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Decoding the Differences Between SPIAs and DIAs

Do you understand the differences between SPIAs and DIAs, and what that would mean for your retirement income?

By Martin Powell

Income in retirement is an enticing draw for your financial future that can be provided by income annuities. But often, the distinctions between each specific type of annuity can feel less than inviting for those with a day job.

Martin Powell

Martin Powell

Single premium immediate annuities (SPIA) and deferred income annuities (DIA) are two of the most popular kinds of annuities. But where to start? The primary decision you can arm yourself with in a conversation with your advisor is whether you feel as though you can wait for your money.

Single Premium Immediate Annuities

SPIAs are the simplest and most consumer-friendly annuity. They provide investors with the opportunity to seek immediate, predictable income with an optional add-on for protection for loved ones. Bottom line: SPIAs are best suited for those who want income sooner rather than later. And, these products have been around the longest, so they’re better known. SPIAs are usually best suited if you are in retirement or just before you retire. These annuities work best for people who can pay a lump sum and want to maximize an income stream. In exchange for a single payment, an insurance company will pay out an immediate income stream, which make it preferable to other retirement plans because of the lack of guaranteed lifetime income options. If you think you may be a candidate for an SPIA, some of the questions you may ask yourself and your advisor are:

  • How large of a lump sum can you afford while still remaining liquid? 
  • How large of an income do you want to prepare to have later in life? 
  • Who else would you like to provide for in the future?

Deferred Income Annuities

DIAs have gained popularity in recent years, and they’re a good option for those who are saving for retirement – as in, people who are still working or have other investment assets. Unlike the immediate benefit of SPIAs, DIAs work like IRAs and 401(k)s. With a DIA, in exchange for payments held by an insurance company for at least a year, they can provide guaranteed lifetime income payments that deliver returns on investment. If you’re not looking to retire for a few years, a DIA is a better choice for you. In order to receive the best returns on your annuity, some of the questions to think about are:

  • How many years can I wait before I will need to retire? 
  • How much risk am I willing to take on in my retirement portfolio? 
  • How much money do I need to live on now, in lieu of what that money could grow to later in life?

There are many other types of fixed income annuities, but these acronyms are two of the most common varieties you’ll come across, and the products work for many people. While guaranteed income from an annuity is a really nice way to round out a portfolio, talk to your financial advisor about some of these important questions to help you determine whether you need income now or can defer to the future.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of any entities they represent.

About the author: Martin Powell

Martin Powell is vice president & head of Annuity Distribution at CUNA Mutual Group, a leading insurance, financial services and technology company focused on helping people achieve financial security through all life stages.

CUNA Mutual Group is the marketing name for CUNA Mutual Holding Company, a mutual insurance holding company, its subsidiaries and affiliates. Corporate Headquarters: 5910 Mineral Point Road, Madison WI 53701

© CUNA Mutual Group


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