Immediate Income Annuities ("SPIA")

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Solve For Guaranteed Lifetime Income – Now

Investors planning for retirement want simple solutions with guaranteed income. SPIAs are an important retirement income tool created to do just that.

SPIAs are the most efficient way to activate an immediate stream of guaranteed lifetime income payments even if you live to age 100 or beyond. 

SPIAs are one of the foundations of many investors' retirement income plans who desire a guaranteed income floor in addition to Social Security payments or employer pensions (if you should be so fortunate). 

A SPIAs is like getting an old-fashion pension plan -  but you build it yourself.

The great thing is when you put money in, you know exactly, to the penny, how much income you will receive at any future age. It's like getting an old-fashioned pension plan, but you build it yourself.  

You can purchase a SPIA from an insurance company with a single, lump sum amount called a premium. In return, the insurance company promises to make regular payments to you (or to another payee you specify) for the remainder of your life (i.e. “life annuity”) or for a specific period (i.e. “period certain”) – to create your own personal pension.

Payments must begin between one month and one year after purchase. 

Most investors typically choose to receive monthly payments for life, however, you may choose to receive quarterly, semi-annual or yearly payments instead. These payments can be sent directly to your bank account for ease of use. 

In exchange for the guaranteed lifetime income payments, you give up the right to demand the return of your original premium, so the purchase of a SPIA is usually an irrevocable decision that cannot be undone once the free-look period has expired following contract issue. 

SPIAs can be funded from non-qualified monies (for example, assets held in an individual or joint account) or qualified monies (for example, IRAs and assets rolled over from 401(k), 403(b) or employer-sponsored retirement plans). Payments are taxed depending upon the source of the funds you use to purchase it. 

Solve For Longevity Risk - The Fear Of Outliving Your Money

If your investment portfolio suffers significant losses as you near or are in the early stages of retirement, losses coupled with retirement income withdrawals can send your investment and retirement income portfolio spiraling downward, and you may suddenly find yourself in a serious dilemma on meeting your long term retirement income needs. 

During retirement, investors are typically conditioned to invest in a traditional "balanced" asset allocation buy-and-hold portfolio of stocks and bonds which conventional wisdom says should perform well over the long run. But such "balanced" portfolios have failed before - and failed badly - as evidenced by the 2000-2002, 2007-2009 and 2022 bear markets which altered the future retirement income plans of countless investors. 

Lifetime income guarantees act as a transfer of risk strategy from your investment portfolio, which is subject to stock market losses, to create your own "pension-like" guaranteed income stream for life, so you don't outlive your money. 

SPIA Payment Term Options Can Be Adopted To Meet Your Needs

One of the many advantages of SPIAs is that the payment term can be customized to meet your needs, the needs of you and your spouse, and/or potential legacy options for your children, grandchildren or other beneficiary(s). 

While the amount of income you receive depends on several factors, including your age and life expectancy, gender, premium amount, your chosen payment term option and interest rates in effect at the time the policy is issued, the income is primarily based on your life expectancy (or joint life expectancies) at the time income starts, with interest rates playing a secondary role. 

You can purchase a Joint Life SPIA if you want your income to also cover a loved one in retirement. By doing so, you can ensure that income will be paid to both of you throughout your lifetimes. 

Similar to your Social Security, the older you are when the SPIA income starts, the higher the payment (i.e. rate of return) because your life expectancy is less.  

Some of the available payment term options include: 

A. Single Life Annuities
- Single Life Only
- Single Life With Period Certain
- Single Life With Installment Refund
- Single Life With Cash Refund

B. Joint Life Annuities
- Joint Life Only
- Joint Life With Period Certain
- Joint :Life With Installment Refund
- Joint Life With Cash Refund 

C. Period Certain Annuities

The Single Life with Cash Refund and the Single Life With Installment Refund are two of the most popular SPIA payment term options.

Single Life With Cash Refund
If structured correctly, this SPIA payment term option will pay income for one lifetime (and the lifetime of one other person if a Joint Life policy). Additionally, this option guarantees that if the annuitant(s) die(s), the beneficiary(s) will receive a lump sum equaling the premium amount less all payments made to the annuitant(s).

The Life With Cash Refund payment term option ensures that all your money will go to you or your named beneficiary(s), and not a penny to the insurance company. 

Single Life With Installment Refund
It structured correctly, this SPIA payment term option will pay income for one lifetime (and the lifetime of one other person if a Joint Life policy). Additionally, this option guarantees that if the annuitant(s) die(s), the beneficiary(s) will continue to receive the annuity payments until the premium is fully recovered. The Life With Installment Refund payment term option entitles the beneficiary(s) to receive the total of the premium less all payments made on a scheduled installment basis.

The Life With Installment Refund payment term option ensures that all your money will go to you or your named beneficiary(s), and not a penny to the insurance company. 

Help Solve For Legacy Planning

If structured correctly, the Life With Cash Refund payment term option guarantees that if the annuitant(s) die(s), the beneficiary(s) will receive a lump sum equaling the premium amount less all payments made to the annuitant(s). 

