The Single Premium Immediate Annuity (SPIA) is an income generating tool that trades a single lump sum payment, called the premium deposit, for a lifetime of monthly payments. Purchasing a SPIA is purchasing a guaranteed monthly income that you cannot outlive, which is an attractive feature for retirees worried about outliving their savings.

You can fund an immediate annuity both with pre-tax and post-tax dollars. With pre-tax dollars, such as those transferred from an IRA or a 401k, you will be responsible for paying income tax on your entire monthly payouts. If you use after-tax dollars, from a CD or a savings account, to buy an immediate annuity, you will only have to pay income tax on the portion of each payment deemed to be interest earnings, commonly referred to as an exclusion ratio.

You can also add enhancements to a SPIA. Adding enhancements will reduce your initial monthly payments but can make the immediate annuity more valuable for your life situation. One option is a Cost of Living Adjustment (COLA). By selecting a COLA option when you purchase your annuity, you ensure that your monthly immediate annuity payment increases each year – anywhere from 2% - 5%, helping to keep pace with periodic inflation. Another enhancement to a SPIA is to add a settlement option, in which you guarantee a specific amount of time for payments, called period certain or you guarantee survivor benefits. If upon your death you have any remaining period certain term, an installment refund or survivor benefits, the payments will be transferred to whom you claim as a beneficiary.

An immediate annuity is also a safe place to move a portion of your retirement savings, ideally a portion that you’ll never need as a lump sum. Your premium deposit and interest earnings are backed by the full faith and credit of the issuing insurance company. By purchasing an immediate annuity from an insurance company rated highly by a respected rating organization such as A.M. Best, you can rest assured that your annuity will keep paying out, year after year.

The Specialists at AnnuityForLife.com can help you find the perfect immediate annuity for your individual situation. Call them at 1-888-261-6237 and you can start receiving your guaranteed monthly income for life right away.