Single Premium Annuity: An In Depth Look

By Kyle Fitzsimmons, InsuranceAgents.com Staff Writer

A Breakdown Of The Single Premium Annuity

If you want the pay out of an annuity without the complications and unpredictability then you might want to consider a single premium annuity. This kind of annuity allows you to make a single premium payment, usually ranging anywhere from $5,000 to $1 million, and then you receive a pay out which usually comes in the form of monthly installments. The easiest way to find the best rate on an annuity is to compare annuity rates, free, using our online form.

You have two options when purchasing a single premium annuities:

Single Premium Immediate Annuity

• Your pay out begins one month after you purchase the annuity and continues for   the remainder of your lifetime or a predetermined number of years.
• This is an attractive option for those interested in turning a tax-qualified rollover, mature CD, or inheritance into income right away.
• The income payments are not taxed until you receive them at which point they may not even be completely taxable.
• You may be able to accelerate payments but this type of single premium annuity cannot be surrendered.

Single Premium Deferred Annuity

• This is a tax-deferred single premium annuity that, much like the immediate annuity, requires a lump sum payment to the insurance company.
• It is typically used to fund a retirement.
• The single premium deferred annuity gains interest over time while also being income tax deferred.
• If you decide to withdraw funds before age 59 and a half then you will be hit with a 10 percent penalty.
• The insurance company issuing your annuity guarantees to pay out the principal on the maturity date of your single premium annuity as well as any interest that has accrued in that time.

Deciding On A Single Premium Annuity

A single premium annuity is designed to benefit you short term. It is different from a life insurance policy that is designed to benefit your family after you’ve passed on and is different from other types of annuities that require periodic payments over a long period of time before the pay out occurs. The single premium annuity is specifically formulated for those who don’t have much time and want to receive the benefits of their annuity immediately so they can enjoy their retirement. Talk to a licensed financial professional or life insurance agent today about the single premium annuity and its relevance to you by using our free online quote service.

Published: Monday 5th October 2009