In certain situations, the Life With Installment Refund payment term option can also be used as a tool to control your legacy from the grave by providing installment payments over time to your heirs (instead of a lump sum inheritance). This payment term option can provide a lifetime income stream for you and your heirs - and may help you - help your heirs - from squandering away their inheritance all at one time (which is oftentimes the case). *

* Note: If the total payments received prior to the annuitant(s) death equal or exceed the initial premium paid for the policy, then no further payments will be made to the beneficiary(s) upon death.

Non-Qualified Accounts And The Tax-Efficient Exclusion Ratio

SPIAs can be purchased with either qualified funds (for example, assets held in an IRA account) or non-qualified funds (for example, assets held in an individual or joint account). 

When a SPIA is purchased with qualified funds, the entire payment received each month from the qualified SPIA is fully taxable as income, because taxes have never been paid on those funds.

However, when a SPIA is purchased with non-qualified funds, a portion of each monthly income payment is considered a return of previously taxed principal (cost basis) and therefore excluded from taxation.

The amount excluded from taxation is called the exclusion and is represented as a percentage of the monthly payout that is calculated by the issuing insurance company (the "Exclusion Ratio").

Following is a summary of key features and benefits that SPIAs offer:​

No annual fees

Simple

Once a SPIA is funded, the only work on your part is to collect your regular payments (which can be sent directly to your bank account).

Principal Protection

SPIAs are not subject to market losses. Your principal is fully protected against stock or bond market downturns and is guaranteed by the assets of the insurer. We work with only the highest rated insurance companies in the industry.

Non-Correlated To The Stock Market

Sequence Of Returns Risk Mitigation

SPIAs help protect your income from stock or bond market down turns which, as you near or are in retirement,  can help lower your stress level and give you Peace Of Mind.

SPIAs Can Become A Part of Your Fixed Income Allocation Within Your Investment And Retirement Income Portfolio

Potential Higher Income Payments

Each annuity income payment you receive is comprised of three things:

(1) a return of your premium,

(2) interest, and

(3) a component from risk pooling (which only an insurance company can provide).

Can Be Used To Create Guaranteed Lifetime Income Annuity Ladders That Start At Different Ages In The Future

Similar to laddering CDs or bonds, SPIAs work well in conjunction with Social Security, DIAs and QLACs to create guaranteed lifetime income annuity ladders.

Helps Solve For Longevity Risk

SPIAs pay you an immediate stream of guaranteed lifetime income payments which cannot be outlived (or which may be guaranteed for a certain period). 

Can Be Purchased In IRA, Roth IRA And Non-IRA Accounts

Rolling some of your IRA, 401(k), 403(b) or employer-sponsored retirement plan into a SPIA is an easy way to turn that money into exactly what is was intended for - a steady stream of income you can count on for the rest of your life - like a good old-fashioned pension plan.

Can Help Keep Up With Inflation

Most SPIAs offer inflation protection as an optional rider known as a COLA (Cost Of Living Adjustment) which can be contractually added to your SPIA policy at the time of purchase. COLAs increase your income stream on an annual basis by the percentage that you choose, to help protect your income from the effects of inflation throughout your retirement. 

Preferred Tax Treatment For Non-Qualified Accounts (Exclusion Ratio Benefit)

SPIAs purchased with non-qualified funds (for example, assets held in individual or joint accounts) allow you to benefit from deferring taxation by spreading out income over time.

Each payout includes interest and a return of principal which creates a tax-favored stream of income with an exclusion allowance; whereas a traditional systematic withdrawal approach will tend to front load the taxation. SPIAs may also be a good strategy to defer taxes until later in retirement when you may be taxed at a lower rate.

Lifestyle And A Smooth Transition

Lifestyle is knowing that you or your spouse will have enough money to live comfortably if something happens to one of you. SPIAs can help provide a smoother transition for a surviving spouse who may not be as familiar with investing, so he or she can go about his or her life without having to worry about financial security.

Protection From Cognitive Decline

SPIAs can help protect you and/or your spouse from the travails of cognitive decline, which could someday limit the ability to make complex decisions about suitable investments and withdrawal strategies.

SPIAs Can Be Easily Structured For Legacy Planning To Create A Lump Sum Legacy Or An Income Legacy For Your Heirs

There is a common misconception that the insurance company keeps what's left of your money when you die. If structured correctly, a SPIA can create:

(1) a lump sum legacy for your heirs, with 100% of the unused premium passing directly to your beneficiary(s) upon your death, or

(2) an income legacy for your heirs, leaving an income stream of the unused premium to your beneficiary(s) as part of your overall legacy plan.

Note: Payment term options vary and can be used to maximize your income or create a legacy. Death benefits are contingent on the payment term option you choose and the amount of income you receive over the life of the policy.

May Avoid Probate

If an option with a death benefit is chosen, any remainder in your SPIA can usually pass outside of probate and be paid discreetly and directly to your heirs (not the insurance company) within weeks after all required paperwork is received in good order, in a lump sum or in installment payments over time (depending upon the selection you made when the contract was set up).

That allows your loved ones to bypass the long, painful and costly probate process - saving them time, court costs, administrative costs and legal fees - and leaves your heirs money instead of family court battles and legal fees.