Unpacking Deferred Annuities: SPDA, FPDA, MVA

Hi there, Stan The Annuity Man, America's annuity agent, licensed in all 50 states. I'm so glad you joined me. Today, we're talking about Deferred Annuities and some acronyms you may not know until you get your policy: SPDA, FPDA, and MVA. What the heck is that, right? I mean, who knows? I'm going to tell you because you need to know, and it's part of the annuity "secret sauce" that no one seems to address. Let's dive in.

SPDA: Single Premium Deferred Annuity

So, one of my team members got a call the other day. The call went like this: "Hey, we filled out the application. I got my policy in the mail from Stan The Annuity Man, and I’m reading through the policy. It says at the top SPDA. What does SPDA mean? I thought I bought a MYGA, a Multi-Year Guaranteed Annuity."

Let's talk about that. SPDA stands for Single Premium Deferred Annuity. Break it down: You gave the annuity company a lump sum, in this case, a MYGA, which is the annuity industry’s version of a CD. The annuity company holds the money and credits you with an annual interest rate. But you get the policy, and it says SPDA. What the heck is an SPDA?

You could have also gotten a Fixed Index Annuity. Same thing on the policy: "Hey, Stan, I bought this Fixed Index Annuity, but I see SPDA on there."

Now, if we look at this philosophically—why would the annuity industry and their team of lawyers put this on the policy and make it confusing? I don’t know, but I think it's an evil plot. You can always call me to talk more about it, and that's a good thing. But SPDA means Single Premium Deferred Annuity. You gave a lump sum to the annuity company, a Deferred Annuity, or, in this case, a Multi-Year Guaranteed Annuity or a Fixed Index Annuity.

FPDA: Flexible Premium Deferred Annuity

So, what’s FPDA? FPDA stands for Flexible Premium Deferred Annuity. You get the policy in the mail, and it says at the top: Flexible Premium Deferred Annuity. You might think, "Wait a minute, I thought I bought a Fixed Index Annuity."

Flexible Premium Deferred Annuity means that after you gave the lump sum to the annuity company for the contractual guarantees that we discussed and you decided on (because it was suitable and appropriate, and you only buy annuities for what they will do, not what they might do), the annuity company will allow you to add more money to the policy after it has been issued. Now, not all do that. Some do, some don't.

Hopefully, when we're talking, you can tell me, "Hey, I'm planning on putting more money in over time." If that’s the case, I’ll shop all carriers that offer Flexible Premium Deferred Annuities that allow that.

At the time of this taping, most Multi-Year Guaranteed Annuities are not Flexible Premium Deferred Annuities. You can’t just keep adding to it. But there are some that do allow that. Once again, if that’s your goal, let me know.

Most Indexed Annuities will allow you to add money to the policy after it has been issued. Fixed Indexed Annuities will generally allow you to add money.

SPDA vs. FPDA: What's the Difference?

Now, you know what SPDA and FPDA mean. But here's the thing: if you bought an annuity from someone else—maybe your brother-in-law, sister-in-law, cousin, or even your spouse if they’re an agent—did you ever stop and think, “Do I really want to do that? Why wouldn't I want to deal with Stan The Annuity Man?”

MVA: Market Value Adjustment

The last "A" we need to talk about is MVA, or Market Value Adjustment. Once again, the annuity industry has made it a little complicated regarding Market Value Adjustment (MVA). Most of the time, MVA applies to Single Premium Deferred Annuities and Flexible Premium Deferred Annuities, like Multi-Year Guaranteed Annuities and Fixed Index Annuities.

But here's the thing: you might get your policy in the mail, and on page 17, you see some math that looks like calculus. You’re thinking, “Wait a minute, that looks like calculus two! There's this formula in there like XVY, the square root of something.” You may say, “Oh my God, this is the math class I hated. I just hated it!” Or maybe you’re a math person and you think, “I love that! I want to know what that is.”

What is Market Value Adjustment (MVA) and why is it important? Well, it isn't important at all if you hold the policy through the surrender charge period. Let me give you an example. Let’s say you have a five-year Multi-Year Guaranteed Annuity with a specific interest rate for five years. If you don’t cash it in, the MVA doesn’t apply. But let’s say, in that same example, you bought the five-year annuity, and after three years, your life changes, and you need to pivot. You decide, “You know what, Stan The Annuity Man, my life has changed. I need to cash this out.” That’s when the Market Value Adjustment comes into play.

How Market Value Adjustment Works

Let’s get into the weeds: If you buy a Multi-Year Guaranteed Annuity and interest rates go up after you purchase it, your Market Value Adjustment will increase the surrender charges. That’s how it works. The reverse is true: if interest rates go down, your surrender charges go down.

In some cases, you could buy a five-year Multi-Year Guaranteed Annuity, and if interest rates go way down, you might be able to cash out in two years. But again, this only applies if you decide to cash out early within the surrender charge period.

Here’s the bottom line: if you hold the policy through the full surrender charge period—whether it’s three, five, or seven years—the MVA doesn’t apply. It only applies if you decide to cash it out early and change your mind in the middle of the policy.

Final Thoughts on SPDA, FPDA, and MVA

Hopefully, I’ve been crystal clear on SPDA, FPDA, and MVA. If not, you can always visit my site at The Annuity Man. You can book a call with us, and we can discuss this further. When you do book, we’ll have a 30-minute, non-salesy, brutally factual conversation.

We love helping people figure out what they’re trying to achieve, and we’ll be brutally honest. If you don’t need an annuity, we’ll tell you that. Don’t believe me? Try us!

Also, feel free to explore my site. We have videos, podcast recordings, and the best calculators on the planet. You can run calculators for Immediate Annuities, Deferred Income Annuities, Qualified Longevity Annuity Contracts, and Income Riders. There’s a live feed for Multi-Year Guaranteed Annuities. We aim to make The Annuity Man the place where annuities are bought, not sold.

Thank you for joining me today, and I’ll see you on the next Stan The Annuity Man blog post.