Customized Financial Strategies

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At Senior Financial Services we help our clients by designing a customized financial strategy that often combines more than one product. Each part of the strategy will often dovetail with the others to produce a comprehensive plan addressing asset protection and growth, income that meets or exceeds the client’s needs, efficient tax strategies as well as efficient methods of passing assets to your heirs. Contact Fred Orentlich at 800-679-2858
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Maximize Your Retirement with Senior Financial Services Inc - Annuities in Retirement Planning Part 3 (FIA vs SPIA)

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At Senior Financial Services we don’t take shortcuts. Hard work and research are hallmarks of our practice.

For help with your retirement planning needs, contact Fred Orentlich of Senior Financial Services at 800-679-2858

Maximize Your Retirement with SeniorFinancial Services Inc

 

Definitions

Term

Meaning

FIA (Fixed Indexed Annuity)

A deferred annuity that grows based on the performance of a market index (like the S&P 500), with a guaranteed minimum interest rate.

SPIA (Single Premium Immediate Annuity)

An annuity purchased with a single lump sum that starts paying a guaranteed income immediately, typically for life or a fixed period.

    Key Features Comparison

Feature

FIA

SPIA

Payment Start

Deferred (months/years later)

Immediate (usually within 1 month)

Income

Not guaranteed monthly until annuitized; growth depends on index

Guaranteed monthly income immediately

Market Exposure

Linked to index performance (often capped or with participation rate)

None; fixed payout

Principal Protection

Guaranteed minimum (usually 0–1%)

Full principal “annuitized” into payments; not returned unless death benefit rider

Tax Treatment

Tax-deferred growth until withdrawal

Portion of each payment is taxable as income; principal is return of investment

Liquidity

Limited; surrender charges apply

None; payments cannot usually be withdrawn as lump sum

Inflation Protection

Optional rider (extra cost)

Rarely adjustable; may include inflation rider at extra cost

Purpose in Retirement

Growth with some protection; optional future income

Immediate income; replaces paycheck; hedges longevity risk

    Pros & Cons

FIA (Fixed Indexed Annuity)

Pros:

  • Tax-deferred growth
  • Participation in market gains without direct stock risk
  • Minimum guaranteed interest protects principal
  • Can add lifetime income rider later

Cons:

  • Complex; returns limited by caps, spreads, or participation rates
  • Early withdrawals trigger surrender charges
  • Guaranteed income only if annuitized

SPIA (Single Premium Immediate Annuity)

Pros:

  • Predictable lifetime income (like Social Security)
  • Simple; easy to understand
  • No market risk
  • Immediate cash flow for retirement needs

Cons:

  • No growth potential; fixed payout
  • Loss of liquidity; principal is converted to income
  • Inflation risk unless a cost-of-living rider is added (extra cost)

    Typical Use Cases

Situation

FIA

SPIA

Younger retiree, wants growth and income later

✔ Deferred income with index-linked growth

❌ Not suitable (no growth, starts immediately)

Retiree wanting guaranteed immediate cash flow

❌ Payments not immediate

✔ Lifetime income to cover living expenses

HNW retiree seeking tax deferral and optional income rider

✔ Can accumulate large balance tax-deferred

❌ Usually doesn’t provide flexibility for later growth

Protect against longevity risk

✔ If lifetime income rider added

✔ Naturally hedges longevity risk

    Summary

Aspect

FIA

SPIA

Growth Potential

Moderate (linked to index)

None (fixed)

Guaranteed Income

Optional; deferred

Immediate; guaranteed

Liquidity

Low (surrender penalties)

Very low; payments cannot be lump sum

Risk

Low–moderate (market upside, principal protected)

Very low (income guaranteed, no market exposure)

Best For

Tax-deferred growth, optional future income

Immediate, predictable lifetime income, replacing paycheck
Location: Massachusetts, USA

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