Single Premium Immediate Annuities (SPIA)
by Paul M. League, QFP, CFP^®

A Single Premium Immediate Annuity, or "SPIA", is a contract whereby one pays a lump sum of money to purchase this type of insurance company Annuity product, in exchange for a guaranteed stream of immediate income for either the annuity owners/annuitants lifetime, or for the lifetime of the annuitant owner and a spouse, or for a specified number of years (i.e. life with a "period certain"). Should the annuitant/owner die before the end of that "period certain" his/her designated beneficiary would receive either the same income stream, or their lump sum cash equivalent, for the remainder of the period certain time frame.

There are two basic types of Income Annuities, Fixed or Fixed with an Inflation Rider, and as such there are also two basic income options; namely, either a "fixed" income amount that does not adjust for inflation,  or an inflation adjusted one where the first payment is based on the life expectancy of the annuitant, plus an assumed interest rate (a kind of "base rate" used to determine the initial income payment, of typically around 3-4%), with adjustments to the income payment throughout the payout phase of the annuity.

Whether or not an Annuity is the right financial instrument for you, or whether it should instead make up only a portion of your total financial portfolio,  depends on many factors.  In the case of most Immediate Annuities" (SPIAs), it is important to note that once these are purchased they are also considered immediately "annuitized" (i.e. you begin receiving payouts), Insurers take the position that you have traded your rights to any control or access over the invested principle and cash accumulations, in exchange for their management and delivery of the income guarantees for your lifetime, or less, depending on the income payout option you selected at the time of acquisition.  

Annuities are as varied as the companies issuing them; therefore, be certain to seek the guidance of an informed Advisor prior to purchase.

Disclaimer: The material discussed herein is meant for general illustration or informational purposes only and is not to be construed as investment advice. Although the information has been gathered from sources believed to be reliable, it is not guaranteed. Please note that individual situations can vary; therefore, the information contained herein should be relied upon only when coordinated with individual professional advice. We are not licensed for and therefore do not provide tax or legal advice.

About the Author:  Paul M. League, QFP, CFP® is the Founding Principal of both League Financial & Insurance Services (www.LeagueFinancial.com) & League Financial Services (www.LeagueFS.com), which are privately held companies located in Palm Desert, CA. Paul and his companies specialize in assisting clients to create, expand & preserve assets. Contact Information: Paul M. League, QFP, CFP®, P.O. Box 11800, Palm Desert, CA  92255-1800 · 800.482.5347 · Info@LeagueFinancial.com. ©Paul M. League. All Rights Reserved.

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Paul M. League, QFP, CFP® - California Insurance License #0610019

Founding Principal: League Financial & Insurance Services (LFIS)
 Web: www.LeagueFinancial.com · E-mail: Info@LeagueFinancial.com

P.O. Box 11800 · Palm Desert, CA · 92255-1800
Tel: 800.482.5347 · Fax: 310.861.8466

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