What Is a Single Premium Immediate Annuity (SPIA)?
A single premium immediate annuity (SPIA) is a contract where you pay an insurance company a lump sum and, in return, receive a guaranteed income stream that begins within 12 months and can last for life. It is the oldest and simplest annuity, often described as buying your own personal pension.
After decades of saving, the hardest part of retirement planning is turning a nest egg into a paycheck that lasts as long as you do. For many retirees, Social Security covers the basics but leaves a gap between those checks and the lifestyle they want. A SPIA is built to close that gap.
“Single premium” means you fund it once, with one lump sum, and cannot add money later. “Immediate” means income starts right away, typically about 30 days after the contract is signed.
SPIA at a glance
- Income starts within 12 months, usually in about 30 days.
- Guaranteed for life (or a set period you choose), so you cannot outlive it.
- Funded once with a single lump sum; no ongoing contributions.
- Pays more than a CD or bond at a similar rate, thanks to mortality credits.
- The trade-off is liquidity: once converted to income, the lump sum is no longer yours to spend freely.
The core components
- Premium: the lump sum you invest (for example, $100,000).
- Payee: the person receiving the income, usually you.
- Annuitant: the person whose life expectancy sets the payment amount.
- Carrier: the insurance company backing the guarantee.
How Does a SPIA Work?
A SPIA pools your money with thousands of other buyers to create “mortality credits,” which let the insurer pay you more than you could safely withdraw on your own. The carrier invests your premium in conservative bonds and treasuries, but your income is built from three sources, not just interest:
- Interest: the yield the insurer earns on its portfolio.
- Principal repayment: part of every check is simply your own money coming back.
- Mortality credits: funds from annuitants who die earlier than expected subsidize the payments of those who live longer. This is the unique edge an annuity has over a bond or CD.
Because of mortality credits, a SPIA almost always generates higher monthly income than a bond or CD at a similar rate. The trade-off is liquidity: once you hand over the premium, that money is converted into an income stream and is generally no longer available as a lump sum.
How Much Income Will $100,000 Buy in 2026?
A SPIA payout depends mostly on your age, gender, and current interest rates. Older buyers receive higher payments because the insurer expects to pay them for fewer years. The table below shows estimated monthly income for a $100,000 “life only” SPIA (payments stop at death). Run your own numbers with our immediate annuity calculator.
| Age / Gender | Monthly Income | Annual Payout Rate |
|---|---|---|
| 60 Male | $585 | 7.0% |
| 60 Female | $565 | 6.8% |
| 65 Male | $645 | 7.7% |
| 65 Female | $620 | 7.4% |
| 70 Male | $740 | 8.9% |
| 70 Female | $705 | 8.5% |
| Joint (65/65) | $545 | 6.5% |
Estimates for educational purposes. Actual quotes vary by carrier and daily rate changes. See How Much Does a $100,000 Annuity Pay Per Month?
Real scenario: closing the income gap
Robert, age 66, has $400,000 in savings and receives $2,200 from Social Security. His expenses are $3,000 a month, leaving an $800 shortfall. Rather than risk selling investments in a downturn, he uses $130,000 to buy a SPIA that pays roughly $850 a month for life.
His essential expenses are now fully covered by guaranteed sources. The remaining $270,000 stays invested for growth and emergencies, and he sleeps better knowing the bills are paid no matter what the market does.
SPIA Payout Options: Life Only vs Period Certain
Your payment changes based on the guarantees you add. The more risk you transfer to the insurer, the higher your check.
1. Life only (straight life)
Pays the highest monthly amount, for as long as you live. When you die, payments stop and the insurer keeps any remaining balance. Best for maximizing income for a single person with no heirs.
2. Life with cash refund
The most popular option. Pays for life, but if you die before receiving your full original premium back, the difference goes to your beneficiaries. For example, you invest $100,000, receive $20,000, then pass away; your beneficiary gets $80,000. Monthly payments run about 2% to 5% below life only.
3. Life with period certain
Guarantees payments for life plus a minimum number of years (often 10 or 20). If you die in year 3 of a 10-year period certain, your beneficiary collects the remaining 7 years. Payments are lower than life only but protect your family if you die early.
4. Joint life survivor
Covers two lives, usually spouses, and continues until the second person passes away. You can pay 100% to the survivor, or step it down to 50% or 75% to raise the starting payout.
