An immediate income annuity (SPIA) turns a lump sum into guaranteed monthly income starting within 12 months. A deferred income annuity (DIA) locks in a larger payment that begins 5 to 15 years later. The right choice depends on whether you need a paycheck replacement today or longevity protection against running out of money later.
If you are deciding how to turn savings into steady income, schedule a consultation with Crosby Insurance Group. We help retirees across Charleston and the Lowcountry compare income options and see what each one would actually pay.
SPIA vs. DIA: Feature Comparison
| Feature | Immediate Income Annuity (SPIA) | Deferred Income Annuity (DIA / QLAC) |
|---|---|---|
| Payout start date | Within 1 to 12 months | 2 to 15+ years in the future |
| Primary objective | Replace salary, fill an immediate income gap | Longevity protection, reduce late-life risk |
| Payout size per $100k | Standard payout rate | Higher payout rate from deferral credits |
| RMD treatment | Standard qualified IRA rules apply | Can qualify as a QLAC, up to $210,000 in 2026 |
| Liquidity | Principal locked once income begins | Principal locked once income begins |
What Is an Immediate Income Annuity (SPIA)?
You hand an insurance company a lump sum, and payments begin right away, usually the following month. The payment amount is fixed at purchase and continues for life, for a set term of years, or for a combination of both.
This is the simplest form of guaranteed income. You trade liquid access to the principal for a predictable payment that arrives regardless of market swings and regardless of how long you live.
What Is a Deferred Income Annuity (DIA)?
A deferred income annuity uses the same lifetime structure with one difference: you choose an income start date years in the future. Because the insurer holds the money longer and expects to make fewer total payments, each monthly check is larger than what the same premium would buy today.
Someone retiring at 65 might set income to begin at 80, covering the years when other savings may be running low and care costs may be rising.
Longevity Protection and the $210,000 QLAC Strategy
Many Lowcountry retirees use a DIA to cover later-life expenses such as in-home care. Held inside a traditional IRA or 401(k), a deferred income annuity can qualify as a qualified longevity annuity contract (QLAC).
- 2026 IRS limit. Up to $210,000 per person can go into a QLAC, a figure set under SECURE 2.0 and indexed for inflation. A married couple can each use their own limit.
- RMD benefit. Money inside a QLAC is excluded from required minimum distribution calculations until payments begin, which can start as late as age 85. That lowers taxable income during the deferral years.
- The trade. QLAC purchases are effectively permanent, so this works only with money you will not need before payments start.
How Are Annuity Payments Taxed in South Carolina?
Tax treatment depends on how the contract was funded:
- Qualified annuities bought with IRA or 401(k) money: payments are taxed as ordinary income.
- Non-qualified annuities bought with after-tax savings: only the earnings portion of each payment is taxable, with the rest treated as a return of your own principal under the IRS exclusion ratio.
South Carolina retirement tax deductions
- No state tax on Social Security. South Carolina does not tax Social Security benefits.
- Retirement income deduction. Residents under 65 can deduct up to $3,000 of qualifying retirement income each year. At 65 and older, that rises to $10,000 per taxpayer.
- Age 65+ deduction. Residents 65 and older can claim an additional $15,000 deduction against any taxable income, reduced dollar for dollar by any retirement income deduction claimed.
The South Carolina Department of Revenue publishes the current rules, and the deductions interact, so confirm the details with your tax advisor before planning around them.
How Safe Is the Guarantee?
An annuity payment is only as dependable as the company behind it, so compare carrier ratings from A.M. Best and S&P before comparing payouts.
If an authorized carrier becomes insolvent, the South Carolina Life and Accident and Health Insurance Guaranty Association provides coverage for annuity benefits up to limits set by state law, per contract owner, per insurer. Those limits are capped, which is another reason to look at financial strength first and to consider splitting large amounts between carriers.
Which Annuity Fits Your South Carolina Retirement Plan?
Choose an immediate income annuity if you are retiring now, want to bridge the years before claiming Social Security at 70, and want guaranteed coverage for core costs such as housing, property taxes, insurance, and Medicare premiums.
Choose a deferred income annuity or QLAC if you are in your 50s or early 60s, have enough income for now, want to reduce IRA required minimum distributions, or want larger guaranteed payments starting around age 80 to protect against outliving your savings.
Many retirees use both, covering today’s income gap with one contract and later-life risk with another.
What Payout Option Should You Choose?
Each guarantee lowers the monthly payment, so pick the one your household needs rather than the one that pays most on paper.
- Life only pays the highest monthly amount and stops at death.
- Joint and survivor continues to a spouse at a lower monthly amount, and is the usual choice for married couples.
- Period certain guarantees payments for a set number of years, so a beneficiary receives the remainder if you die early.
- Cash refund returns any unpaid portion of the premium to a beneficiary.
Where Do Indexed Annuities Fit In?
Income annuities are one option among several. Indexed annuities work differently, crediting interest based on an index while protecting principal from market losses, and many offer optional income riders that pay lifetime income while keeping an account value you can still see. Our article on recent SEC rule changes covers how these products are marketed and what to ask about caps, fees, and assumptions.
Which structure fits depends on whether you value the highest guaranteed payment, growth potential, or continued access to a balance.
Talk It Through With a Local Agent
Crosby Insurance Group has helped South Carolina residents plan retirement income since 1996, and our retirement planning team works with clients in Mount Pleasant, Summerville, and throughout the Lowcountry. Schedule a consultation and we will show you what immediate and deferred income would pay in your situation.
Frequently Asked Questions
Can I get my principal back once annuity income starts?
Generally no. Committing the principal in exchange for guaranteed lifetime income is the core trade-off, which is why most people annuitize only part of their savings and keep a liquid reserve for emergencies.
What happens to my annuity when I die?
It depends on the payout option. Life-only payments stop at death, joint and survivor payments continue to a spouse, and period certain or cash refund options pay a beneficiary the remaining term or premium.
Does South Carolina tax annuity withdrawals?
Qualified annuity payments are taxed as ordinary income, though the state’s retirement income deduction and the age 65+ deduction reduce the bill for many retirees. Payments from after-tax savings are only partly taxable.
How much can I put into a QLAC in 2026?
Up to $210,000 per person across all IRAs and qualified plans. A married couple can each use a separate limit.
Is an annuity worth it if I already have a pension?
Sometimes. If a pension and Social Security already cover your essential expenses, growth and liquidity may matter more than additional guaranteed income. That is worth mapping before you buy.
