Becky has a problem, but it’s a good one to have. She has carefully managed to put away a
sizable sum in her checking account that will more than help her get through a financial
Sadly, a shocking 40% of Americans don’t have enough on‐hand cash to cover an unexpected
$400 expense, according the 2019 Federal Reserve Board Survey of Household Well‐being.
Knowing this, Becky is in good form ─ but her problem is that she’s getting next to nothing in
interest on her savings.
Becky’s problem, however, is easily solved. She has options to grow her savings beyond
traditional, low‐paying CDs and savings accounts. And if she’s also planning to use her
money for retirement, there is one solution in particular that can meet her needs for both
competitive interest crediting potential and a lifetime of income. It’s a Single Premium Deferred Annuity
WHAT IS AN SPDA?
SPDAs are designed to put a one‐time payment right to work to help grow a retirement savings
strategy and eventually provide an income stream for life. Many confuse SPDAs with
“immediate annuities,” which take your lump‐sum and turn it right into an income stream. But
SPDAs have an accumulation phase, which can range from as little as one year up to multiple decades or more. In other words, your lump‐sum payment continues to grow until you need it at retirement. As with other annuities, you have options for the underlying funding, among them:
- A traditional fixed annuity credits interest based on a declared interest rate that changes periodically but can be no less than that guaranteed by the contract.
- A fixed indexed annuity that credits interest based in part on the changes of a stock market index.
5 KEY BENEFITS OF SPDAS
When you purchase a fixed indexed SPDA, other key benefits include:
- The potential for better interest crediting and tax-deferred growth than a traditional fixed annuity.
- A choice of index-crediting strategies including a fixed account with a declared interest rate and several accounts that credit interest based in part on major market indexes.
- Guarantees that the premium you pay and what you accumulate won’t lose money due to market downturns.*
- Retirement income for the rest of your life.
- Access to your money, usually with 10% penalty‐free withdrawals beginning in year 2 on
most products subject to IRS limitations.
Becky was smart to start saving for retirement. But it’s also prudent to look beyond her bank for opportunities in SPDAs to enhance her growth potential and guarantee her future income.
SPDAs come in many shapes and sizes, so talk with your financial professional to see how one
can work for your situation.
Next: Beyond Becky: Other Situations Ideal for SPDAs
*Assuming no withdrawals during the withdrawal charge period. Rider charges continue to be deducted regardless of whether interest is credited. The 0% “floor” provided by an indexed annuity ensures that during crediting periods where the index is negative, that no less than 0% interest is credited to the index strategy.
Indexed annuities have withdrawal charges that are assessed during the early years of the contract if the annuity is surrendered. In addition, withdrawals prior to age 59 ½ may be subject to a 10% Federal Tax Penalty. Indexed annuities do not directly participate in any stock or equity investments. Guarantees are dependent on the claims paying ability of the issuing company. This is not a solicitation of any specific annuity contract.