certain), or your can combine the lifetime income guarantee with a period certain. It’s all up to you.

SPIAs can be used inside of an IRA (i.e. qualified $$), outside of an IRA (i.e. non-qualified $$), or with a Roth IRA. Regardless of the structure you choose, the contractual guarantees are the same. The difference is how the income stream is taxed. With a Traditional IRA, all of the SPIA income is taxed at ordinary income levels. With non-IRA assets, a portion of that income stream is taxable because SPIA payments are a combination of return of principal + interest. You only pay taxes on the interest. With Roth IRA $$, all of the SPIA income is tax-free.

Buying a SPIA is like buying a plane ticket. They are commodities. You have to shop all carriers for the highest contractual guarantee for your specific situation. Quotes change every 7 to 10 days. Think of SPIA quotes like a gallon of milk. Every week or so, it spoils or expires. If you want to see a SPIA quote on your life, click here and I will email you the results.

I have also written a SPIA Owner’s Manual that I would love to send you for free and under no obligation. Simply click here to fill in your shipping address.