Single Premium Deferred Annuity
What Does Single Premium Deferred Annuity Mean?
A Single-Premium Deferred Annuity (SPDA) is a type of annuity purchased with a one-time lump-sum payment. During its saving phase, the earnings grow on a tax-deferred basis. The payout phase can either provide guaranteed payments or vary based on the performance of the investments made during the saving phase.
Insuranceopedia Explains Single Premium Deferred Annuity
The standout feature of the Single-Premium Deferred Annuity (SPDA) is its tax deferral. Once purchased with a lump-sum payment, the investment grows without being taxed, even as it earns interest. This makes it an attractive option for individuals nearing retirement who have saved enough to make the initial investment.
The annuitant can choose between fixed or variable distribution options. A fixed option provides a guaranteed steady income in the future, while a variable option allows the annuity to be invested in securities, potentially yielding higher returns.
Like other annuities, an SPDA also includes a death benefit, ensuring financial security for the beneficiary.
