Why would someone buy a SPIA?

There are a number of reasons to consider buying an immediate annuity (also known as a Single Premium Immediate Annuity or SPIA) including protecting your longevity, diversifying your assets, and setting up an automated retirement paycheck. Let’s dig into these and other reasons for buying a policy.

Longevity Protection

Insurance is typically thought of as something you buy to protect you and your family from unfortunate events. By turning your assets into income you can’t outlive, the SPIA offers a more pleasant kind of protection: longevity protection. This means you don’t need to worry about outliving all your savings. The longer you live, the more financial value the SPIA provides.

Automated Retirement Paycheck

Employers’ shift away from pensions and towards 401(k)s has left retirees with complicated retirement situations. When you don’t know how long you’ll live or what returns your portfolio will generate, how can you decide what the right amount of money to withdraw from your savings each year is? Instead, converting some of those savings to a lifelong retirement paycheck means steady income to live off of forever.

Alternative Fixed Income Investment

While SPIAs are primarily insurance products, the value they offer can be compared to low-risk fixed income investments, such as an investment grade bond fund. As you approach retirement and no longer want to take equity market sized risks, you’ll likely move your assets into safe but low returning bond funds. Moving some of those assets instead into a high-rated SPIA will make your money last longer.

Simplified Asset Management

Adding a longevity annuity to your portfolio can dramatically simplify your retirement planning. Knowing that you’ll be receiving a steady paycheck, which could cover all or a portion of your expenses, makes it easier to manage your remaining assets. Guaranteed income means that you can take more risk with how your remaining assets are invested and be more comfortable deciding whether to take that extra vacation.

Principal Protection

The savings that you allocate to a SPIA are protected from swings in the stock or bond markets. And, by selecting the death benefit option, you can guarantee that all of your savings will be passed onto your beneficiaries if you pass away prematurely.

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Head to the SPIA Guide to learn more about the product, its benefits, and next steps for buying.