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An Immediate Annuity Has Been Purchased With a Single Premium (SPIA)

Stan Haithcock
May 19, 2024
An Immediate Annuity Has Been Purchased With a Single Premium (SPIA)

An Immediate Annuity has been purchased with a single premium. That's today's topic. Hi, I'm Stan The Annuity Man, America's annuity agent, licensed in all 50 states. Yes, we will talk about Single Premium Immediate Annuities, the granddaddy of all annuities, how that works, and why you might consider that for a lifetime income stream.

Brief History

Single Premium Immediate Annuities have been around for a long time. How long? Good question. Since the Roman times. The dutiful Roman soldiers and their families were laying it on the line for the Empire, and the Empire said, "You know what? Let's create a pension payment, a lifetime income stream for the dutiful Roman soldiers and their families." And that's where the Single Premium Immediate Annuity started. And to this day, it's pretty much the same structure and has been sold in this country, the United States of America, for hundreds and hundreds and hundreds of years. What you need to understand about Single Premium Immediate Annuities is that they're a commodity product, meaning that there's not one better than the other. You have to shop all carriers for the highest contractual guarantee. And fortunately, the best calculators on the planet are found at The Annuity Man where you can run your own Single Premium Immediate Annuity quotes, 24/7, 365 at your leisure.

Is SPIA a Pension?

And I encourage you to book a call with us. You'll get my team for 30 minutes, and we can create a customized plan for you. But think of an Immediate Annuity as a pension. We live in a pensionless world. Unless you're working for the government or a very good labor union, you don't have a pension. You probably have a 401k or something you've been deferring, and it's growing. Eventually, you'll have to convert some or all of that into a lifetime income stream, and that's where a Single Premium Immediate Annuity comes into play. Now, a Single Premium Immediate Annuity is when you run the quote, and again, you can go to my site at The Annuity Man and run your own Single Premium Immediate Annuity quote. And by the way, the information you put in is encrypted and non-shared. It's not sold. We're not going to tell anybody. You can get your quotes right there and see what it will be to the penny.

Different Ways to Quote

However, Single Premium Immediate Annuity quotes can be run in two different ways. The first way is a lump sum. So, you say, "Wait a minute, Stan. I have $100,000 or $200,000. What would that pay? Would that pay for my life? Or what would that pay for me and my spouse or partner's life?" You can put that in, and obviously, on one life, there will be a higher payment than if they're covering two lives. Now, there's a myriad of ways to customize that structure. There are over 40. And that's the reason that we eventually need to talk. After you run the quotes yourself, you need to schedule a call with me, and I can ask questions.

The other way to run the quote is to reverse engineer the quote, and the way to do that is to put in the amount that you want to solve for. Let's say you have an income floor. I call it the income floor, which is the amount of money coming to your bank account every month to cover expenses. So, you have Social Security, which is an Immediate Annuity or Deferred Income Annuity. However, you want to frame it, but it's an annuity. A pension, that's an annuity of dividends coming in or rental income or whatever. But you need an additional $750 as an example, or $500.

Then what you do is you put in to solve for that $750 a month, what carrier, quoting all carriers, which was what we do, would contractually guarantee that amount using the least amount of money. That's how to buy annuities: use the least amount of money to solve the contractual guarantee you're looking for. That's the best way, in my opinion. I know the annuity gods are like, "Stop it, Stan. Stop it. Trying to get all the money, Stan." That's how they sound. It's kind of like this Orson Welles thing going on. But you know what I'm saying. So, lump sum or reverse engineer, that's how to run your Single Premium Immediate Annuity quotes.

How Much Money Should I Put In?

A question that I get all the time is, "Hey, Stan The Annuity Man, America's annuity agent, how much money should I put into an annuity? In this case, a Single Premium Immediate Annuity?" Well, most carriers in the industry do not like any more than 50% of your investable assets put in any annuities total, period. So, the unfortunate part is a lot of agents don't know that, and they're putting way too much money into annuities than they should. If you're thinking, "How much money should I put in?" And let's just say you have a total of $500,000 in IRAs, non-IRAs, Roth IRAs, checking accounts, and banking accounts. I'm not talking about home or car or guitars. I'm talking about investable assets. Let's say you have $500,000, then $250,000 is the maximum. I'm not saying you have to put all that in there, but that's the maximum you should consider for any type of annuity.


