Guaranteed income with Single Premium Immediate Annuity
November 14, 2022
Retirement’s worst mistake, according to many people, is failing to plan for it. That’s especially true for individuals who haven’t yet planned how to create dependable retirement income, or how to pass on an inheritance to others.
One solution can be a Single Premium Immediate Annuity (SPIA) such as the Gleaner Life Foundation Series® SPIA. It is the first new SPIA introduced by Gleaner in 31 years, designed to add certainty in this time of uncontrollable economics.
A SPIA, also known as an income annuity, is a contract with an insurer. It is the most basic and oldest type of annuity, originating during the Roman Empire. In exchange for a one-time premium, the insurer guarantees to make defined payments for a specified length of time or, if the purchaser chooses, for as many years as the annuitant continues to live. Payments begin within a year of purchase, and there are some tax benefits.
The Foundation SPIA offers 14 different payment options to meet a variety of needs. These can help address several concerns people typically have entering retirement:
How can I turn savings into income? — A SPIA can convert a lump sum, whether from years of saving or from a sudden windfall, into a steady stream of payments their owners can count on. With five different fixed period payment options in the Foundation SPIA, owners know exactly how much to expect. They also know when their secure, electronic payment will be deposited.
What if I live longer than I expect and risk running out of money? — An owner can instead choose to receive payments for the length of their lifetime, no matter how many years they enjoy. These typically pay higher rates of interest. In addition, the six Single Life payment plans include four term-certain options, meaning that payments will continue to their beneficiary if the annuitant dies before the term ends. For example, if a person purchases a Life with Twenty Year Period Certain and then dies 11 years later, payments will continue to their beneficiary for the nine remaining years. There also is a Life with Premium Refund plan. This option guarantees that, if the annuitant dies before receiving back the amount of their premium, the balance will be paid to their beneficiary.
What about taking care of a couple after one person dies? — The Foundation SPIA also offers options for two joint annuitants. Payments are based on the life expectancy of both people. When one annuitant dies, the second annuitant will continue to receive 100% of the regular payment for the rest of his/her life. The three options are: Joint Life Only (payments for as long as at least one of the annuitants is alive with no guaranteed period); Joint Life with Ten Year Period Certain (payments made as long as at least one of them is alive with a minimum guaranteed period of 10 years) and Joint Life with Twenty Year Period Certain (the same but with a guaranteed period of 20 years).
How can a SPIA help provide an inheritance? — One strategy involves using a SPIA to purchase permanent life insurance such as whole life or universal life. These provide permanent coverage, create cash value you can borrow interest-free while alive, and — as life insurance — their death benefit is passed tax free to the beneficiary. This strategy can make the total benefits significantly larger than the original lump sum used to purchase the SPIA.
The guaranteed income stream from a SPIA also can be used as a bridge to Social Security. By planning, a person who retires in their early or mid-60s can wait until age 70 to claim the maximum Social Security benefit. There are other ways a SPIA could help you plan for retirement. Contact your Gleaner agent or visit www.gleanerlife.org/products/annuities/single-premium-immediate-annuities to learn more.
Gleaner Life Insurance Society is domiciled in Michigan and licensed in AZ, FL, GA, IA, IL, IN, KS, KY, MI, MO, NC, NE, OH, PA, SC, TN, VA, WI and WV. Foundation SPIA Form # ICC22-IA with state-specific variations. This article is intended for informational purposes only. It is not intended to recommend a specific product, nor is it intended to provide any legal or professional advice. For information on possible tax implications, you should consult with a legal or tax adviser.