Next Wave Options
Independent life insurance and retirement income agency serving Salinas and Monterey County.
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Independent life insurance and retirement income agency serving Salinas and Monterey County.
Get a quote
A single premium immediate annuity, or SPIA, is the plainest income contract in insurance: you pay the insurer a lump sum, and starting within a year it pays you a fixed amount every month for the rest of your life, or for a period you choose. There is no crediting formula, no cap and no rider fee. There is also no going back: the lump sum becomes the insurer's, the payment is what you get, and the decisions you make at purchase, about survivors, guarantees and inflation, are permanent. This page explains how the payout is set, what each option gives up, how it is taxed, and how to use an immediate annuity calculator honestly.
Next Wave Options is an independent, insurance-licensed agency in Salinas appointed with several carriers. For someone with a genuine gap between essential expenses and guaranteed income, an immediate annuity sized to that gap is often the most efficient contract available, and we compare payouts across carriers because they differ meaningfully for the same person.
The insurer quotes a monthly payment per dollar deposited based on your age and sex (in California, unisex pricing applies to some contracts and not others; the quote states which), the payment option you choose, and the interest-rate environment at purchase. Older buyers receive a higher payment per dollar because the expected number of payments is smaller. The payout is not a rate of return; part of each payment is a return of your own money and part is interest, and the value of the contract to you depends on how long you live. That is the point: it is insurance against outliving your money, and like all insurance it costs something if the insured event does not happen.
| Option | What it pays | What you give up |
|---|---|---|
| Life only | The highest monthly payment, for as long as you live | Everything at death, even if death comes early; nothing passes to heirs |
| Life with period certain (for example 10 or 20 years) | A lower payment for life; if you die within the period, payments continue to your beneficiary until it ends | Some monthly income in exchange for the guarantee |
| Life with cash or installment refund | A lower payment for life; if you die before payments equal your premium, the difference goes to your beneficiary | Some monthly income |
| Joint and survivor | Income for two lives; after the first death the survivor receives all, or a stated percentage, of the payment | A lower payment than a single life, in exchange for the survivor's security |
| Period certain only | Payments for a set number of years, not for life | Longevity protection; it is a payout schedule, not lifetime insurance |
| Inflation adjustment | Payments that rise by a fixed percentage each year, where offered | A materially lower starting payment |
For a married couple covering household essentials, a joint-and-survivor option is usually the honest choice, because the bills do not stop at the first death. For a single person with heirs, a refund or period-certain option addresses the fear of dying early at a modest cost. We quote every option so the trade-offs are in dollars, not adjectives.
Payments from an immediate annuity bought with non-qualified money are partly a tax-free return of your own premium and partly taxable interest, divided under an exclusion ratio the insurer reports each year; after the premium has been fully recovered, payments are fully taxable. Payments from a contract bought with IRA or other pre-tax retirement money are fully taxable as ordinary income, and the purchase itself, done as a direct rollover or transfer, is tax-deferred, not tax-free. An immediate annuity inside an IRA also satisfies required minimum distributions for the money it holds, under rules a tax professional should confirm for your situation.
A calculator estimates the monthly payment a deposit would buy at a given age using assumed payout rates. Any such figure is a hypothetical illustration rather than a quote, and it is worth no more than the assumed rate behind it and the date that rate was set. Use one to size the deposit to the gap, to see how the payment changes with age and with a survivor option, and to compare the result with the guaranteed withdrawal amount of an indexed annuity income rider, which for the same money often pays less. Then get real quotes from several carriers; they differ, and the differences compound over a lifetime of payments.
An immediate annuity is irreversible, so the decision deserves the most scrutiny of any contract on this site. We compare carriers on payout and financial strength (see our carriers), show the alternative of delaying Social Security or keeping the money flexible, and put the reasoning in writing. For clients 65 and over, California Insurance Code section 789.10 requires 24 hours' written notice before an in-home appointment, and the Department of Insurance's guide Annuities: What Seniors Need to Know is worth reading first.
It depends on your age, the payment option and the interest-rate environment at purchase, and it differs by carrier. We do not print payout figures because they change; our calculator illustrates the arithmetic with dated assumptions, and we quote real figures from several carriers in a conversation.
Generally no. The lump sum becomes the insurer's in exchange for the payment stream. A refund or period-certain option protects beneficiaries if you die early, and a few contracts allow a costly commutation, but there is no cash value to withdraw.
For the portion of savings that must cover essential expenses for life, after Social Security and any pension, it can be the most efficient way to buy lifetime income. It is a poor idea for money you may need, for your whole balance, or when delaying Social Security would fill the gap more cheaply.
From non-qualified money, each payment is partly a return of premium and partly taxable interest under an exclusion ratio until the premium is recovered. From IRA or other pre-tax money, payments are fully taxable as ordinary income; the purchase itself is a tax-deferred rollover or transfer.
If the income covers household essentials for a couple, joint and survivor is usually right because the bills continue after the first death. Life only pays more but stops at your death. We quote both so the difference is in dollars.
State guaranty associations provide limited protection to policyholders of insolvent licensed insurers, up to limits set by state law. Choosing a strongly rated carrier is how we try to keep that from ever being your question; ratings are on our carriers page.
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Schedule a CallReviewed by Roberto Morales, California Insurance License #0G97165. Next Wave Options is licensed for life and annuity products only and does not provide investment, tax or legal advice.
