Before we went get into the post – I want to address the post going out twice yesterday. There was a technical issue with our email provider which has now been resolved! I always want to be aware that each and every post is value-add for you all so please ignore the re-send, apologies again! Back to the post…

I am skeptical of pretty much anything other than very basic and understandable investment products. And that includes annuities. Many are complex, expensive, and marketed with promises that do not match what most physicians need. But, there is one annuity that can make real sense for doctors when used correctly, especially late in your career or at retirement. That is the single premium immediate annuity, or SPIA.

A SPIA sticks to the core job an annuity is really meant to do. It converts a lump sum of savings into a guaranteed paycheck that you cannot outlive. That is it. No fluff, just a clear benefit when placed in the right plan.

What a SPIA Is, and What It Is Not

A single premium immediate annuity is a contract with an insurance company. You hand over a lump sum, and income starts soon after, usually within 30 days and no later than a year. There is no accumulation period. That is the main difference from a deferred annuity, where you pay in, the money sits for years, and income begins at a future date you choose.

You may see SPIAs labeled as income annuities or immediate annuities. The idea is the same: you are buying a paycheck.

Key features of this annuity product in plain language

• Lump sum in, paycheck out, on a schedule you choose such as monthly, quarterly, or annually.
• Payments are usually fixed. Some contracts offer inflation adjustments.
• Lifetime income is the default. You can choose a period certain instead, but the classic use is income for as long as you live.
• Unless you add guarantees, payments end when you die. That is how the insurer funds lifetime income for those who live longer than average.

Why SPIAs Resemble Term Life

Term life insurance is a clean, purpose-built tool. It's what I have. Whole life insurance is the kitchen sink. And it does more harm than good for doctors in 99.9% of cases.

SPIAs are the term life of annuities. They do one job well, with minimal moving parts.

Many other annuities bolt on investment subaccounts, teaser rates, or riders that sound impressive but introduce complexity, fees, and restrictions. With a SPIA, you trade liquidity for certainty. You give up access to the lump sum in exchange for a paycheck that arrives on time and is not tied to market performance.

When a Single Premium Immediate Annuity Can Make Sense for Doctors

Physicians share a few retirement realities. We often begin saving later due to training. Many of us rely on portfolio withdrawals rather than a pension. We are exposed to sequence-of-returns risk in the first years of retirement. A SPIA can help in several ways.

Let's take a look:

Cover your essential spending floor
Add Social Security and any pension to your SPIA payout. If those checks cover housing, food, insurance, and basic travel, you have a reliable base. That base can let you invest the rest of your portfolio more rationally.

Reduce sequence-of-returns risk
If markets drop as you start withdrawals, selling shares to fund spending can cause lasting damage. SPIA cash flow is independent of market swings, so you are less likely to sell at bad times.

Hedge longevity
Many physicians are likely to live a long time. A lifetime SPIA carves out a slice of assets to fund income no matter how long you live.

Behavioral benefits
Watching balances bounce can be stressful. Converting a chunk of savings into a paycheck reduces the urge to tinker or panic-sell.

Simplify for a spouse
If you are the household CFO, a SPIA can make life easier for a partner who prefers not to manage withdrawals and rebalancing for decades.

When a SPIA Might Not Be Right

However, this annuity product is still not for all doctors. Let's look at some scenarios where it may not make a whole ton of sense:

• You need liquidity for emergencies, large purchases, or flexibility.
• You already have more than enough income from other sources.
• You are early in your career and should focus on saving, paying off high-interest debt, and building diversified portfolios.
• You plan to leave a large bequest and prefer assets with principal value at death. Add-on guarantees exist, but each one reduces the payout.

Levers You Can Adjust Without Overcomplicating It

SPIAs are simple, yet you still have meaningful choices that shape the payout and protections.

Life-only vs guarantees

• Life-only pays the highest monthly amount and stops at death.
• Life with period certain pays for life, and if you pass early, payments continue to a beneficiary until the period ends.
• Cash or installment refund ensures your beneficiaries receive at least what you paid in, minus what you already collected.

Keep in mind though that each added protection lowers the monthly payout. That trade is acceptable for many buyers while not for others.

Single life vs joint life
Married couples can choose payments that last as long as either spouse is alive, with a survivor percentage such as 100 percent, 75 percent, or 50 percent.

Inflation adjustments
Some SPIAs offer a fixed annual increase or tie increases to CPI. The starting payment is lower, but purchasing power is better protected. Another approach is to buy a fixed SPIA and keep extra equities and bonds to address inflation.

