Income Annuity

Wade Pfau, Ph.D., CFA

by Wade Pfau, Ph.D., CFA

December 30, 2015

There are two main types of income annuities: One is a Single Premium Immediate Annuity or SPIA, and the other is a deferred Income Annuity or DIA. A SPIA allows an investor to convert a lump sum, single payment into immediate, consistent, and guaranteed payments. They can be set up to issue payments for a certain period of time, or as long as the retiree(s) are alive. A DIA differs in that the retiree can defer the payments to a later date. For example, a retiree at age 65 can set up a DIA to issue payments when he/she turns 75.