Everyone like a guarantee. Unfortunately, in the financial services industry they’re few and far between. And those that are available often come with a steep price — if you can even figure out what the price is.
- Life only. Payments continue during your lifetime, but stop at your death.
- Period certain. Payments are made for a fixed period of time (e.g., 5, 10, 15, 20 years). If you die prior to the end of the chosen period, your beneficiary will continue to receive payments for the remainder of the fixed period.
- Life with a period certain. Payments are made for the rest of your life or a minimum period of time. If you die prior to the end of the minimum payment period, the beneficiary you name in the annuity will receive the payments for the remainder of the period certain, but no longer. If you outlive the period certain, payments will end at your death.
- Joint and survivor. Payments are based on the lives of two people, typically you and your spouse. When either of you dies, payments continue to be made to the survivor. This option can also be combined with a period certain option, in which case payments will continue until both of you have died or for the minimum period of time you select, whichever is longer.
- Installment refund/cash refund. If you die prior to receiving at least the return of your investment in the immediate annuity, your beneficiary will receive an amount equal to the difference between what you invested and what you received. Your beneficiary will receive this amount in either a lump sum (cash refund) or periodic payments (installment refund).
The amount of each SPIA payment you get can be affected by the payment option you select. For example, a 60-year-old man who invests $100,000 in an immediate annuity may receive annual payments of $7,260 for the life only option, $6,696 for life with a period certain of 20 years, or $7,920 for a fixed period of 20 years. (This example is for illustration purposes only and does not reflect actual insurance products or performance, nor is it intended to promote a specific company or product.)