Single Premium Immediate Annuity (SPIA) Guide (2026)

What is a single premium immediate annuity?

A single premium immediate annuity is a contract you fund once, with one deposit, in exchange for a stream of guaranteed payments that starts almost right away and can run for the rest of your life. Think of it as buying yourself a pension on the spot, using money you already have rather than decades of payroll contributions.

The two words in the name tell you exactly how it works. "Single premium" means the deposit happens one time only. There is no adding to the contract later the way you might keep contributing to a 401(k). "Immediate" means the payout clock starts fast, generally within a year of signing and often in as little as 30 days.

Retirees reach for this structure because Social Security rarely covers the whole picture on its own. Once the paycheck stops, the job of turning a pile of savings into a reliable monthly deposit falls on the retiree, and that is a harder problem than it sounds. A SPIA hands that problem to an insurance company in exchange for giving up the lump sum.

A handful of terms show up throughout any SPIA contract worth knowing before you sign:

• Premium, the lump sum you hand over, commonly $100,000 as a round example.
• Payee, the person who actually receives the monthly deposit, usually the buyer.
• Annuitant, the person whose age and life expectancy the insurer uses to calculate the payment. This is often the same person as the payee, but does not have to be.
• Carrier, the insurance company standing behind the promise to keep paying.

How does a SPIA actually work?

A single insurer cannot know how long any one buyer will live, but it can predict fairly accurately how long a large pool of similar buyers will live on average. That predictability is what makes the whole structure work, and it is why a SPIA can pay meaningfully more each month than a CD or bond fund earning a similar rate.

Your check is built from three separate pieces, not just interest on a balance:

• Investment return. The carrier puts your premium to work in a conservative portfolio, largely bonds and government securities, and that yield funds part of every payment.
• Return of your own principal. A slice of each check is simply your original deposit coming back to you over time, the same way a mortgage payment includes both interest and principal.
• Mortality credits. This is the piece unique to annuities. Buyers who pass away earlier than the actuarial tables predicted leave behind funds that get redistributed to the buyers who are still collecting, which lets the insurer stretch payments further than a pure interest calculation would allow.

That third ingredient is the entire reason a SPIA usually out-earns a comparable bond or CD in monthly cash flow. Picture two retirees with identical $100,000 balances: one keeps it in a bond fund and draws down principal carefully to make it last, guessing at how many years they have left, while the other hands it to an insurer that pools that same risk across thousands of contracts and can therefore promise a specific number every month without the guesswork. The insurer can afford to be more generous per dollar precisely because it is not gambling on any one individual's lifespan, only managing the average across the whole pool.

The cost of that advantage is liquidity. Once the premium is handed over, it has converted into a payment stream, and in most cases there is no mechanism to reclaim it as a lump sum again. That is the fundamental trade every SPIA buyer makes: certainty and higher monthly cash flow in exchange for giving up control of the underlying capital.

How much income does a lump sum actually buy?

Payout size comes down mostly to three inputs: your age, your gender, and the rate environment the day you buy. Older buyers receive a bigger monthly check for the same deposit, because the insurer expects to make fewer total payments. Rates move constantly with the bond market, so any number printed today can be stale within a week.

Rather than publish a rate table that goes out of date almost immediately, here is how to think about the math. As a purely hypothetical illustration, imagine a life-only SPIA priced at a 7% annual hypothetical payout rate. A $100,000 premium at that rate produces roughly $7,000 a year, or about $583 a month, for as long as the annuitant lives. A buyer five years older would typically see a noticeably higher rate on the same premium, since the insurer is pricing for a shorter expected payout period, and a woman typically sees a somewhat lower rate than a man of the same age given a longer average life expectancy. Add a second life to the contract and the rate drops further, since the insurer is now on the hook until the later of two deaths.

None of those figures are real quotes. Actual payouts shift with carrier, product design, and the day's interest rates, which is exactly why we do not print a live number here. Run your own scenario with our immediate annuity calculator, or request a quote to see what today's rates actually translate to for your age and state.

Consider a retiree at 66 with $400,000 saved, drawing $2,200 a month from Social Security against $3,000 in monthly expenses, an $800 shortfall every month. Rather than sell investments during a down market to cover that gap, this retiree could direct roughly $130,000 into a SPIA that hypothetically pays close to $800 a month for life. Essential bills are now covered from a source that cannot run dry, and the remaining $270,000 stays invested and available for growth or emergencies.

SPIA payout options: choosing how the guarantee works

The size of your check depends heavily on which guarantee you attach to it. Every added protection for you or your family trims the monthly number a bit, because you are shifting risk back onto the insurer or away from a pure life-expectancy bet.

Life only. This pays the largest monthly amount of any option, for exactly as long as the annuitant is alive. When that person dies, payments stop completely and nothing passes to heirs, even if death comes the month after the first check. It suits someone maximizing income with no dependents to plan around.

