Single-premium deferred annuity (SPDA) is a policy that is purchased at once with a lump-sum payment. It is tax-deferred during its saving phase. The payout can either be guaranteed or dependent on the performance of the investments made during the saving phase.
The best feature of the single-premium deferred annuity is the tax deferral. Once someone buys this annuity, the investment is not taxed even when it yields interests. This is ideal for would-be retirees who have saved enough to afford the lump-sum payment.
The distribution can be fixed or variable—the choice is with the annuitant. Either they get a guaranteed amount as steady income in the future or they choose to invest the annuity to securities that can yield returns.
Like other annuities, an SPDA has a death benefit for the beneficiary.
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