SPIAs Versus Portfolio Withdrawals
Two Different Income Tools
As you decide how your retirement resources will support your spending, it helps to understand that contractual income and portfolio withdrawals address different risks and may be used separately or together.
What a SPIA can emphasize within your plan
If you use a fixed SPIA, you are placing greater emphasis on predictable contractual income and protection against the financial risk of living a very long time. Your payments do not depend on current market performance, although your purchasing power may decline over time unless you select an increasing-payment option.
What a diversified portfolio can preserve for you
When you retain assets in a diversified portfolio, you preserve ownership, access, and the potential for long-term growth, while also accepting that your withdrawals will remain exposed to market returns, withdrawal rates, inflation, and the uncertainty of how long your retirement may last.
What to compare beyond the initial payment
As you compare the two approaches, the highest quoted payment tells only part of the story, because your liquidity needs, inflation exposure, taxes, survivor needs, legacy goals, insurer strength, investment risk, and personal comfort with uncertainty can all affect which structure is more appropriate for you.
How the two approaches may work together
Depending on your circumstances, you may choose to support some essential expenses with dependable income while keeping investments and cash available for discretionary spending, inflation, emergencies, and legacy, creating a coordinated structure that can be reviewed as part of your overall retirement-income plan.
Frequently Asked Questions
Which approach may produce more income for you?
Your answer will depend on age, interest rates, payout options, market returns, longevity, and the withdrawal method, so a larger initial payment by itself does not establish which approach is more appropriate.
Can your portfolio withdrawals be guaranteed?
No. Your portfolio withdrawals are supported by the assets you own and their market performance rather than by an insurance guarantee.
Can you combine the two approaches?
Yes. Depending on your plan, you may combine contractual income with liquid investments and reserves so that different resources serve different purposes.
Annuities are insurance contracts intended for retirement or other long-term needs. Contractual guarantees are based on the claims-paying ability of the issuing insurance company. Annuity payments and available features vary by contract. Annuities may have limited or no liquidity after annuitization. This material is intended for general informational and educational purposes and is not a recommendation for any specific individual or situation. Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation.