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Annuity Comparison: SPIA vs. DIA

Stan Haithcock
September 4, 2023
Annuity Comparison: SPIA vs. DIA

Hi, there. Stan The Annuity Man, America's Annuity Agent, licensed in all 50 states, including that beautiful one you're sitting in right now. Today, we're going to talk about annuity comparisons. SPIAs versus DIAs. Immediate Annuities versus Deferred Income Annuities.

‌Explain them both to me, Stan The Annuity Man. What's the difference? How do I use them? Should I use them? Should I have them? All that stuff. I don't know why I'm rapping, but I am rapping, and that's a good thing.

‌So, Single Premium Immediate Annuities' acronym SPIA, S-P-I-A, and Deferred Income Annuities' acronym DIA, D-I-A. For both of those, you can go to my site, and run quotes 24/7, 365. No one's going to call you, show up at your doorstep, or bother you. We'll treat you like a professional. You can just run the quotes. And then, when you're ready to engage, as they say, you can book a call, and me and you one-on-one are going to talk about the good, the bad, the ugly, the limitations, and the benefits of SPIAs and DIAs.

‌Lifetime Income

‌But first, let's talk about lifetime income. Lifetime income is a transfer of risk. You're transferring the risk to the annuity company to pay for as long as you live, for as long as you're breathing.

‌So, people say, "Well, what's the return on investment on a lifetime income annuity, Stan The Annuity Man?" I don't know that until you die. And when you die, I'll offer to come to your funeral and sing. No one's ever taken me up on that, but I will sing acapella. And then, at the end of the song, I will work in the return on investment number because you died, and I'll know it then. So don't just say, "Well, I compared it to my ETFs, and this just doesn't make sense."

‌If you compare annuity contracts to investments, that's apples and oranges, player. I mean, you're not even in the same ballpark or universe. Lifetime income is a transfer of risk. And, by the way, annuities are the only category providing a lifetime income stream. "Well, I never bought an annuity. It's crazy because the annuity company keeps the money when I die." That's not true. That's only one of 40 ways to structure either an Immediate Annuity or Deferred Income Annuity. And oh, by the way, you already own one.

‌Social Security

‌I know you're like Scooby-Doo saying, "Huh?" I like that, "Huh?" "Huh, I own one?" Yes, you do. It's called Social Security. It's the best inflation annuity on the planet, and you already own one. Even though you might hate annuities, you already own one. Why do you like Social Security? Good question. The reason you like it is it's going to pay you for the rest of your life, right? It's part of the income floor. It's fantastic, right? It's an annuity, right? Exactly. It is.

‌The Structure

‌Single Premium Immediate Annuities and Deferred Income Annuities are pretty much the same structure. I mean, no annual fees, moving parts, or market attachments. It's a straight transfer of risk pension. You're transferring the risk to the annuity company to pay you or you and your spouse or partner for the rest of your life. Regardless of how long you live, as long as you're breathing. I mean, that's it. There's no ROI until you die. It's part of your income floor. So, what's the difference between an Immediate Annuity and a Deferred Income Annuity, Stan The Annuity Man, America's Annuity Agent? If you tell me it's the same thing, it all comes down to the start date.

‌With an Immediate Annuity, you can start it as soon as 30 days from when the contract is issued and as far out as a year. So, 30 days to a year is defined as a Single Premium Immediate Annuity. Once you go past that year point, say 13 months, magically, pop, boo, phew, that's magic, phew. It turns into a Deferred Income Annuity. Same thing, same product. It works the same way, but that's it. An Immediate Annuity is what it sounds like. It's immediate. Nine-year-olds get that; no offense to nine-year-olds. Right, nine-year-olds? Uh-huh. Yeah, that's it. Single Premium Immediate Annuity, 30 days to a year. A year to 40 years, you can defer as far as 40 years. And I know that you're not seeing it on camera. My hands are going shoo. As long as up to 40 years with some carriers is a Deferred Income Annuity, that's when the start date is.

‌Remember, the older you are, the higher the payment. And with either product, Single Premium Immediate Annuities or Deferred Income Annuities, it is a combination of return of principal plus interest with longevity credits. Meaning they're pooling everybody that's your age or ages. Some of you will die sooner, some of you will die later. But that's how it's priced. It's a transfer of risk.

‌Most people who hate annuities are so misinformed and uneducated. Unfortunately, many journalists write about it, "Never buy an annuity because the annuity company keeps the money when you die." That's one of 40 ways to structure it, and that's called life only.

‌Life Only

‌And if you hate your beneficiaries and your wife, and you hate your husband, you hate humanity, and you're misanthrope, you just hate everyone. But if you want the highest lifetime income payment, then you choose life only. Because when you die, and the Learjet hits the mountain, and the money goes poof, that's life only. But not many people choose that. Only the true misanthropes out there. See, you got the philanthrope. Philanthrope people are like, "I'm going to give away money. And I love children, and I love life, and I love the environment." Misanthrope is, "I hate everybody, and I hate everything, but I still want the highest contractual guarantee." That's life only.