Let's talk about inflation, the gorilla in the room, the financial gorilla in the room. Everybody's talking about inflation. Can Single Premium Immediate Annuities solve for inflation? Yes and no, and let me explain that. The yes part is you can attach what's called a COLA, Cost of Living Adjustment. That's what it stands for, to the immediate annuity payout. You can choose the percentage. Let's say you say, "Okay, I want it to increase by 3%." And you say, "Wait. Stan, that sounds great. It's going to increase by 3% every single year." So, calm down. You already own the best inflation annuity on the planet. It's called Social Security. That is the best inflation annuity on the planet.

But when you buy an annuity out on the street from all these huge carriers, and we represent every single carrier, and we'll quote all carriers for you. And you say, "I want to put a Cost-of-Living Adjustment." I'm going to do that Madonna thing. You've seen my videos. This is the Single Premium Immediate Annuity without the COLA, and this is the one with the COLA. In other words, this is where they start. Vogue. All right, so they're not giving it away. You can put a COLA on a Single Premium Immediate Annuity, but it's taking some time to catch up with the same Immediate Annuity that doesn't have a COLA. That doesn't mean that you don't buy one with a COLA. What I recommend is that if you're thinking about Immediate Annuities, you might buy one with and one without. But just remember, you already own the best inflation annuity on the planet, Social Security.

No Fees

Another good thing about Immediate Annuities, Single Premium Immediate Annuities, is that they have no annual fees, moving parts, or market attachments. I love it when consumer advocates say, "Well, I hate all annuities because they're high in fees." Single Premium Immediate Annuities have no fees. Now, there are commissions paid to the annuity agent or whoever sells it to you on any type of annuity, but it's part of the administrative cost, just like a light bill, water bill, or whatever. When you put $100,000 into an Immediate Annuity, you have $100,000 go to work for you. I mean, that's just a fact. So, when someone says, "Well, those are expensive." Really? No. They have no annual fees.

I spoke with someone the other day, and they asked, "Which annuities provide benefit payments starting immediately?" The answer was Single Premium Immediate Annuities. Then the follow-up question was, "So when do payments start with an Immediate Annuity?" As soon as 30 days up to a year. When the policy's issued, that issue date, that money will hit your bank account as soon as 30 days.


With Single Premium Immediate Annuities, there are really three types of quotes that you can get. The first is life only, which people think is the only thing out there with Single Premium Immediate Annuities. What does that mean? Life only is the highest payment you can get. It's based on your life expectancy. But when your Learjet hits the mountain, money goes poof. It's the highest payment. That's one way of many ways to structure the payment. Then there's life with, say, a period certain or a cash or installment refund. What does that mean? That means it will pay you as long as you're breathing. No matter how long you live. If you live forever, there's a medical miracle; the annuity company's on the hook to pay. That's the transfer of risk benefit proposition that only annuities can provide.

But you can attach to that lifetime income guarantee. Say, "Stan, I don't want a penny to go to the annuity company. I want it to go to my family." You could do a life with cash refund or life with installment refund. Or you could do a life with a period certain. I'll give an example on a period certain. Let's say you said, "I want life with 10-year period certain." What does that mean? That means it will pay you for the rest of your life. But if you die in year two, there are eight more years of payments. Or if you die in year seven, there are three more years of payments. But if you die in year 11, there are no payments for the beneficiaries. Now, you don't have to do life in 10. You could do life in 15, life in 20, life in 30, whatever. That's the customization part of a Single Premium Immediate Annuity.

And then life with cash refund means when your Learjet hits the mountain, you die. Whatever's left in the account, remember, the income is return of principal plus interest. But whatever's left goes to the beneficiaries in a lump sum. Life with installment refund means that you don't want them to get the lump sum, but they will get all the money in the same payment amount until the money's exhausted. Remember, you don't have to allow the annuity company to keep a penny, even though they're on the hook to pay. You can structure it however you want to structure it, and hopefully, you and my team can talk. Go to The Annuity Man and set an appointment so we can talk about a customized structure for you.

The last type of payment with a Single Premium Immediate Annuities, if you said, "You know what? I just want a period certain. I don't want a lifetime income payment, Stan. I just want it to pay for 10 years or 15 years or 17 years or 20 years." I'll give an example. Let's just say you said, "I want a 20-year period certain. Not a life in 20. A 20-year." That means somebody, you, or whoever the listed beneficiaries are on the policy, will get 20 years of payment. At 21, no more payment. If you did a life in 20, you will get paid for the rest of your life regardless of how long you live. But let's say you died in year 13 with a life in 20. There are seven more years of payments. Get it? Of course, you do.

So, Single Premium Immediate Annuities, you've been looking for a pension. You wish your company provided a pension. You already have one with Social Security. But how do you create your own pension? Single Premium Immediate Annuities.

Hey, thanks for joining me. I'll see you next time.

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