How can I create my own pension if I don’t have one from work?

Create the life you want by using SPIA’s to create lifetime income!

Create Your Own Pension with a Single Premium Immediate Annuity (SPIA)

With traditional pensions becoming less common, many retirees are searching for ways to secure reliable, lifetime income. The Single Premium Immediate Annuity (SPIA) offers a simple and effective solution, allowing you to create your own "pension." By purchasing a SPIA, you lock in an income you can't outlive, taking the stress out of the possibility of running out of money in retirement.

What is a SPIA?

A SPIA is a fixed annuity where you make a one-time lump sum payment, and in return, the insurance company guarantees you a predictable income stream for life. Payments can begin as soon as a month after purchase, or you can delay them for up to a year, depending on your needs. This makes a SPIA an ideal option for those without a traditional pension, providing the same financial security with guaranteed income for life. .

How much income can I receive?

Payouts are based on your age and gender, with slightly higher percentages paid out to men because they have a shorter life expectancy. Also the older you are when you purchase a SPIA, the larger the percentage payout is, because the payments are spread out over a shorter remaining life expectancy. Currently, for people aged 65, the payout percentages can range from 6.7 -7.7% of a hypothetical $100,000 total lump sum payment.

Benefits of a SPIA

One of the key benefits of a SPIA is guaranteed lifetime income without market volatility. Once you pay the insurance company the lump sum, the insurance company assumes the market risk and guarantees the lifetime income. Part of the SPIA payments are considered by the IRS to be a return of your principal, and thus are tax-free (unless it is inside an IRA and then it’s considered fully taxable). Also, it’s also generally protected from creditors and sometimes isn’t counted towards your Medicaid assets when qualifying for Medicaid coverage of nursing home care.

Considerations: No Built-In Inflation Protection

While SPIAs offer stability, they do not include protection against inflation. The fixed payments will stay the same throughout your life, which could impact your purchasing power over time. Some SPIAs offer inflation riders for an added cost, or you can ladder SPIAs by purchasing them at different ages. Or you may choose to balance your income strategy with other investments that hedge against inflation.

Conclusion

A SPIA is a powerful tool for creating your own pension and securing guaranteed lifetime income. With flexible payment start dates, possible tax advantages, and peace of mind knowing your income is guaranteed, a SPIA can provide the financial stability needed for a comfortable retirement. Please contact me today if you’re interested in getting a quote on a SPIA.