Immediate annuities and SPIAs.
The oldest and simplest idea in the annuity world: you give an insurance company a lump sum, and it sends you a check every month for the rest of your life. No caps to decode. You are buying a paycheck.
What you are really buying
Most retirement planning is about accumulating a big enough pile. This product is about the opposite problem: converting a pile into reliable monthly income without having to guess how long you will live.
That guess is the whole difficulty of retirement. Withdraw too aggressively and you risk running out. Withdraw too cautiously and you spend your retirement poorer than you needed to be. An income annuity removes the guess for whatever share of your savings you place in it.
A SPIA — single premium immediate annuity — starts paying within about a year of purchase. A deferred income annuity is the same concept with payments scheduled to begin years later, often used by people who want a guaranteed paycheck waiting for them at 80 or 85.
The payout options
How you set it up determines both the size of your check and what happens to the money after you die.
| Option | What it does |
|---|---|
| Life only | Largest monthly payment; ends at your death with nothing left to heirs |
| Life with period certain | Payments for life; if you die within a guaranteed window, the remainder goes to your beneficiary |
| Joint and survivor | Payments continue as long as either spouse is living, usually at a lower monthly amount |
| Cash refund | If you die before receiving back what you paid in, the balance goes to your beneficiary |
Every protection you add lowers the monthly check. That is not a catch; it is arithmetic. The right structure depends on whether income or legacy matters more to you.
The honest trade-off
Be clear-eyed about what you give up. In most cases, once the contract is issued, that money is no longer a balance you can access. You have converted it into a stream of payments.
That is why nobody should put all of their savings into one. The sensible approach is to cover your fixed monthly costs — housing, utilities, food, insurance premiums — with guaranteed income from Social Security plus, if there is a gap, an income annuity. Keep the rest liquid for everything else life sends you.
A word about inflation
A level monthly payment buys less in twenty years than it does today. Some contracts offer an increasing payment option, which starts lower and rises over time. Whether that trade is worth it depends on your health, your other assets, and your time horizon. It is a conversation worth having deliberately rather than defaulting to level payments because they look bigger on the illustration.
Who this tends to fit
- Someone with a specific monthly gap between guaranteed income and fixed expenses
- Someone who values simplicity and does not want a product with moving parts
- A married couple wanting income that continues for the surviving spouse
- Someone in good health with longevity in the family, for whom lifetime payments are likely to be a good deal
Who this tends not to fit
- Someone whose priority is leaving the largest possible inheritance
- Someone in poor health, where lifetime payout math works against them
- Someone who may need large lump sums for medical costs, home repairs, or helping family
This page is educational and is not a recommendation to buy any product. Guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Fixed and fixed indexed annuities only — variable annuities are securities products and are not offered here. Not affiliated with or endorsed by any government agency.
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Want to know what your income gap actually is?
We add up your fixed monthly costs, subtract Social Security and any pension, and look at what is left. Often the gap is smaller than people fear — and sometimes there is no need for an annuity at all.