Life with cash refund. The most commonly chosen option. Payments continue for life, and if the annuitant dies before collecting the full original premium back, the shortfall goes to a named beneficiary as a lump sum. A $100,000 premium where only $20,000 has been paid out at death would send the remaining $80,000 to beneficiaries. Expect the monthly payment to run roughly 2% to 5% below the life-only version.

Life with period certain. Combines a lifetime guarantee with a minimum number of guaranteed years, commonly 10 or 20. Die in year 4 of a 10-year period certain and a beneficiary collects the remaining six years of payments. The monthly amount lands below life only but protects a family against an early death.

Joint life survivor. Covers two people, typically spouses, and keeps paying until the second one passes. You can structure it so the survivor keeps receiving 100% of the payment, or step it down to something like 50% or 75% after the first death, which raises the starting payout in exchange for a smaller amount later.

How are SPIA payments taxed?

Tax treatment depends entirely on what kind of money funded the contract in the first place.

Qualified money (an IRA or 401(k))

If pre-tax retirement funds bought the SPIA, every dollar of every payment counts as ordinary taxable income, since none of that money has ever been taxed. Payments from an IRA-funded SPIA also satisfy the required minimum distribution obligation tied to that portion of the IRA.

Non-qualified money (after-tax savings)

When after-tax dollars fund the contract, the IRS uses what is called an exclusion ratio to split each payment between taxable interest and a tax-free return of your own principal, since you already paid tax on that principal once. As an example, an 80% exclusion ratio applied to a $600 monthly payment would leave $480 untaxed and $120 subject to ordinary income tax. That ratio stays fixed for the length of a life-only or period-certain payout, then usually shifts once the original premium has been fully returned, at which point every remaining dollar becomes taxable interest. That structure makes a non-qualified SPIA a relatively tax-efficient income source, especially for a retiree sitting in a higher bracket who would otherwise owe tax on interest income at the top of their return. Our guide to the exclusion ratio walks through the calculation in more detail, and a tax professional can confirm exactly how it applies to your own filing.

SPIA vs MYGA vs DIA: matching the tool to the job

A SPIA is one of several guaranteed-income products, and each one is built to solve a different piece of the retirement puzzle.

A monthly paycheck starting almost immediately points toward a SPIA. Locking in a higher rate today for income that begins years from now points toward a deferred income annuity. Wanting your principal to stay reachable while it grows safely points toward a MYGA instead. Our guide comparing SPIA, DIA and MYGA options goes deeper on how to choose among the three, and it helps to understand where income annuities and fixed annuities sit as broader families before deciding.

Is a SPIA right for your retirement plan?

A SPIA is not designed to grow your money. It is designed to guarantee a piece of your income, which puts it in the safety bucket of a retirement plan rather than the growth bucket.

A SPIA tends to make sense when

• Your guaranteed income sources, Social Security and any pension, fall short of covering essential monthly expenses.
• You find it stressful to spend down principal on your own and would rather automate that process.
• You want fewer moving parts to manage, with no bond ladder or portfolio to rebalance.
• You are somewhere around 70 to 80, the range where mortality credits typically add the most lift above what pure interest would pay.

It usually makes less sense when

• Your health suggests a shorter-than-average life expectancy, which tends to make the underlying math less favorable for you personally.
• Your total assets are on the smaller side, since committing a large share of a sub-$200,000 nest egg to an illiquid contract can crowd out emergency savings.
• Leaving as large an inheritance as possible is your top priority, since a simple investment portfolio is generally more efficient for that specific goal, even with a cash-refund option attached.

Most retirees who use a SPIA well do not put their entire nest egg into one. A common approach is to size the purchase to close a specific, identifiable gap, essential expenses minus guaranteed income, rather than annuitizing every available dollar. That leaves a separate pool of savings free to absorb an unplanned expense, take advantage of market growth, or pass to heirs, while the SPIA quietly handles the non-negotiable bills every month regardless of what happens elsewhere in the plan.

How to get more income out of a SPIA

Ladder your purchase instead of buying all at once. Splitting a large premium into pieces bought at different ages, for example a third at 65, a third at 68, and a third at 72, captures a mix of rate environments and takes advantage of the higher payout rates that come with buying later in life.

Weigh a cost-of-living adjustment carefully. A rider that raises your payment 2% to 3% a year sounds appealing, but it usually cuts your starting payment by 20% to 30% to pay for it. Many buyers land on a flat payment instead and keep a separate investment account growing to help offset inflation over time.

Compare more than one carrier before committing. Payout rates for the same premium can differ meaningfully from one insurance company to the next, and the gap compounds every year the payments continue. We can put multiple top-rated carriers side by side so you see the strongest guaranteed payout available for your exact age, state and payout option, not just a single company's number. Start with a free, no-obligation quote whenever you are ready to see current numbers.