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What is a SPIA?

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If you don't have a pension from your employer or you're concerned about outliving your savings in retirement or losing purchasing power to inflation, know that you have options. A single premium immediate annuity (SPIA), also known as an immediate annuity, might be a good choice for your retirement planning to provide stable, monthly income.

Here's a closer look at what a single premium immediate annuity is, how it works and whether this type of annuity is right for you.

What is a single premium immediate annuity?

A SPIA is a financial contract between you and an insurance company. You agree to pay the insurance company a lump sum of money up-front (the single premium), and the insurance company agrees to pay you an immediate stream of income (an annuity) while investing your money. Payments continue steadily until your death or for a specified amount of time, depending on the payment option you choose.

This is generally considered to be one of the simplest types of annuities and tends to be a consumer-friendly choice with simple terms.

How does a SPIA work?

A single premium immediate annuity works like this:

  1. You have a lump sum of money that you have saved for retirement, such as a 401(k) or other savings account.
  2. You work with an insurance company that agrees to help you convert that sum of money into an annuity, or a permanent stream of income.
  3. You purchase the annuity from the insurance company.
  4. At purchase, your insurance agent or financial advisor will help you customize your income from the annuity. You can get monthly, quarterly, semi-annual or annual payments from the annuity. You also can choose customized options like life only (lifetime income for one person), joint (payouts cover both you and your spouse for as long as you live), or payments structured over a certain period of time. If the annuity has a guaranteed timeframe, this also may provide payments to your beneficiaries.
  5. You immediately begin receiving payouts from the annuity—typically within one month of purchase.

How is a SPIA structured?

There are a few options for structuring the annuity contract. You can select fixed payouts, payouts with an annual percent increase, or payouts adjusted annually for inflation. When the annuity is fixed, you receive a steady payment no matter what and don't have to worry about the ups and downs of the stock market. In contrast, payouts from variable annuities depend on investment performance. If you're concerned about your money keeping up with inflation in retirement, you can get an annuity with a fixed percent increase or one where payments are tied to an inflation index.

With a single premium immediate annuity, you are entrusting your savings to an insurance company, which promises to use those savings to generate a lifetime stream of income for your retirement. Instead of investing the money yourself and trying to earn a return in volatile stock and bond markets, the insurance company takes on that investment risk for you.

How do you decide if a SPIA is right for you?

When it comes to single premium immediate annuities, you should consider a few things about your individual financial position, your goals for the future and your investments.

If you're leaning toward a SPIA, here are some pros and cons to this type of annuity:

Advantages of a SPIA

Guaranteed income

With an annuity, you can turn your savings into secure, guaranteed income for life. You don't need to worry about investing your money or watching the ups and downs of the stock market. The insurance company manages the risks for you and provides you with a steady retirement income payout.

Possible tax benefits*

Depending on the annuity you choose and whether you're funding the annuity with tax-deferred savings, like a 401(k) or individual retirement account (IRA), only a portion of your annuity income is taxable. This may help reduce your tax bill in retirement and continue to defer taxes on part of your retirement nest egg.


What are your financial goals or concerns for your annuity? Do you want to make sure your beneficiaries are protected after you die or that your spouse receives lifetime income? Or do you want to protect your retirement income against inflation? These contracts can offer a wide range of customized options to address your needs.

Disadvantages of a SPIA

Lower liquidity

When you sign up for a SPIA, you agree to hand over a lump sum of money to an insurance company. If you need to take out more than your scheduled annuity payments, that option is only available if you have a remaining guaranteed period. Even so, there would be a sizeable penalty.

Possible smaller inheritance

If you have not selected a specified period for your payments, there will be no death benefit to your heirs. This means that if you die sooner than expected, you might not be able to leave as much money to your beneficiaries as you had planned.

Lower growth of your wealth

With a SPIA, you generally are no longer trying to achieve investment growth. You are signing over a lump sum of money for an insurance company to manage and invest in exchange for guaranteed income. If you want to invest your money to potentially grow your wealth into the future, a SPIA might not be the right choice. (However, variable annuities can offer you some additional upside if you're willing to accept the financial risk.)

Lack of control

Ultimately, the choice comes down to guarantees vs. control. Is it more important to you to get a certain amount of guaranteed income, or would you rather keep control of your own money even if there are some risks of not earning enough money to have a comfortable retirement?

Ready to talk more about SPIAs?

Purchasing a SPIA is a major financial decision that can bring lifelong results for your personal finances. However, it requires some consideration. Connect with a Thrivent financial advisor to learn more about SPIAs and whether annuities will help you reach your retirement goals.

* Withdrawals made prior to the age of 59 ½ may be subject to a 10 percent federal tax penalty.

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