SPIA vs. CD

Many retirees purchase Certificates of Deposit to protect and preserve their hard earned savings and to generate more income. A Single Premium Immediate Annuity (SPIA) can provide your clients the same security, with several important advantages.

Guaranteed income for Life

While a CD allows for systematic cash outs, or interest only payments, there’s no guarantee the funds will last the retiree’s lifetime. A SPIA can guarantee income for life or other specified period (fixed annuities provide guarantees, including safety of principal from the issuing company. CDs provide guarantees from the FDIC).

Flexible Income Options

Clients can choose a payment period and frequency to meet their unique circumstances.

Continued Tax Deferral on Qualified Asset

Because interest earned under a SPIA – when funded with rollover assets from a qualified retirement plan – is tax deferred until withdrawn, savings will compound more quickly than with taxable savings vehicles. Taxes on a CD may be payable each year or at the end of the term. Interest is generally taxed as ordinary income.

Inflation-Fighting Options

A SPIA may include an optional annual cost-of-living adjustment to help clients cope with rising inflation that can diminish their purchasing power.

Liquidity of Funds

CDs are subject to penalties if cash is withdrawn before the CD matures. SPIAs provide guaranteed payments and may provide a return of premium in the event of your client’s premature death.

No Probate

Upon an annuity owner’s death, any remaining payments due under the annuity will be payable directly to the spouse or beneficiary outside of probate.

Higher Payout Amounts

In addition to offering all the advantages listed above, a SPIA also often outperforms CDs on monthly payout rates.