What is a Single Premium Annuity?

• A single premium annuity is an investment tool that is bought with a one-time payment. Depending on the owner's terms, the annuity can pay out a specific amount of money either for immediate income or to fund a retirement.
  
  

Benefits

• Single premium annuities will earn interest over the lifetime of the product. Also, the money in this product will grow tax-deferred, and be taxed upon any payouts.
  
  

Considerations

• People may consider buying a single premium annuity if they receive a large lump sum such as an inheritance. They may also opt for this product if they have accepted a severance package, own a matured CD or have a tax-qualified retirement plan to rollover.
  
  

Misconceptions

• The owner's death will not affect the value of the annuity. If the owner dies before the annuity is liquidated, the remaining balance is left to a beneficiary.
  
  

Costs of a Single Premium Annuity

• Companies offering a single premium annuity have a minimum amount requirement. Most can be bought with a payment of $25,000 or more, but some financial institutions will sell this product with amounts as low as $5,000.