SPIA Structure for Life With Installment Refund

Single Premium Immediate Annuities (aka SPIAs) are a great way to contractually guarantee an income stream that you can never outlive. Many people call this solving for “longevity risk.” Since the Roman Times, SPIAs have been used as pension type products and were the only type of annuity sold in this country until 1952. One could argue that since 1952, the annuity industry has gone downhill with a complicated and unregulated sales message with now over 15 different annuity types. It would be a better world if SPIAs were the only annuity type available. Let’s go back to the 1950s!

A common misconception about SPIAs is that if you own one and then die early in the contract the evil annuity company keeps that money and this is the reason they have the big buildings. What people are referring to is an SPIA that is structured as “Life Only.” However, there are over 15 different ways to contractually structure an SPIA payout and “Life Only” is just one of them.

Most people have worked very hard to save and accumulate money for retirement, so the majority of people do not feel comfortable with the “Life Only” structure. People want the lifetime income guarantee, but they want to make sure that all of the money will go to either them or someone in their family. That makes sense for most hard-working Americans who are looking for additional income to supplement their Social Security payments or employer pension payments (if so fortunate). There is a way to contractually receive all original funds. This SPIA structure is called “Life with Installment Refund.”

Have Your SPIA Cake…..and an Installment Refund Too!

For people that want the lifetime income guarantee, but want the money to stay in the family, the most popular SPIA structuring choice is called “Life with Installment Refund.” 

“Life with Installment Refund” provides the highest lifetime income guarantee, while also contractually assuring that 100% of the initial remaining premium goes to someone in your family or other stated beneficiary. The structure guarantees a lifetime income stream, regardless of how long you live. If you live to 150 or longer, the annuity company is on the hook to pay. That’s the benefit proposition of the SPIA strategy. 

Remember, if you pass away early in the contract, any money remaining in your SPIA account will be given in payment form to listed beneficiaries until the money is exhausted. The annuity company does not keep a penny. 

If you structure the SPIA policy “Joint Life with Installment Refund”, the joint annuitant is typically a spouse. In this case, if one of you passes away, the income stream continues uninterrupted and unchanged for the life of the surviving spouse. When the surviving spouse dies, whatever money is left in the SPIA account is distributed in payment form to the listed beneficiaries until the money is fully exhausted. Once again, the annuity company does not keep a penny. 

An SPIA Is a Life Expectancy Bet That Can Keep on Paying

With a “Life with Installment Refund” SPIA structure, you are making a life expectancy bet with the issuing annuity company. They are on the hook to pay regardless of how long you live.

However, if you or your spouse live past your life expectancy, there will not be money left in the SPIA account. Remember that an SPIA payment is a combination of a return of premium and interest, and is based on your life expectancy(s) at the time you start the income stream. Even if your SPIA account is at zero dollars….you will still receive your payment.

Many people who have had their SPIA accounts at zero for over a decade are still receiving payments. Now that's transferring risk!

When you request a SPIA quote from, ask for both “Life Only” and “Life with Installment Refund” quotes so you can see the payout difference between the two. With those two quotes, it should be possible to make an informed SPIA buying decision.