When a soon-to-be retiree would like to put off taking Social Security to allow those benefits to grow, some financial advisors will suggest a specific type of annuity to bridge the gap.
It's a conundrum faced by some pre-retirees: Full-time work soon will be behind them and they'll need income, yet they want to delay tapping Social Security for as long as possible to maximize those benefits.
Yet SPIAs, as they're called, generally are more straightforward than their brethren. They make up a fraction of annuities sold yearly — just $9.7 billion of $233.7 billion last year, according to the LIMRA Secure Retirement Institute. However, once you hand over the cash, and the short window to change your mind ends, you generally can't get your money back — except in the form of payments that you already agreed to.
Additionally, it's important to know the annuity's income will be taxed. If you use money from a tax-deferred account — say, an IRA or 401 — to fund a SPIA, you'll pay taxes on this income as you receive it over the length of the annuity contract.
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