Are Single Premium Deferred Annuities a Good Investment?

Annuities are contracts that allow you to receive payments in exchange for premium payments. Many individuals use annuities to supplement other retirement plans and create another source of income. There are many types of annuities available.

One example is a single premium deferred annuity (SPDA). As the name suggests, these annuities require a single lump-sum premium. The premium amount will experience tax-deferred growth during the accumulation phase. Then, at the date specified when purchasing the annuity, the total premium and interest will become regular payments.

It's not hard to see how traditional multi-premium annuities are beneficial. But are SPDAs a good investment?

Reasons to Purchase an SPDA

There are many reasons why one might consider investing in an SPDA. Beyond standard retirement planning, many people with large sums of money they want to protect will get an SPDA. Single premium deferred annuity rates are typically higher than your average high-yield savings account.

Therefore, you can put your money to better use than having it sit in a savings account. You'll earn more tax-deferred interest.

More importantly, it's a way to protect your money from yourself and others. When you purchase an annuity, you're locking the money away. While not FDIC-insured, your contract to buy an annuity is usually with an insurance company. Therefore, your money is safe.

It's a fantastic way to set money aside for retirement and ensure you don't spend it. You'll often see people who come into large sums of cash using SPDAs to grow their wealth while safeguarding it long-term.

Next to taking advantage of better single premium deferred annuity rates, another notable benefit is getting guaranteed payments later. Furthermore, the interest earned is tax-deferred.

If you're worried about risks, you can invest in an indexed SPDA. They come with downside protection, providing growth without considerable risks.

Are SPDAs good investments? If you have money you want to protect and put aside for retirement, they're a fine investment. They offer a fantastic way to park your assets and plan for the future.

Read a similar article about best annuity investments here at this page.