Glossary

Immediate annuity

An annuity bought with a lump sum that starts paying income within about a year, for life or a set period, in exchange for giving up access to the money.

Also called: income annuity, single premium immediate annuity

An immediate annuity converts a lump sum into guaranteed payments that begin within 12 months of purchase, often a month later. Most are bought with a single premium, which is why the product is often called a single premium immediate annuity, or SPIA. Retirees use them to turn part of their savings into a pension-like paycheck for fixed bills.

You choose a payout form when you buy: life only, life with a period certain, joint and survivor for a couple, or a fixed number of years. Payouts depend on your age, sex, the option chosen and interest rates at purchase. Say, hypothetically, a 70-year-old buys a $100,000 life-only annuity paying $650 a month. The payment is fixed for life, and if the money was after-tax, part of each check is a tax-free return of principal under the exclusion ratio.

The trade-off is liquidity. Most immediate annuities can't be cashed in once payments begin, and a life-only contract pays nothing after death. Fixed payments also lose buying power to inflation unless you choose a rising-payment option with a lower starting amount. See single premium immediate annuities and try the annuity payout calculator.

Last reviewed October 4, 2026

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Related terms

SPIA An annuity bought with one lump sum that starts paying guaranteed income within a year, often for life, in exchange for giving up access to the money. Annuitization Converting an annuity's account value into a stream of guaranteed payments for life or a set period, usually giving up access to the lump sum. Life-only annuity An annuity that pays income for one person's lifetime and stops at death, with no refund or payments to heirs, in exchange for the highest payout. Period certain An annuity payout feature that guarantees payments for a set number of years, paying a beneficiary if the annuitant dies before that time is up. Joint and survivor annuity An annuity that pays income for as long as either of two people lives, often at a reduced amount after the first death, such as 50% or 100%. Exclusion ratio The fraction of each annuity payment treated as a tax-free return of the buyer's own money, found by dividing cost basis by expected total payments.

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Related insurers

Royal Neighbors of America Women-founded fraternal insurer in Rock Island, Illinois, selling final expense, whole life, term and annuities via independent agents in 43 states and D.C.

Related annuity companies

New York Life The largest U.S. mutual life insurer, a major seller of income annuities, including participating ones that can pay dividends, through its career agents. Protective Life Birmingham insurer owned by Japan's Daiichi Life, selling MYGAs, indexed, variable and immediate annuities, many with lifetime income, via advisors and banks. RiverSource (Ameriprise) Ameriprise Financial's insurer, selling RAVA variable annuities, a buffered structured annuity and immediate annuities only through Ameriprise advisors. Western & Southern (Integrity Life) Cincinnati mutual holding company group whose Integrity Life and National Integrity sell MYGAs, indexed, variable and income annuities via advisors and banks.

Related tools

Annuity payout calculator Estimates monthly income from an immediate annuity, paid for a fixed period or for life on average U.S. mortality, to sanity-check real quotes.