What Is a SPIA? A 2025 Guide to Single Premium Immediate Annuities

Turn your lump sum into guaranteed income — with payments typically starting within 30–60 days after funding.

What Is a SPIA?

A SPIA (Single Premium Immediate Annuity) is a financial product that allows you to turn a lump sum of money into a stream of guaranteed income, typically beginning within 30 days of your contract being issued.

It’s a simple concept:
You pay an insurance company one time, and they pay you back on a regular schedule — either for a set number of years or for the rest of your life.

How a SPIA Works

Here’s how a SPIA typically functions:

You contribute a one-time premium — often from savings, a rollover, or a windfall.
You choose how you want to receive income: for life, for a fixed period, or in a way that covers two lives (like you and a spouse).
Your income begins almost immediately — usually within 30–60 days of funding the annuity.

Your monthly income amount is based on your age, gender, the payout option you select, current interest rates, and the amount you invest.

Example: What Happens With $100,000?

Let’s say you’re 67 years old and you purchase a SPIA using $100,000.

You choose lifetime payments with a 10-year minimum payout (called a period certain).

In today’s 2025 market, that could generate roughly $600 to $700 per month, guaranteed for life — and at least 10 years, even if you pass away early.

If you live 30 more years, you keep getting paid the entire time. If you pass away earlier, your beneficiary still receives income for the remainder of the 10 years.

Want to know your exact payout?

Use our SPIA Calculator to get personalized results based on your age, state, and amount.

SPIA Payout Options Explained

SPIAs are flexible. You can customize how — and how long — you want to be paid. Here are the most common payout structures:

Life Only

You receive monthly payments for as long as you live. This option provides the highest monthly income, but no benefits go to your heirs after you pass away.

Life with Period Certain

You still receive income for life, but if you pass away within the guaranteed term (like 10 or 20 years), your beneficiary continues receiving payments until the period ends.

Joint Life

This covers two people, usually spouses. Income continues for as long as either person is alive. You can also combine this with a period certain option for added protection.

Period Certain Only

This pays income for a specific number of years — like 10, 15, or 20. If you die during that term, your beneficiary continues receiving payments until the contract ends.

Cash Refund

If you pass away before you receive the total amount of your original investment, the insurer refunds the remaining balance to your beneficiary. It’s a popular option for those who want to ensure they don’t “lose” their money.

Pros and Cons of SPIAs

Advantages

Guaranteed income that you can’t outlive
Simplicity — no ongoing investment decisions
No market risk — payments are fixed and predictable
Peace of mind — ideal for budgeting in retirement

Disadvantages

No liquidity — once you buy the annuity, the money is locked in
No growth potential — fixed payouts won’t rise with inflation unless you add a rider
Limited inheritance — unless you choose a refund or period certain option
Irrevocable — once payments start, you can’t change your mind

What Affects SPIA Payments?

Several factors determine how much income you’ll receive from a SPIA:

Age — older buyers receive higher monthly payouts
Gender — women generally receive slightly less due to longer life expectancy
State — regulations and insurer offerings vary by state
Payout structure — more guarantees = lower monthly payments
Current interest rates — SPIAs are more generous when rates are high
Premium amount — the more you invest, the more you get paid

Qualified vs. Non-Qualified SPIAs

You can buy a SPIA with either pre-tax or after-tax money.

Qualified SPIAs

These are funded from an IRA, 401(k), or other retirement account. All payouts are taxed as ordinary income. If you're under age 59½, early withdrawal penalties may apply.

Non-Qualified SPIAs

These are funded with after-tax savings, like cash or brokerage accounts. A portion of each payment is considered a return of principal and is not taxable. Only the interest portion is taxed.

Optional Riders to Customize Your SPIA

Many SPIAs allow you to add contract features (called riders) to improve flexibility:

Cost-of-Living Adjustment (COLA) – Gradually increases payments to offset inflation
Refund Option – Ensures that your beneficiary receives any unused funds
Commutation Rider – May allow partial access to your lump sum in emergencies
Joint Payout Rider – Extends income across two lives for couples

Riders may reduce your monthly payout, but they can offer added peace of mind and control.

Is a SPIA Right for You?

A SPIA may be a strong choice if:

You’re nearing or in retirement
You have a lump sum from savings, inheritance, or a rollover
You want stable, guaranteed income
You’re concerned about outliving your money
You don’t want to manage investments anymore

It might not be a good fit if:

You need flexible access to your funds
You want growth tied to inflation or the market
You’re focused on leaving a large inheritance

SPIA vs Other Retirement Options

You might wonder how SPIAs compare to other annuities or income tools. Here's how they differ:

SPIAs provide immediate income, typically for life, and are irreversible once started.
Deferred Income Annuities (DIAs) delay income for years and are used for long-term retirement planning.
Fixed Indexed Annuities (FIAs) allow for growth tied to a market index, with income available later via riders.

Each has its place in a well-balanced retirement strategy.