A single premium immediate annuity is a good investment that’s simple to understand and works for many investors. According to Forbes article “For Some Retirees, This Annuity Makes Sense,” Mel Lindauer says that the SPIA works as a bridge between social security and your necessary living expenses. Immediate annuities also help to guarantee that you won’t outlive your money. After your lump sum payment to an insurance company, you’ll receive periodic payments until you or your spouse, if that benefit option is chosen, is no longer living. You can also choose to receive your payments over a specific time period.
With immediate fixed annuities, your payment options are inflation-adjusted, nominal, or graded. You can also choose an immediate variable annuity, where your payout is based on your chosen investments’ returns. Neither option accounts for inflation in most instances, so that is something you’ll have to consider in the future. Most likely the amount you receive monthly will not increase over time. There are a few products out there that adjust for inflation though. Not only do immediate annuity products help make up for the difference between your needed monthly income and your proposed social security payments, they are also useful to help you delay social security payments until later in life. You and your spouse can both receive more from social security by delaying payments for a few years or even a decade.
A single premium immediate annuity is one of the best annuities for you if your health is good and your family history dictates living a long life. It makes sense if you are worried about outliving your money, don’t want to manage your own investments or don’t know how to, or are concerned that your spouse has no knowledge of investing to protect their future. Since you cannot leave annuity money to heirs, an annuity is good for those who have no heirs, or have no desire to leave the money used to purchase their annuity to their heirs. If these situations sound like they apply to you, a single premium immediate annuity might be a good investment.
