Lifetime Income Annuity: How the Defer to SPIA Strategy Works

Hello, America! Stan The Annuity Man, America's annuity agent, licensed in all 50 states, as you know. And that means yours, too, which is a good thing.

Today, we’re talking about lifetime income annuities and my favorite strategy, the Defer to SPIA strategy—one the annuity industry absolutely hates. But hey, if they hate it, maybe you’ll like it.

Let's Talk About SPIAs and the Defer to SPIA Strategy

Let’s talk about Immediate Annuities and the Defer to SPIA strategy. SPIA stands for Single Premium Immediate Annuity. Immediate Annuities were the granddaddy of all annuity products. They’ve been around since Roman times and have been sold in this country for hundreds of years. In my opinion, it’s still the most efficient, pro-consumer product out there. That’s why most agents won’t sell it. I love it. I can’t imagine anyone selling more Immediate Annuities than Stan The Annuity Man, America’s annuity agent. It’s essentially a basic pension plan—no moving parts, no annual fees. It’s the best pro-consumer product available for immediate income.

The Drawbacks of Other Products

I know a lot of agents will try to sell you other products, claiming they could potentially perform better in the future. But if you want the best contractual guarantee based on your life expectancy when you need the payment, you need a SPIA quote. We’ve got a SPIA calculator at The Annuity Man\ that you can use, but I encourage you to connect with me directly. Go to our site, schedule an appointment, and let’s talk. I’d love to review your situation and see how we can help.

Why the Annuity Industry Hates the Defer to SPIA Strategy

The Defer to SPIA strategy is something the annuity industry absolutely hates. Why? Because I tell people not to buy the annuity now. Oh yes, I said it—don’t buy the annuity yet. The reason I say that is because sometimes it makes sense to wait before turning on that lifetime income stream.

I had a call from a gentleman the other day who had worked hard, accumulated a big lump sum, and wanted to know whether he should buy the income stream now. We went through all the details—this is where I start. The first question I asked was, "Do you need the income right now?" Basic, right? He said no. If you don’t need income, then you might not need to buy it now. Sometimes, it’s better to wait to defer.

How Annuity Companies Want You to Buy Now

Annuity companies love it when you buy the annuity now, whether it's a Deferred Income Annuity, a QLAC (Qualified Longevity Annuity Contract), or an Income Rider that starts at a future date. It’s good for them because they hold onto the money while you defer it, and it’s good for you because you know exactly what the guaranteed lifetime income will be when you start it. The older you are, the higher the payment—just like Social Security, the best inflation annuity on the planet. Yes, you already own one.

The Defer to SPIA Strategy: Keep Your Money in the Market

However, the Defer to SPIA strategy suggests that it might be better to keep your money in the market, such as CDs, or simply keep your powder dry until you actually need that income. In the case of the gentleman I spoke with, that’s exactly what he chose to do. He decided to wait 4-5 years before buying the annuity, and we agreed that at that time, we’d run an Immediate Annuity quote with all carriers to find the best contractual guarantee for his specific situation. He was comfortable with shouldering a little risk during that period.

Understanding the Risks of Defer to SPIA

Immediate Annuities are primarily based on your life expectancy when you take the payment, with interest rates playing a secondary role. The good and bad of the decision he made—if interest rates go higher, payments might go up. If interest rates go lower, payments could be lower. But there’s a risk. If life expectancy tables change, meaning you’re expected to live longer than previously projected, that could result in more payments, which means the payments could be lower.

While it’s true that there’s some risk in deferring the SPIA, I don’t think that risk is particularly big in this environment.

The Case for Buying Now vs. Defer to SPIA

Annuity companies will push you to buy now, and there’s an argument for that. A deferred income annuity or QLAC gives you a set future income stream that you know exactly how much it will be. But the argument for waiting and buying the annuity when you actually need it can be even stronger. You get the benefit of reverse-engineering that exact monthly income stream you need at that time, using as little money as possible to solve for your income goal.

One of the biggest mistakes I see people make is putting too much money into an annuity. The annuity gods are probably shaking their heads right now, but it’s the truth. Annuities should be a portion of your portfolio, and if you use them, they need to be appropriately allocated to meet your specific goals.

The Opportunity Cost of Annuities

When you buy an annuity contract, you’re essentially giving up the opportunity to use that money elsewhere. That’s the biggest trade-off. In some cases, waiting and deferring that purchase might be the better option for you.

Conclusion

At the end of the day, after using the calculators at The Annuity Man, you need to schedule a one-on-one conversation with us. You need an expert to weigh in. We're here to shoot it straight with you, not to sell you anything. If you haven’t figured that out yet, then you haven’t been listening closely. I’ll give you the facts.

Free Books and Resources

By the way, you can download all the annuity owner's manuals that I’ve written. You can get them for free, under no obligation. Nobody’s going to call you or show up at your door. You’ll see soon enough that we treat you like a pro, shoot it straight, and give you brutally factual advice. We won’t be your friend, but we'll be the best advisor you’ve ever had.

So, with that, thank you for joining me today. I'll see you on the next The Annuity Man blog.