Single Premium Immediate Annuities (SPIAs): A Comprehensive Guide

Hi there. Stan The Annuity Man. I'm America's annuity agent licensed in all 50 states. Today's topic is Single Premium Immediate Annuity, SPIAs. And a comprehensive guide to those. There's a lot of misinformation out there and you go, wait a minute, how's that even possible?

Brief History

SPIAs are the original annuity. It's the granddaddy. It's the one that was developed in Roman times, for the dutiful Roman soldiers and their families, as a pension payment for them laying it on the line for the empire. The word annuity comes from the Latin word, ANNUA, which means payment. And no, I didn't take Latin, as you could probably tell. And these Immediate Annuities, which are a straight transfer of risk pension products, for the 91% of us that don't have pensions out here, that's your pension.

Immediate Annuities

It's been sold in this country for hundreds of years. What I like about Immediate Annuities is that there are no moving parts or annual fees. People believe that annuities are expensive and have high fees. Immediate Annuities have no fees. There are no market attachments at all. It is a straight transfer risk pension product that is primarily priced on your life expectancy, or, if you set it up joint with a spouse, life expectancy at the time the payment starts.

So, remember, life insurance companies issue annuities. They issue Immediate Annuities. They have the big buildings for a reason, because they know when we're going to die. And they price things accordingly. Now, the value proposition of an Immediate Annuity is that if you live forever, the annuity company's on the hook to pay. That's the value proposition. I have people all the time say, "Well, what if I lived to 125? It'll pay. Well, what if I lived 150?" It'll pay. And the best one I had recently, "Well, what if I'm in a coma and on a ventilator, but I'm still alive, Stan The Annuity Man?" It's still going to pay.

With Single Premium Immediate Annuities, there's no ROI until you die. There's no return on investment calculation until you keel over. And then I'll come to your funeral, I'll sing a song acapella, my decision on what I sing. And then I'll tell your family and the people at the congregation what the return on investment was on that Immediate Annuity. Ironically, I've never been taken up on that offer, but I'm still waiting for the family that said, "Fly in, fly into Poughkeepsie, and sing your song, and then tell the return on investment on the Immediate Annuity." I will. I say that to you in a joking fashion for you to understand that. Do not fall for the journalist or the advisors out there that go, "Well, the return on that; I mean, if you compare that thing to Immediate Annuities, to mutual funds, or stocks or crypto, it doesn't add up."

IRA Accounts

That's apples and oranges player. It doesn't exist. An annuity is for a lifetime income. And there are many types; we're only talking about Immediate Annuities. There are four types, but this is the granddaddy. It's the only category that pays for as long as you're breathing. Period. Now, you can use Immediate Annuities in non-IRA accounts. You can use them in IRA accounts. You can use them in Roth IRA accounts. With Roth IRA accounts, guess what? The income is tax-free. In IRA accounts, the income will be taxed at ordinary income levels, just like anything you take out of your IRA. But if you use it in a non-IRA account, non-qualified, remember, Immediate Annuities, that income stream is a combination return of principal plus interest. So, you're getting your money back with interest. In a non-IRA account, you're only paying taxes on the interest, so it's really a nice feature.

Now, if you outlive your life expectancy and draw the account down to zero, then all of that income, which they're continuing to pay because you're breathing, is taxable. But up until that point, taxes are preferable, as they say in universities. With the ascots, the smoking jacket, and the protectors here, that's what the math people do. Sociology, psychology.

My wife is a clinical psychologist by trade. For all of you out there going, yeah, of course she is. Well, it's free. I don't have to pay any type of ongoing fee. Well, I take that back. Yes, I am paying an ongoing fee. That's a wife fee, which is very expensive. It would probably be more palatable if I just went to a therapist, but I digress.

The Structure

Let's talk about Immediate Annuities and how to structure them. I know you've heard that we'll never buy an Immediate Annuity because when you die, money goes poof, and the evil annuity company keeps the money. That's one of 40 ways to structure it. That's called life only. You can structure it like that. If you hate your family and you have no beneficiaries, and you just are a misanthrope, and you just want the highest payment, that's life only. But most people, because they've worked hard for their money, they didn't grow up with a silver spoon, they're not in the inheritance business, as some people are, they want the lifetime income stream, but they want to make sure that 100% of any unused money goes to the beneficiary. So, the evil annuity company doesn't keep a penny. You're transferring the risk to the annuity company, the Immediate Annuity company, the company that issues that, to pay you for as long as you're breathing. But if your Learjet hits the mountain, whatever's left goes to the beneficiary.

