- A SPIA (Single Premium Immediate Annuity) converts a lump sum into guaranteed monthly income that starts within 30 days of purchase.
- SPIA payments are guaranteed for life — you cannot outlive them. This is the defining feature that no CD, bond, or savings account can replicate.
- In exchange for lifetime income, you give up access to your principal. The transaction is generally irrevocable.
- SPIAs are most efficient when purchased at older ages (65–80) and in higher interest rate environments. Both conditions exist in 2026.
- A SPIA is not a growth vehicle — it’s an income vehicle. Use it to convert accumulated savings into a reliable income floor, not to grow wealth.
A Single Premium Immediate Annuity — SPIA — is the purest form of an annuity. You hand an insurance company a lump sum. They hand you a guaranteed monthly payment for the rest of your life. Nothing complicated. No subaccounts, no cap rates, no benefit bases. Just a check every month, forever.
SPIAs are one of the most efficient income tools in retirement finance — and one of the least used, largely because the irrevocability makes people uncomfortable. This guide explains exactly how they work, what they pay, and who should consider them.
How a SPIA Works
You make a single premium payment — typically $50,000 or more — and within 30 days (sometimes sooner), monthly income payments begin. The payment amount is determined at purchase based on:
- Your premium amount
- Your age (and your spouse’s age if joint)
- Current SPIA payout rates (driven by bond yields)
- The payout option you select
Once the contract is issued, the payment amount is locked in forever. It does not change with the market. It does not stop if interest rates fall. As long as you live — and, depending on your chosen option, as long as your spouse lives — the payments continue.
SPIA Payout Options
You choose the income structure at purchase. This decision is permanent:
Life Only: Payments for your lifetime. Stops when you die. No death benefit. Produces the highest monthly payment — this is the “pure” longevity insurance option.
Life with Period Certain: Payments for life, but if you die before the certain period ends (10 or 20 years), payments continue to your beneficiary through the end of that period. Slightly lower payment than life-only.
Joint and Survivor: Payments continue for both your life and your spouse’s life. When one spouse dies, the survivor continues receiving either 100%, 75%, or 50% of the original payment (you choose the percentage at purchase). Lower monthly payment than single-life options because it covers two lives.
Period Certain Only: Payments guaranteed for a specific number of years (10, 15, 20). Payments stop at the end of the period — even if you’re still alive. Not a lifetime option. Appropriate for bridging a specific income gap (e.g., pre-Social Security years).
Real SPIA Example: What $250,000 Buys
Patricia, age 68, has $250,000 from a maturing MYGA. She has a Social Security income of $2,100/month but needs $3,200/month to cover essential expenses. Her income gap: $1,100/month.
She purchases a SPIA with $200,000 using a life-with-10-year-certain option:
- Monthly income: $1,240/month — guaranteed for life
- Starts 30 days after purchase
- If she dies before year 10, payments continue to her beneficiary through the 10-year mark
- Combined with Social Security: $3,340/month total — covering all essential expenses with $140/month to spare
- Remaining $50,000 stays in a new MYGA for emergencies and discretionary needs
Patricia’s essential expenses are now covered entirely by guaranteed, can’t-outlive-it income — regardless of what the stock market does, regardless of how long she lives.
SPIA vs. Income Rider: When Does Each Make More Sense?
| Feature | SPIA | FIA + Income Rider (GLWB) |
|---|---|---|
| Income starts | Immediately (within 30 days) | After deferral period (5–15 years) |
| Access to principal | No — irrevocable | Yes — account value remains accessible |
| Death benefit | Only with period-certain option | Yes — remaining account value |
| Annual fees | None | 0.75%–1.25% for rider |
| Payout rate efficiency | Higher — no fee drag | Lower — fees reduce actual account value |
| Flexibility | None — fixed forever | Some — withdrawals can be paused |
| Best for | Immediate income need at or in retirement | Pre-retirees who want future income with growth potential |
The Tax Treatment of SPIA Payments
For non-qualified SPIAs (purchased with after-tax money), the IRS applies the exclusion ratio to determine the taxable portion of each payment:
Exclusion ratio = your investment ÷ total expected payments over life expectancy
A portion of each payment is returned tax-free (your original principal coming back). The remainder is taxable as ordinary income. Once you’ve fully recovered your basis, all subsequent payments are 100% taxable.
For qualified SPIAs (purchased with IRA/401k money): the entire payment is taxable as ordinary income, since the funds were pre-tax going in.
Who Should Consider a SPIA?
SPIAs make the most sense for people who:
- Need income now. If you’ve retired and have a gap between Social Security/pension and essential expenses, a SPIA is the most direct tool.
- Are in their late 60s to 70s. Payout rates are most favorable between ages 65–80. Buying at 80 produces dramatically higher monthly payments than buying at 60.
- Have no heirs to consider, or have handled estate needs elsewhere. The life-only option (highest payout) means nothing passes to heirs. If you’ve handled estate planning through life insurance or other assets, the lack of SPIA death benefit isn’t a problem.
- Have longevity risk. Long family history of living into the 90s? A SPIA makes the actuarial math work in your favor — the longer you live, the more you collect relative to your premium.
- Want simplicity. A SPIA requires no management, no monitoring, no rebalancing. Once purchased, it generates income automatically until death.
Who Should Not Buy a SPIA
- People in poor health with below-average life expectancy — the actuarial math works against them
- People who may need the lump sum for major expenses (healthcare, long-term care, family emergency)
- People under age 65 who have better growth options ahead of them
- People who feel strongly about leaving maximum assets to heirs
Frequently Asked Questions: SPIA (Immediate Annuity)
What is a SPIA annuity?
A SPIA (Single Premium Immediate Annuity) is an annuity purchased with a lump sum that begins paying guaranteed monthly income within 30 days of purchase. In exchange for your premium, the insurance company guarantees monthly payments for life (or a specified period). The transaction is generally irrevocable — you give up access to the principal in exchange for guaranteed income.
What happens to a SPIA when you die?
It depends on the payout option. With life-only, payments stop and nothing passes to heirs. With life-and-period-certain, if you die within the guaranteed period, payments continue to your beneficiary through the end of that period. With joint-and-survivor, payments continue to your surviving spouse. Choose the option that matches your estate and income goals before purchasing.
Can you get your money back from a SPIA?
Generally no. A SPIA is designed to be irrevocable — you exchange your lump sum for guaranteed income payments. Most contracts do not allow you to surrender the policy and get a refund after the free-look period expires. This irrevocability is the trade-off for the highest possible monthly payment rate. If you may need access to the principal, a SPIA is not the right product.
How is SPIA income taxed?
For non-qualified SPIAs, each payment is partially taxable (the gain portion) and partially tax-free (the return of your original principal), calculated by the exclusion ratio. For qualified SPIAs funded with IRA or 401(k) money, the entire payment is taxable as ordinary income since the funds were never previously taxed.
What is the difference between a SPIA and a deferred annuity?
A SPIA starts paying income immediately — within 30 days of purchase. A deferred annuity accumulates value over time before income begins. Deferred annuities (MYGAs, fixed annuities, FIAs) are accumulation products. A SPIA is purely an income product. The two serve different phases of retirement planning: deferred annuities in the accumulation phase, SPIAs in the income distribution phase.
