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Single premium deferred annuity: How it works & types to consider

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If you’re looking for a way to invest in your future retirement, you may be considering a single premium deferred annuity. It allows you to contribute money now and defer your payouts until later—potentially decades later—depending on how far away you are from retirement.

Deferred annuities are designed to help you build your retirement savings over time, ensuring a consistent income flow to help support your lifestyle in retirement. Here's how to know if it's a good option for you.

What is a single premium deferred annuity?

A single premium deferred annuity (SPDA) is a type of deferred annuity you purchase with one lump sum—a single premium—at the beginning of your contract. After your initial purchase, you cannot contribute any more money.

The deferred angle is related to when you start receiving payments. Unlike immediate annuities, which begin paying you shortly after you purchase them, deferred annuity payments don't begin until later—often at retirement. During that deferral period (or accumulation period), your annuity grows in value according to your contract terms.

The sooner you purchase your annuity and the later you begin receiving payments, the longer the deferral period and the greater your potential to accumulate returns. Any interest is tax-deferred until you make a withdrawal or begin receiving annuity payments. It's this time-delayed, tax-advantaged aspect of deferred annuities that makes them such a useful retirement tool. Your contract value is a major factor in determining how much your payments may be, so a longer deferral period also means your payments will likely be higher as well.

Who should consider a single premium deferred annuity?

If you decide that you want an annuity, SPDAs are an option if you have a lump sum to contribute and want to grow that money over time. The time to buy one is generally when you’re in your 50s or early 60s and looking forward to retiring in the next decade or so.

3 types of single premium deferred annuities

SPDAs can be structured as fixed rate, multi-year guarantee, or fixed indexed annuities. These annuities specify how your annuity value may grow during the accumulation period.

1. Fixed annuities: A conservative option

Fixed annuities allow you to earn a guaranteed minimum interest rate for the life of the contract. A current rate, which may be higher, will be reset annually. In this case, the guaranteed minimum interest rate is written into your contract so you know the minimum interest applied. This makes it a conservative retirement product and eliminates uncertainty.

One downside of fixed annuities is that their growth can be lower than other annuities, and that growth may not keep up with inflation.

2. Multi-year guarantee annuities: A dependable fixed-rate of interest for a specified time period

Multi-year guarantee annuities, or MYGAs, are another type of fixed annuity. The key difference between MYGAs and other types of fixed SPDAs is the period of time you receive the guaranteed fixed rate. MYGAs provide a locked-in, guaranteed rate of return for as long as the selected guaranteed period lasts. (Typically, a period between three and nine years.)

3. Fixed indexed annuities: Interest tied to the performance of an index

Fixed indexed annuities' growth depends on the performance of the specified index. In addition, most fixed indexed annuities have a cap. This means if the index performs above a certain level, the interest applied to the fixed indexed annuity will be limited by the cap.

For example, suppose your contract caps growth at 7%. Even if the index increases by 11%, your contract will only be credited with a 7% increase.

Is an SPDA right for you?

An SPDA gives you a way to accumulate tax-deferred savings that you can convert into a permanent and fixed source of income in retirement. A Thrivent financial advisor can help you assess your retirement strategy to see if an SPDA or another annuity type might be a good fit for achieving your goals.

Hypothetical examples are for illustrative purposes. May not be representative of actual results.

Thrivent and its financial advisors and professionals do not provide legal, accounting or tax advice. Consult your attorney or tax professional.

Withdrawals and surrenders will decrease the value of your annuity and, subsequently, the income you receive. Any withdrawals in excess of 10% may be subject to a surrender charge. The taxable portion of each annuity distribution is subject to income taxation. If a taxpayer is younger than 59½ at the time of distribution, a 10% federal tax penalty will apply to the taxable portion of the distribution unless a penalty-tax exception applies.

Investing involves risk, including the possible loss of principal. The prospectus and summary prospectuses of the variable annuity contract and underlying investment options contain information on investment objectives, risks, charges and expenses, which investors should read carefully and consider before investing. Available at

Holding an annuity inside a tax-qualified plan does not provide any additional tax benefits. 

Guarantees based on the financial strength and claims-paying ability of the issuer.