What Are the Pros and Cons of a SPIA?
A SPIA offers unmatched income security in exchange for giving up access to your capital.
Advantages
- Longevity protection: you cannot outlive the income. Live to 102 and the insurer keeps paying.
- Higher cash flow: because you spend down principal alongside interest, monthly income tops most bond yields or dividends.
- Simplicity: no annual fees to track, no investment decisions, no charts to watch.
- Creditor protection: in many states, annuity income is shielded from lawsuits and creditors.
Disadvantages
- Loss of liquidity: the biggest hurdle. You generally cannot get the lump sum back for a large purchase or emergency.
- Inflation risk: a fixed $1,000 payment buys less in 15 years. You can add inflation protection, but it lowers your starting payment.
- Opportunity cost: if markets boom, your payment stays the same.
How Are SPIA Payments Taxed?
How your income is taxed depends entirely on the money used to buy the contract.
Qualified funds (IRA or 401k)
If you fund the SPIA with pre-tax money, 100% of each payment is taxable as ordinary income, because that money was never taxed. Payments from an IRA-funded SPIA also count toward the required minimum distribution for that portion of your IRA.
Non-qualified funds (after-tax cash)
If you use after-tax money, the IRS applies an “exclusion ratio.” Because you already paid tax on the principal, part of every check is treated as a tax-free return of principal and part as taxable interest. For example, with an 80% exclusion ratio on a $600 monthly check, $480 is tax-free and you owe tax only on the remaining $120. This makes a SPIA a tax-efficient income source for retirees in higher brackets.
SPIA vs MYGA vs DIA: Which Income Tool Fits?
A SPIA is one of several guaranteed products, and they solve different problems.
| Product | Primary Job | When Income Starts | Get Lump Sum Back? |
|---|---|---|---|
| SPIA | Income now | Within 12 months | Generally no |
| DIA | Income later | 2 to 40 years out | Generally no |
| MYGA | Safe growth | Not an income product | Yes, at maturity |
If you need a monthly paycheck now, a SPIA fits. If you want to lock in income that starts years from now, a deferred income annuity pays more for waiting. If you just want safe, CD-like growth you can reclaim later, a MYGA is the better tool. For a deeper breakdown, see our SPIA vs DIA vs MYGA guide, or learn how SPIAs sit within the broader income annuity and fixed annuity families.
Is a SPIA Right for Your Retirement Plan?
A SPIA is not a growth investment; it is insurance for income, and it belongs in the safety bucket of your plan.
Consider a SPIA if
- You have an income gap: your essential expenses exceed Social Security and any pension.
- You are afraid to spend principal: a SPIA automates the spend-down and gives you permission to enjoy your money.
- You want to simplify: no bond ladder to manage or portfolio to rebalance.
- You are roughly 70 to 80: the sweet spot where mortality credits boost payouts well above ordinary interest rates.
Think twice if
- Your health is poor: a shorter-than-average life expectancy usually makes the math unfavorable.
- Your assets are limited: with under $200,000 total, locking a large share into an illiquid contract is risky. Keep cash for emergencies.
- Legacy is your top priority: even with a cash-refund option, a simple investment portfolio is usually better for maximizing inheritance.
How to Maximize Your SPIA Income
1. Ladder your purchases
Instead of buying one large SPIA, split it over time, for example $50,000 at 65, $50,000 at 68, and $50,000 at 72. Laddering captures different interest rate environments and rising payouts as you age.
2. Weigh inflation protection (COLA)
A cost-of-living rider raises payments 2% to 3% a year, but it is expensive and can cut your starting payment by 20% to 30%. A common alternative is to buy a flat-payment SPIA and keep a separate investment account to cover inflation later.
3. Shop the market
SPIA payouts vary widely between carriers. For the same $100,000, one company might offer $580 a month while another offers $640, a $720 difference every year for life. We compare 90+ top annuity companies so you see the highest payout available, not just one carrier’s quote.
Is a SPIA a good investment?
A SPIA is less an investment than an insurance policy for income. For a retiree who needs guaranteed monthly cash flow and worries about outliving their savings, it is one of the most efficient ways to turn a lump sum into lifetime income. It is a poor fit if you need liquidity, are in poor health, or want to maximize what you leave to heirs. The strongest approach is to cover your essential expenses with guaranteed income and keep the rest invested and accessible.
