Retire · 5 min read · Updated November 10, 2026

SPIAs, DIAs and QLACs: building an income floor in depth

Illustrative examples, education not advice.

In plain words

An income annuity is the simplest kind of annuity. You give an insurer a lump sum, and it promises to pay you income for life, or for a set period. There is no market account to watch. It works like buying your own pension.

There are three main types:

SPIA (single premium immediate annuity). Payments start within a year, usually the next month.
DIA (deferred income annuity). You pay now and payments start later, often 5 to 20 years later. Because the insurer holds the money longer and some buyers won’t live to collect, each dollar buys more future income.
QLAC (qualifying longevity annuity contract). A DIA bought inside an IRA or 401(k) that meets IRS rules. For 2026, you can put up to $210,000 per person into QLACs. Income must start by age 85, and the amount in the QLAC is left out of required minimum distribution (RMD) calculations until payments begin.

How it helps real people

Retirees face a risk they cannot diversify away alone: not knowing how long they’ll live. Insurers can manage that risk because they pool thousands of people. Those who die early help fund those who live long. That pooling is why an income annuity can pay more than you could safely withdraw from savings yourself.

Wealthy households often have pensions, rental income or bond ladders that pay regardless of markets. An income annuity gives a regular family the same thing: a floor under essential bills. With essentials covered, the rest of the portfolio can stay invested for growth and wants.

Choosing between them

	SPIA	DIA	QLAC
Income starts	Right away	At a future date you pick	Future date, no later than 85
Paid with	Any savings	Any savings	IRA or 401(k) money
Main use	Fill today’s floor gap	Fund later years, bridge to a pension or protect very old age	Longevity insurance and lower RMDs
Limit	None set by tax law	None set by tax law	$210,000 per person in 2026

Payout options

Life only. The highest payment, which stops at death.
Life with period certain. Pays for life, but at least for, say, 10 or 20 years to a beneficiary.
Cash or installment refund. Ensures you or your heirs get back at least what you paid in.
Joint and survivor. Pays as long as either spouse lives, often at a reduced amount after the first death.
Cost-of-living increases. Some contracts let you choose payments that rise each year. They start lower.

A worked example

Illustrative. Not a quote. Payout rates depend on age, interest rates, options and insurer.

Carmen and Luis are 65. Their essential spending is $64,000 a year. Social Security, claimed at 67 for Luis and 66 for Carmen, will pay $50,000. They want the remaining $14,000 gap covered for life, and they want protection if they live past 90.

Piece	Illustrative cost	Illustrative income
Joint SPIA with cash refund, bought at 67	$160,000	$9,600 a year for life
QLAC from Luis’s IRA, starting at 82	$80,000	$14,000 a year from 82
Bond ladder for ages 65 to 67	$100,000	Covers spending until Social Security starts

Together with Social Security, their essentials are covered for life. The QLAC adds a raise in their 80s, when health costs often climb, and its $80,000 is left out of Luis’s RMDs until 82. The remaining $560,000 of their savings stays invested for travel, gifts and surprises.

Who it’s for

Retirees whose guaranteed income doesn’t cover essential spending.
People in good health with a family history of long lives.
People who want certainty and dislike watching markets.
IRA owners who want to reduce RMDs and insure against very long life (QLAC).

Who it’s not for

People with health conditions that shorten life expectancy, unless they choose refund or period-certain options.
People who need access to the money for emergencies.
People whose pensions and Social Security already cover essentials.

Risks and trade-offs

Liquidity. Once you buy, you usually cannot get the lump sum back.
Inflation. Level payments lose buying power. A 3% inflation rate halves real value in about 24 years.
Interest rates at purchase. Payout rates are set when you buy. Buying in stages, a practice called laddering, spreads that risk.
Insurer strength. Payments depend on the insurer’s claims-paying ability. State guaranty associations offer backup protection up to limits that vary by state. Spreading large sums across insurers reduces risk.
Legacy. Life-only options leave nothing to heirs.

Common mistakes

Buying too much. Keep cash and growth assets for emergencies, care and inflation.
Buying too early. Payouts rise with age. Many people buy in stages from their late 60s.
Ignoring the spouse. A life-only annuity on one spouse can leave the survivor short.
Not comparing prices. Payouts for the same contract can differ between insurers.
Mixing it up with complex annuities. An income annuity is not the same as a variable or indexed annuity with riders.

FAQs

How is SPIA income taxed?

If bought with after-tax money, part of each payment is a tax-free return of your cost and part is taxable, until your cost is recovered. If bought with IRA money, payments are generally fully taxable.

Can my QLAC have a death benefit?

Yes. QLACs can include a return-of-premium death benefit or a joint life option for a spouse.

What if interest rates rise after I buy?

Your payments stay the same. Buying in stages helps you catch some of a rise.

Is there a free-look period?

Most states give a short window after purchase to cancel for a refund. The length varies by state.

Your next step

Get a quote at /quote/ to see illustrative income for your age.

Education, not advice. Examples are illustrative. VeraLife.ai is not a registered investment adviser, broker-dealer or insurance agency.