Retirement Literacy Foundation · Annuity Education

Immediate Annuity (SPIA) Explained

By Hans Goldstein, founder, Retirement Literacy Foundation · Updated October 8, 2026

Short answer: A single premium immediate annuity (SPIA) turns a lump sum into a stream of income that starts within a year, for the rest of your life or for a set period. It is the simplest form of lifetime income: you hand over the money and the insurer promises the payments. In most cases you cannot get the lump sum back.

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Payout options

Life only: the highest payment, ending at death.
Life with period certain: pays for life, and to a beneficiary for the rest of a guaranteed period (for example 10 years) if you die early.
Cash or installment refund: guarantees at least your premium back, to you or your heirs.
Joint and survivor: pays for as long as either spouse lives, often at a lower amount.
Period certain only: pays for a set number of years.

What decides the payment

Your age (older buyers get more per dollar), the payout option, interest rates when you buy, and sometimes your health. More guarantees for heirs mean a smaller check. Some contracts add a cost-of-living increase, which starts the payment lower.

Trade-offs

Usually irrevocable: little or no access to the lump sum after the free-look period.
Fixed payments lose buying power to inflation unless you add an increase.
Life-only income stops at death.
The upside: income you cannot outlive, and it is often used to cover basic bills alongside Social Security.

Taxes

In a non-qualified SPIA, each payment is part tax-free return of your premium and part taxable interest, using the exclusion ratio, until your premium is recovered. Inside an IRA, payments are fully taxable and can satisfy RMDs. Payments from an immediate annuity are an exception to the 10% early withdrawal tax. See how annuities are taxed.

Common questions

How much does a $100,000 annuity pay per month?

It depends on your age, sex in some states, the payout option and interest rates on the day you buy. Older buyers and life-only options get the highest payments. Compare quotes in dollars per month for the same payout option.

Can I get my money back from an immediate annuity?

Usually not after the free-look period, unless you chose a refund or period certain option, which pays the remainder to your beneficiaries.

Is a SPIA the same as a pension?

It works much like one: a lump sum converted into guaranteed monthly income for life. See pension lump sum vs annuity.

More on annuities: How Do Annuities Work? A Plain-English Guide · How Are Annuities Taxed? · Inherited Annuity Taxes · 1035 Exchange · Annuities in an IRA · Annuity Surrender Charges and How to Get Out of an Annuity · Types of Annuities and Their Pros and Cons · What Is a MYGA? Multi-Year Guaranteed Annuities Explained · Fixed Index Annuity Explained · Variable Annuity Explained · Annuity vs CD

Education only; nothing is sold here and no product is recommended. Hans Goldstein, founder of the Retirement Literacy Foundation, is also a licensed California insurance producer (#4273294). Tax rules depend on your situation; check with a tax professional before acting.