You can set that up life with cash refund. It's going to pay for life, but when you die, the lump sum goes to the beneficiaries. You could do life with installment refund, which means it's going to pay for life, as long as you're breathing. But when you die, whatever's left in the account gets paid in the same payments until the money is exhausted and goes to the beneficiaries. The evil annuity company doesn't keep the money. You could do what's called a period certain Single Premium Immediate Annuity. Which is, a lot of you out there say, Stan, I need income for the next 12 years. After that, I'm set. I got it all set up. Great. You can do a 12-year period certain Immediate Annuity to solve that specific gap. All of this you can get at The Annuity Man and run quotes 24/7/365. And set a time to talk to my team, who are going to listen and use their mouth and ears in proportion two to one. And if you need an annuity, great. If you don't, that's fine too, and we'll tell you.

You've got life only, Learjet hits the mountain, money goes poof, that's one of 40 ways. You got life with cash refund. You got life with installment refund. You got a period certain, and then you have what's called life with period certain. Those are the other 30 plus, because you could do life with five year certain, life with six, life with 10, life with 15, life with 20, life with 30 year certain. What does that mean, Stan The Annuity Man?

Examples

It means that it's going to pay for as long as you're breathing. That's what the word life means. As long as you're breathing, if you're on a ventilator, in a coma, it's going to pay. Life means life. As long as you're breathing, they're going to pay. But the period certain is, think little league. Think of backstop. Where every third pitch goes to the backstop. It's the backstop. It's the minimum amount the annuity is going to pay. So, let's do life with five years certain. Life with five means, if you live forever, it's going to pay forever. But if you died year three, there's two more years of payments.

Life with 10 years means that if you die in year seven, there are three more years of payments. Life in 10, if you lived 11 years, your beneficiaries don't get anything, but you're still going to get the payments.

Life with 20 years certain means that as long as you're breathing, you're going to get paid. But if you die in year seven, there are 13 more years of payments guaranteed. If you live 21 years, there are no payments for the beneficiaries. But if you're still alive, it's going to pay you.

They're Customizable

What I want you to get into that thick, high-IQ skull is that Single Premium Immediate Annuities, my comprehensive guide. If you come away with one thing, they're customizable for your specific situation.

The income can start as soon as 30 days from when the policy is issued. Okay? And you can defer up to one year. You can say, I want to buy it now, and then a year from now, I want it to start. You can do that. You can also attach what's called a Cost of Living Adjustment increase.

Now, understand you already own the best Immediate Annuity on the planet. Annuity for inflation is called Social Security. But let's just say you want to buy an Immediate annuity with a 3% COLA, which means it's going to increase by 3%, as long as you're breathing every single year. Before you get up and start doing the happy dance, I need you to sit back down, because remember, annuity companies don't give anything away for free. They have big buildings for a reason.

Inflation

In my opinion, Stan The Annuity Man, America's annuity agent, Mr. Annuity, out here. What I would tell you to do is buy the one without the COLA. And you say, wait a minute, Stan, what about inflation? What about inflation? Okay, let's talk about that. Good question. If inflation hits, let's just say you have an income floor of $3,000. That's including Social Security. That's including the annuity that you purchased without the COLA. And let's just say you call us up and you say, you know what? We need an additional $500 a month. Then what do we do? At that time, we reverse engineer the quote, which you can do at The Annuity Man, solving for $500, and we use the least amount of money humanly possible to solve for that amount. That's how annuities address inflation. So again, customizable.

All right, I've covered the vast majority of Single Premium Immediate Annuity stuff. You can go to my site and pull up all of the Immediate Annuity videos that I've done. You can download my book, an owner's manual, on Single Premium Immediate Annuities. You can run quotes 24/7/365. I mean, The Annuity Man is where annuities are purchased. You're going to buy it on your timeframe and on your terms. There's no high pressure from my team whatsoever. My name is Stan The Annuity Man. I'll see you next time.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.