What is a characteristic of Single Premium Immediate Annuities (SPIA)?

Single Premium Immediate Annuities (SPIA) are designed to provide an immediate stream of income following a single upfront investment. One defining characteristic of SPIAs is that they provide benefits based on the age and gender of the annuitant. This is important because these factors are used to calculate the payout amounts, as life expectancy plays a significant role in determining how much income the annuitant will receive and for how long. Generally, the older the annuitant, the higher the monthly payout, due to a shorter anticipated lifespan for receiving payments.

The other options do not describe SPIAs accurately. Regular monthly payments are relevant to all annuities but do not define SPIAs specifically, since SPIAs require a lump-sum payment upfront rather than several regular payments. Likewise, SPIAs do not offer flexible payment options; they are structured around the single premium payment, providing fixed payouts thereafter. Lastly, SPIAs require an initial lump sum investment; hence, they do not align with the concept of having no initial investment. Understanding these characteristics clarifies the distinction between SPIAs and other types of annuities.