The Simple Explanation
A SPIA — Single Premium Immediate Annuity — is the oldest and simplest form of annuity. You give an insurance company a lump sum, and they send you a check every month for the rest of your life. No accumulation phase. No market exposure. You trade a pile of money for a guaranteed income stream.
How SPIA Payments Work
Payments are calculated based on: your age (older = higher payments), current interest rates, your gender, and the payout option you choose. A 65-year-old putting $200K into a life-only SPIA might receive ~$1,150-$1,250/month for life.
Payout Options
Life Only: Highest payment, stops at death. Life with Period Certain: Guarantees minimum years (10, 15, 20). Joint and Survivor: Covers both spouses. Cash/Installment Refund: Returns remaining premium to beneficiaries if you die early.
When a SPIA Makes Sense
• You need guaranteed income and don't want to manage investments
• You're healthy and expect to live a long time
• Social Security and pensions don't cover basic expenses
• You want to reduce decision fatigue
When a SPIA Doesn't Make Sense
• You might need the principal back (no liquidity)
• Inflation will erode purchasing power
• You want to leave money to heirs
• You're buying at a young age
The Mortality Credit Advantage
SPIA payments are higher than you could safely generate from your own portfolio. When you buy a SPIA, you're pooling money with thousands of others. The insurance company uses premiums from those who die early to pay those who live longer. This is the one financial advantage you can't replicate on your own.