‌Life With Cash Refund

‌But for most people, the most popular way to structure these is what's called life with cash refund or life with installment refund. What is that, Stan The Annuity Man? Really good question. Glad you ask. Life is what it is. As long as you're breathing, right? As long as you're breathing, they're going to pay. But when you die, when your rented Learjet hits the mountain, goes kapoof, and you die, whatever's left in the account, remember, return of principal plus interest. Whatever's in the account goes in a lump sum with a cash refund to your beneficiaries that you list on the policy. If it's an installment refund, they get a payment form. My thing with that is if it's a cash refund, they will just go to Vegas and blow all the money. But with installment refunds, they get to go to Vegas a lot and use the money coming in from the installment refund. So typically, the life with installment refund is going to have a higher contractual guarantee payout than the life with a cash refund.

‌Why? Because the annuity company doesn't have to come up with the lump sum, they just continue the payments at the same level until the money is exhausted. So, you can have life only; the money goes poof: highest payment, life with a cash refund, or life with installment refund. Most people choose life with a cash refund or life with installment refund with Immediate Annuities or Deferred Income Annuities because you've worked hard for your money, right? Nod your head. You have. I mean, you've busted it. You saved, you scrimped, and you've made it. You're there. You're at the finish line. But you want to make sure that this money that you're giving the annuity company, that they're not going to keep a penny. That's the great part about life with an installment refund or life with a cash refund or joint life with an installment refund or joint life with a cash refund.

‌The great news is they, the annuity company, are on the hook to pay you for the rest of your life. But when you die, all the money that's in the account, all that hard-earned money you put in there goes to someone in your family. So, the evil annuity company doesn't keep a penny.

‌Joint Life

‌Now, let's talk about joint life, either on an Immediate Annuity or Deferred Income Annuity. Let's just say it's you and your spouse. Joint life with cash refund. When you die, your spouse is going to continue that income stream uninterrupted and unchanged for the rest of their life. And when they die, the second spouse dies, that's when the cash refund or installment refund will kick in.

‌If you outlive your life expectancy, if you lived to 120 like your grandmammy and your grandpappy in North Carolina, where I'm from, then there might not be any money in the account. "Hey, Stan The Annuity Man, America's Annuity Agent. What happens when there's no money in my SPIA or DIA account? What happens then, Stan The Annuity Man?" Here's the great news. The annuity company's on the hook to pay, and they will pay regardless of how long you're breathing.

‌I have thousands of clients whose accounts are at zero, and the annuity company's still paying. What's the return-on-investment on that? I don't know until you die, but that's a good deal as long as you breathe. I think it's ironic that people never ask, "Well, what's my return on investment with Social Security?" You never ask that. You never have even thought that. But for whatever reason, when it comes to annuities and lifetime income, you're like, "What's the return on investment?" I'll come back to you. What's the return-on-investment on your Social Security? You know what you're going to say? "Well, it didn't matter, they didn't pay me for life."

‌It's Customizable

‌Duh. Hello. Join the party, come on. Join it. It's the same thing with Immediate Annuities and Deferred Income Annuities. So, synopsizing this, there are no annual fees, moving parts, or market attachments. That's a good thing. You can customize them. And that's when me and you need to talk one-on-one. Go to my site and book a call. But it all comes down to when you want to start the income. If it's 30 days to a year, it's an Immediate Annuity. If it's a year out, it's a Deferred Income Annuity. They work the same, and they are structured the same.


‌One last thing before we go. Let's talk about inflation. You go, "Inflation? I need one to increase the inflation. Lumber prices are high, and gas prices are high. "Good question about inflation.

‌Annuity companies have the big buildings for a reason. They have the big logos on the plane for a reason. As my CEO says, they're now sponsoring sports stadiums for a reason. A, they know we're going to die, and B, they don't give anything away. So, with inflation, yes, you can put what's called a Cost-of-Living Adjustment, acronym COLA, C-O-L-A, attached to the SPIA or DIA. And it'll increase by that amount. You're saying, "Wait a minute, that sounds really good, Stan. I want it to increase with inflation." Annuity companies don't give that away. Once again, Madonna, vogue (singing). Without an increase, with an increase. Just remember that. They're not going to give it away. That doesn't mean that you don't choose that. But you might say, "Okay. Let's buy one Immediate Annuity with, and let's buy a Deferred Annuity without." I mean, it could be that simple.

‌Deferred Income Annuities, Immediate Annuities, great products, simplistic products. Nine-year-olds understand it. No offense to nine-year-olds. They're easy to understand, and they're pension products. And in a pension-less world where most people don't have pensions, this is where to go. These are the products to look at. By the way, SPIAs and DIAs can be used in IRAs, non-IRAs, and Roth IRAs; it doesn't matter.

‌Now, the difference is the taxation of the income stream coming out. So, you can use any account. If anyone says, "Never put an annuity inside of an IRA." Okay, that's dumb. And it's not even close to being informed.

You can use a DIA or SPIA inside of an IRA. You're just buying a pension using IRA-type funds.

‌I hope this has helped. Hey, do me a favor. Hit subscribe, share, like, and comment on my YouTube channel. Go to the comments, and we'll answer the comments. I mean, we're engaged here. This is Stan The Annuity Man. Me and you talking annuities. Can you believe it? Can you believe you're reading this? Of course, you can. I'll see you next time on Stan The Annuity Man's blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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