The pros and cons of Single Premium Immediate Annuities (SPIA)

Are you seriously considering SPIA? Then, know the advantages and disadvantages before you get one.

16:45 25 February 2013

Single premium immediate annuities are investment products that allow you to start drawing income the very next month after you purchase your SPIA. These products that are purchased from insurance companies are considered very safe as they are backed up by tough state regulations and insurance companies. 

 

However, just like any investment vehicle, SPIA also has its own advantages and disadvantages. Know these before you make a purchase so you can easily make well-informed decision. 

Advantages

 

The biggest advantage is that retirees can expect to get monthly income the very next month. No waiting time is always good especially for those people who are in their golden years. 

 

Another advantage is that SPIA are generally safe, low-risk investments. This means that retirees do not have to face the risk of losing their capital along the way. 

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Disadvantages

 

SPIA is not for everyone. In order for you to get bigger monthly income, you also need to put in huge amounts of money into your account. People who sell their homes and move to apartments usually find this option very attractive. 

 

Another disadvantage is that you will not be able to access the money you put into your account for a long period of time. Most annuities carry high penalties if you change your mind.