If the low costs of a DIA does not lead to better benefits than a FIA, how about a low cost SPIA in comparison with a FIA?
As FIAs are deferred income annuities, while SPIAs are immediate annuities, it would appear that comparing the two types of annuities is like comparing apples and oranges.
However, for retirement income planning, if clients should need certain amount of income at a particular time, such as age 65, the income goal can be accomplished through the use of either a SPIA or a FIA. What we would compare is the benefits from a FIA and a SPIA at age 65.
The policy parameters for the SPIA and the FIA for Benefit Comparison B are as follows.
a. Policy Parameters For The FIA
1. The same FIA in Benefit Comparison A.
2. The benefit base becomes $200,000 at age 65, as it has grown from $123,000 at age 55 as a result of the interest bonus of 5 percent compound over 10 years.
3. The payout schedule is the same as in Benefit Comparison A.
b. Policy Parameters For The SPIA.
1. The policy begins at age 65 and the payout also begins at 65.