Single Premium Deferred Annuity (SPDA) with Inflation Protection

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A single premium deferred annuity (SPDA) with inflation protection allows you to deposit a one-time premium and grow your retirement savings on a tax-deferred basis until a future date, while also protecting against the rising cost of living. At Diversified Insurance Brokers, we help clients compare SPDA options that include inflation riders or cost-of-living adjustments (COLAs), ensuring your income keeps pace with inflation once distributions begin.

How a Single Premium Deferred Annuity (SPDA) with Inflation Protection Works

With a standard SPDA, you pay a lump sum premium and allow the contract value to grow tax-deferred until you’re ready to take income. Adding inflation protection means your future payout stream will increase annually, either by a fixed percentage or linked to the Consumer Price Index (CPI). This helps safeguard your retirement income from losing value due to inflation over time.

Why Add Inflation Protection?

Even modest inflation can erode the value of fixed payments during a long retirement. By selecting an SPDA with inflation protection, your income is designed to rise as living costs increase. While starting payments may be lower than a standard deferred annuity, the long-term protection against inflation can provide more stability and security throughout retirement.

Who Should Consider an SPDA with Inflation Protection?

This type of annuity may be a strong fit if you:

Have savings you want to grow tax-deferred before converting to income
Plan to retire in 5–15 years and want predictable future income
Are concerned about inflation eroding your purchasing power
Prefer guaranteed income without market risk

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Compare today’s top deferred annuity rates with inflation protection and see how they can support your retirement goals.

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Why Work With Diversified Insurance Brokers?

Diversified Insurance Brokers has been serving families since 1980 with unbiased, carrier-neutral advice. Our advisors compare SPDA options from more than 75 A-rated carriers, helping you find the right balance of growth potential, guaranteed income, and inflation protection. We make sure your annuity solution aligns with your long-term retirement income needs.

Learn more about other annuities offered through Diversified Insurance Brokers.

SPDA with Inflation Protection — FAQs

What is a Single Premium Deferred Annuity (SPDA)?

An SPDA is a contract where you make one lump-sum deposit that grows tax-deferred until a later date.
You can take withdrawals or convert the value into guaranteed income in the future.

How does inflation protection work on an SPDA?

Inflation protection can be built in as a rider or product feature that increases your credited rate or income payments
by a set percentage (e.g., 1–3% annually) or by linking increases to an index, helping your purchasing power keep pace with rising costs.

Is the inflation increase guaranteed or index-based?

It depends on the product. Some riders offer a guaranteed annual step-up (fixed COLA), while others apply increases based on an external index
(which may rise, stay flat, or have caps/floors). Review whether increases are guaranteed, formula-driven, or capped.

What’s the trade-off for adding inflation protection?

You typically accept a lower initial payout/crediting rate or pay a rider fee to get future increases.
Consider whether the long-term inflation adjustments outweigh the lower starting value.

How are earnings credited in an SPDA?

Depending on the annuity, earnings may be credited at a fixed rate or tied to an index with caps/spreads/participation rates.
Indexed SPDAs protect principal from market losses while limiting upside via those terms.

What liquidity do I have before income starts?

Most SPDAs allow limited penalty-free withdrawals each year (often up to 10%) after the first contract year.
Larger withdrawals during the surrender period may incur surrender charges and market value adjustments (MVA), if applicable.

How do taxes work on an SPDA?

Growth is tax-deferred. Withdrawals are generally taxed as ordinary income on gains and may be subject to a 10% federal penalty if taken before age 59½.
Non-qualified and qualified (IRA) contracts follow different rules—coordinate with your tax professional.

What happens if inflation is low—or negative?

With fixed COLA riders, increases occur regardless of the actual inflation rate. With index-based riders, increases may be smaller or zero in low-inflation years,
and some contracts include floors to prevent negative adjustments. Check the rider’s cap and floor language.

Are there fees for inflation protection riders?

Many contracts charge a rider fee (often a small annual percentage of the account or benefit base) or reduce the initial rate/payout in exchange for future increases.
Compare total costs to the value of the protection over time.

How do I turn my SPDA into lifetime income?

You can annuitize (convert the contract value to guaranteed payments) or use an optional income rider.
If your annuity includes inflation protection, payments may step up annually per the rider terms after income begins.

Is my principal protected?

Fixed and indexed SPDAs protect principal from market losses when held per contract terms.
Your guarantees are backed by the issuing insurer’s claims-paying ability—review carrier ratings and understand state guaranty association protections as applicable.

How do I compare SPDA options with inflation protection?

Look at: initial rate or payout, increase method (fixed vs index-based), caps/floors, rider fees, surrender schedule/MVA, free-withdrawal terms, carrier ratings,
and projected income over time under different inflation scenarios.

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About the Author:

Jason Stolz, CLTC, CRPC, is a senior insurance and retirement professional with more than two decades of real-world experience helping individuals, families, and business owners protect their income, assets, and long-term financial stability. As a long-time partner of the nationally licensed independent agency Diversified Insurance Brokers, Jason provides trusted guidance across multiple specialties—including fixed and indexed annuities, long-term care planning, personal and business disability insurance, life insurance solutions, and short-term health coverage. Diversified Insurance Brokers maintains active contracts with over 100 highly rated insurance carriers, ensuring clients have access to a broad and competitive marketplace.

His practical, education-first approach has earned recognition in publications such as VoyageATL, highlighting his commitment to financial clarity and client-focused planning. Drawing on deep product knowledge and years of hands-on field experience, Jason helps clients evaluate carriers, compare strategies, and build retirement and protection plans that are both secure and cost-efficient.