Legal Definitions - SPDA

SPDA stands for single-premium deferred annuity. An annuity is an obligation to pay a stated sum, usually monthly or annually, to a stated recipient. SPDA is a type of annuity where a party pays a lump-sum premium in exchange for receiving a specified sum at a future date. The income earned on the investment is tax-free until it is withdrawn.

For example, John purchases an SPDA by paying a lump sum of $100,000 to an insurance company. The insurance company promises to pay John a specified sum at a future date, say 10 years from now. The income earned on the $100,000 investment is tax-free until John withdraws it.

SPDA is a savings account with an insurance company or investment company, usually established for retirement income. Payments into the account accumulate tax-free, and the account is taxed only when the annuitant withdraws money in retirement.