What is a Single Premium Immediate Annuity (SPIA)?

A Single Premium Immediate Annuity (SPIA) is characterized by its structure where an individual makes a one-time lump sum payment to the insurer and, in return, begins to receive regular periodic payments almost immediately—typically within one year of that initial investment. This makes it an attractive option for retirees or individuals seeking a steady income stream right away, as it converts a lump sum of money into a predictable income stream.

The essence of a SPIA is that it is designed for immediate income, distinguishing it from other annuity products that may require ongoing contributions or have a delay before payments begin. This immediate payment structure is what sets it apart from options requiring multiple premiums over time or offering only a one-time payout. Therefore, the ability to start receiving payments shortly after the premium is paid is central to understanding what a SPIA is.