Single Premium Immediate Annuities

How immediate annuities work

Step 1: Fund your annuity

You can open an immediate annuity with a minimum contribution of $5,000. Your lump-sum payment can come from a retirement account like a 401(k) or IRA – or from other sources of income, such as a savings account or inheritance. However you fund it, you’ll be turning that money into guaranteed income in as little as 30 days.

Step 2: Set up your income plan

Your SPIA is flexible – you can customize it to fit your needs and goals. First, you’ll choose when you want your payments to begin – they can typically start within 30 days to one year of your purchase. Then, pick the payout option that works best for you:

• Lifetime income: Guaranteed payments for as long as you live.
• Fixed period: Guaranteed payments with a guaranteed minimum payout period.
• Life with period certain: Lifetime payments with a guaranteed minimum payout period.
• Joint and survivor: Guaranteed payments for your spouse if you pass away.

Step 3: Receive income

You’ll choose how often you want to receive payments – monthly, quarterly, semiannually or annually – so it fits your life. Once you’ve selected your structure and frequency, your payments begin. And with no ongoing account maintenance, you can enjoy your guaranteed income without the hassle.

Is an immediate annuity a good fit for you?

SPIAs offer guaranteed income with minimal upkeep – making it a smart way to turn your savings into immediate retirement income. It might be right for you if:

• You want guaranteed income starting now. If you’re already retired and ready to begin receiving payments, a SPIA gets you started quickly. 
• You’re looking for simple, low-maintenance retirement income. After your one-time contribution, there’s nothing more you need to manage.
• You’re comfortable giving up access to the lump sum. In return, you’ll receive steady income you can count on.
• You value stability over market swings. SPIA payments are not affected by the volatility of the market – they’re predictable from start to finish.
• You’re thinking about your spouse’s future. With a joint option, payments can continue for your spouse after you’re gone.

Looking for growth and more flexibility instead? A deferred annuity may be a better fit if you're still building your retirement savings.

Tax treatment of immediate annuities

When you receive payments from a SPIA, part or all of that income may be subject to taxes. How your income is taxed depends on how you funded your annuity – whether with pre-tax or after-tax dollars:

• Qualified annuities are funded with pre-tax dollars, like money from a 401(k) or IRA rollover. In this case, your payments are fully taxable as ordinary income.
• Non-qualified annuities are funded with after-tax dollars, such as personal savings. Each payment includes both a taxable interest portion and a non-taxable return of your original premium.

Understanding SPIAs in more detail

Choosing how to fund your retirement is one of the most important financial decisions you’ll make. That’s why it helps to understand exactly how an immediate annuity works, so you can decide if it fits your retirement goals. Here’s a closer look at how Amica’s Single Premium Immediate Annuity works:

• Minimum premium: You can get started with a $5,000 minimum contribution. This makes a SPIA accessible whether you’re rolling over funds from a retirement account or using personal savings.
• One-time payment: Once you’ve made your single contribution, there are no ongoing payments or account management required.
• Income start date: You choose when your payments begin, usually within 30 days to one year of purchase. This flexibility allows you to time your income to match your retirement needs.
• Payout frequency: You can decide how often you’d like to receive your payments. Choose from monthly, quarterly, semiannual or annual payouts – whatever works best for you.
• Payout options: Your SPIA can be tailored to support your specific goals with payment options for lifetime income, fixed-period payments, life with period certain or joint and survivor benefits.
• Access to funds: SPIAs are built for long-term income stability. That means once your income stream begins, you won’t have access to the original lump sum.
• Death benefit: Depending on the payout option you choose, a death benefit may be included.
• Availability: Product features may vary by state.