Single Premium Deferred Annuity
What Does Single Premium Deferred Annuity Mean?
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.
Insuranceopedia Explains Single Premium Deferred Annuity
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.