Payment frequency
Monthly is most common, but quarterly and annual options work well.

Taxes in One Minute

How does this work when it comes to taxes? An important point as ignoring taxes is never a good idea. Here's the deal:

• If you buy a SPIA with pre-tax money from an IRA or 403(b), payments are usually fully taxable as ordinary income.
• If you buy with after-tax money from a backdoor Roth IRA or bank account, each payment is part return of principal and part taxable interest, calculated with an exclusion ratio. After the principal has been fully returned, future payments are taxable.
• State taxes vary. Coordinate with your CPA so the SPIA fits your overall tax and withdrawal plan.

What About Insurer Safety

Insurer strength (i.e. where you buy the SPIA from) matters.

Favor financially strong carriers, and consider diversifying across companies if you are putting in large amounts.

Most states have guaranty association limits that provide a backstop up to certain levels. Do not rely on those limits as the primary plan, but factor them into risk management along with ratings and diversification.

Rates, Timing, and the Ladder Idea

SPIA payouts depend on interest rates and age. Higher rates and older ages mean larger payments. Since rates move, you can ladder purchases.

Buy a portion now, another in a year or two, and another later. This is similar to the ladder strategy with term life insurance as well.

This approach spreads interest-rate timing risk and can make the decision easier.

How Much to Annuitize

There is no single correct number when it comes to how much of an annuity doctors need . A practical way to decide is to size the SPIA to cover your needs-based income gap.

1. Add up essential expenses in retirement.
2. Add up guaranteed income such as Social Security and any pension.
3. Gap equals essential expenses minus guaranteed income.
4. Consider a SPIA sized to close part or all of that gap, while keeping enough liquid assets for flexibility and growth.

Some physicians annuitize a slice of the fixed-income portion of the portfolio. Others target a dollar amount that covers housing and healthcare. The right answer is the one that gives you confidence without boxing you in.

Common Questions About This Annuity From Doctors

What if I die early; does the insurer win?
With a life-only SPIA, payments stop at death. That trade funds higher income for those who live long. If that feels wrong, add a period-certain or refund feature. Your payout will be lower, but your heirs have protection.

What about inflation?
You can buy a cost-of-living rider or keep part of your portfolio in growth assets. Many people combine a fixed SPIA for the base with an equity sleeve for long-term inflation defense.

Can I change my mind and get my money back?
Usually no. SPIAs are meant to be permanent. Buy only when your plan is clear, your emergency fund is intact, and near-term purchases are funded elsewhere.

Are they customizable?
Within reason. You can choose life vs joint, add guarantees, select an inflation adjustment, and set payment frequency. Compared with other annuities, customization is limited, which is part of the appeal.

A Simple Doctor-Friendly Evaluation Process

1. Define the job you want the SPIA to do. For example, I want a guaranteed four thousand dollars per month for life to cover essentials.
2. Shop multiple carriers. Get side-by-side quotes and compare payout, options, insurer ratings, and costs.
3. Prefer clean over clever. Choose a straightforward structure that matches your goal.
4. Start small or ladder. Annuitize a slice and build from there if it fits well.
5. Coordinate taxes and beneficiaries. Work with your CPA and attorney so the SPIA aligns with your withdrawal order, Roth conversions, and estate plan.
6. Update your plan after purchase. Map which cash flows fund which expenses.

Bottom Line on This Annuity for Doctors

I do not give annuities an automatic thumbs up for all doctors.

Too many come with bells and whistles that distract from the main job. A single premium immediate annuity is the exception. It provides the real benefit an annuity is supposed to provide, a paycheck that lasts as long as you do. Used in the right plan, a SPIA can reduce stress, shrink sequence risk, and simplify retirement.

It is still not for everyone, and it is not for every dollar. For many physicians approaching retirement, setting a reliable income floor with a SPIA can be the kind of boring that makes financial freedom even more enjoyable and secure.

If it sounds like it could fit your situation, run the numbers and make sure the tool matches the job. If the job is to guarantee a paycheck for life, a SPIA deserves a serious look.

Here are some other tools to help you determine your financial freedom number and actually reach it on your terms:

• The 7 Step Basic Formula for Wealth as a Physician
• How Much Do You Need to Save for a $5 Million Nest Egg?
• When Should Doctors Take Social Security?
• Crash Proof Retirement for Doctors

Or check out my best-selling book, Money Matters in Medicine!

What do you think? Can a SPIA fit in your retirement plan? Is that the only annuity that makes sense for doctors? Why don't others fit the bill? Let me know in the comments below!