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single-premium deferred annuity

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Single-Premium Deferred Annuity (SPDA)
An IRA-like annuity into which an investor makes a lump-sum payment that is invested in either a fixed-return instrument or a variable-return portfolio, which is taxed only when distributions are taken.
single-premium deferred annuity
A deferred annuity purchase having one lump-sum premium payment. Single-premium deferred annuities offer the tax benefit of increasing in value tax-free until distribution takes place. Thus, an investor could pay a large single premium, have the investment build up free of taxes for a period of years, and then receive partially taxable annuity payments at retirement. A single-premium deferred annuity is more flexible than an individual retirement account, but unlike contributions by some individuals to an IRA, a premium to purchase a deferred annuity is not deductible for tax purposes. Compare periodic purchase deferred contract.


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