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Moving from savings to income generation using a SPIA

As you approach retirement, it is possible that you’ll have to generate some – or maybe even all – of your future income from money that you saved in an IRA (Individual Retirement Account), employer-sponsored account (like a 401k), and/or personal savings. One option for doing so is through a SPIA, or Single Premium Immediate Annuity. But after a lifetime of focusing on setting money aside “for the future,” how do you move from savings to income generation using a SPIA? The answer is easier than you may think – provided that you choose the right annuity for your specific needs and objectives.

How Single Premium Immediate Annuities Work

A single premium immediate annuity, or SPIA, is a contract between an individual and an insurance company whereby an income stream is paid out that starts immediately (or soon after the annuity is purchased). SPIAs differ from deferred annuities in that the latter’s income stream is paid out at some point in the future, if ever. During the “accumulation” period – or the time before the annuity is converted to an income stream – the funds that are in the contract of a deferred annuity are allowed to grow on a tax-deferred basis, meaning that no tax is due on the gain until the time of withdrawal. Many people “roll” money over from their savings – either qualified or non-qualified – to fund a single premium immediate annuity. The income can then be received for a pre-selected time period, such as ten or twenty years, or even for the remainder of your lifetime, no matter how long that may be. Payments that come from a single premium immediate annuity are usually fixed, so you can be certain of the amount of money to be received with each – regardless of what is happening in the stock market, or even in the economy as a whole. The amount of the income payments that are generated from a SPIA are based on a number of factors, including:
  • Age of the annuitant (i.e., income recipient)
  • Amount of money contributed to the annuity
  • Prevailing interest rates
  • How long the payments are set to continue

Are You a Good Candidate for a SPIA?

The funds that are contributed to a SPIA must typically remain in the annuity – particularly as the decision to annuitize (i.e., turn on the income stream) is irreversible. With that in mind, if you feel that you might need the funds for a future emergency or other financial obligation, then a single premium immediate annuity might not be right for you. However, you could be a good candidate for a SPIA if you:
  • Are seeking a reliable source of income that arrives at regular intervals
  • Wish to receive an income stream for life – no matter how long that may be
  • Do not want to rely (at least not completely) on a portfolio drawdown strategy for your retirement income
  • Need to supplement what you will receive from Social Security and/or a traditional pension plan
  • Are fearful of running out of income during retirement while it is still needed

How to Narrow Down Which Single Premium Immediate Annuity (If Any) is Right for You?

There are many different types of annuities to choose from in the marketplace – and even within certain categories of annuities like SPIAs, all are not exactly the same. So, if it appears that a single premium immediate annuity may be a good fit for your needs, it is recommended that you work with a retirement income specialist who can assist you with narrowing down the right one for you. At Annuity Gator, we focus on educating consumers and financial professionals on how annuities work, and where they may – or may not – fit in an individual’s portfolio. Therefore, if you would like more information on SPIAs and/or you would like us to review an annuity that you already own, please feel free to contact us directly by calling (888) 440-2468 or via email through our secure online contact form. We look forward to helping you create an ongoing income that you can count on in retirement. Moving from Savings to Income Generation Using a SPIA
  • Ely Miller
    5:21 PM, 5 June 2022

    I am looking to have extra income . If I would like to invest in annuity single premium, start generating extra income , I read the lump sum used to invest on this annuity , the money can not be used if any emergency . My question is :
    Is there a period of time like 5 or 10 years , when the annuity can be used or surrendered? O reinvest again in other annuity , especially , if the interests or market interests changes with the time?

    Thank you

  • Annuity Gator
    4:53 PM, 7 June 2022

    Hi Ely– Thank you for your comment.
    We would be happy to help with your questions and determine if an annuity is right for you. We will be in a better position to know that after getting some additional information from you. Rather than sending sensitive personal and financial details back and forth via email, though, it would be best to discuss via phone. Please feel free to reach out to us directly at (888) 440-2468. Or alternatively, you can contact us by going to and letting us know what time works best for you.
    We look forward to chatting with you.
    Annuity Gator

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