What is a pension annuity and how does it work?

The Annuity Man

Some people call it a "pension annuity."  Some call it a "retirement annuity."  In the industry, we call it a Single Premium Immediate Annuity (SPIA).  Tomatoe.  Tomato.  It's all the same thing because the benefit is a lifetime income stream, and annuities are the only product category that offers this transfer of risk type of personal personal pension plan.

Single Premium Immediate Annuities (SPIAs) were originally used in the Roman Times as pension payments for the dutiful Roman soldiers and their families.  The Latin word for payment is "annua"...which is the origin of the word "annuity."  SPIAs have been sold in the United States for hundreds of years and are not seeing a resurgence in popularity with over 10,000 baby boomers reaching retirement age every single day.

SPIA payments are primarily priced on your life expectancy at the time you start taking the payments.  Interest rates play a secondary role.  SPIA income is a combination of return of principal plus interest, with the annuity company being "on the hook" to pay regardless of how long you live.

Less than 10% of private companies currently offer pension plans to their retiring employees, so most people will have to create that needed income stream using Single Premium Immediate Annuities (SPIAs).  SPIAs are commodities, so all carriers should be quoted in order to find the highest contractual guarantee for your specific situation.

Contact Stan The Annuity Man to get annuity quotes for your specific situation, and to see a live feed of current MYGA fixed rates.

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