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What Is a Single Payment Immediate Annuity?

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By    |   Monday, 04 May 2015 09:34 AM

A single payment or single premium immediate annuity, often called an SPIA, provides guaranteed payouts over a certain number of years after you make a single lump sum payment to an insurance company.

The aim of the annuity is to reduce investment risks because it is more like an insurance policy rather than investing in stocks, bonds or funds, which can fluctuate according to the markets.

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Guaranteed payments from the annuity may occur on a monthly, quarterly, semi-annual or annual basis, Annuity Rate Watch explains. After you make your single payment, the payouts could begin right away or start up to a year later, depending on the plan. Annuity periods last for five to 30 years.

Annuity payments may be made as long as the annuitant is still living or for a certain period of time stipulated by the purchase amount. The annuity payments can be made to the annuitant and spouse or partner selected. Depending on the annuity purchased, refunds might be paid in one lump sum upon the death of the annuitant. Beneficiaries may terminate the contract and receive remaining payments based on the agreement, according to Annuity Rate Watch.

Annuities include fixed annuities, in which you receive a fixed amount during the period of the annuity, and variable annuities that depend on the changing value of investment funds during the period. Many retirement advisors recommend fixed annuities because of fewer complications, lower fees and fewer risks.

Fixed annuities provide easier retirement planning, according to the Oblivious Investor. They also bring peace of mind knowing you receive a fixed amount each payment. SPIAs include fixed annuities that adjust for inflation. They usually require higher single premiums.

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Fixed SPIAs allow retirees to depend on a certain amount through the life of an annuity for better planning in the years ahead. Other retirement funds depend on inflation and other economic factors that can rise and fall. The money could even run out. A retiree with a fixed annuity is guaranteed the same amount in payments.

Payouts are guaranteed because the annuity is similar to an insurance policy with many policyholders. If a recipient dies, the money is gone, so the insurance company can stay in business for the sake of other clients.

When considering a single premium immediate annuity, research the financial strength of insurance companies through Standard and Poor's, A.M. Best or other rating agency. Strong companies indicate a better chance of staying in business to ensure a guaranteed income for the life of the annuity, reports the Oblivious Investor.

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A single payment or single premium immediate annuity, often called an SPIA, provides guaranteed payouts over a certain number of years after you make a single lump sum payment to an insurance company.
annuity, single payment
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2015-34-04
Monday, 04 May 2015 09:34 AM
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