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Joint and Survivor Annuity: Guide (2023)

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A joint and survivor annuity is a type of annuity which provides income payments to two people simultaneously, usually married couples. This differs from single life annuities which only pay income to one individual.

Definition and Overview

  • Joint and survivor annuities provide income to both spouses or beneficiaries.
  • There are two participants: the primary annuitant and the secondary annuitant (spouse or designated beneficiary).
  • Payout amounts are determined based on factors such as age, gender, and selected payout options.
  • Payments continue to the surviving spouse or designated beneficiary after the death of the primary annuitant.
  • Individual annuity payments may be reduced to accommodate the survivor benefit.
  • Joint and survivor annuities typically have limited flexibility in payout options compared to other annuities.
  • The annuity payments are generally taxable income for the recipient.
  • Considerations such as the age, health, and longevity of the participants impact the payout amounts and duration of the annuity.

Joint and survivor annuities allow two people to receive an annuity payout as long as both individuals remain alive, making this option appealing for couples who wish to ensure that their spouse will still have some form of financial security even after their passing.

An annuity is a contractual financial product offered by an insurance company. It can create a one-time payment or multiple payments over time. The person who gets the money is called the annuitant. An annuity owner usually names one or more beneficiaries in their contract and pays money into the contract from their own resources; additionally, the annuitant and beneficiary can determine when payments will occur and who will receive them.

Joint and survivor annuities offer many advantages to surviving spouses of those who pass on, most notably protecting them from prematurely spending their retirement savings. It offers monthly income payments as long as the surviving spouse lives – this is particularly valuable given that men tend to live shorter lifespans than women.

How Joint and Survivor Annuities Work

Joint and survivor annuities provide income guarantees to two annuitants: typically the primary annuitant (who usually includes his/her spouse or partner) and the secondary annuitant. Should one die before the other, regular payments will continue for both annuitants.

Various options are available regarding the percentage of annuity payments that will go to the surviving annuitant after one dies. As expected, higher guarantees go directly to them while initial payments decrease correspondingly; for instance, 75% joint and survivor annuity offers the highest initial payment amount but will result in 50% decreased payments after their death.

Joint and survivor annuities can provide couples with security in retirement even if one spouse passes before the other. Before making your decision, it’s wise to thoroughly research all available options and consult with an advisor – SmartAsset’s free tool can connect you with expert financial advisers that can explain how these annuity types work and fit into your retirement plan.

Advantages of Joint and Survivor Annuities

  1. Continued Income for Surviving Spouse or Beneficiary: Joint and survivor annuities provide a reliable stream of income to the surviving spouse or beneficiary even after the death of the primary annuitant.
  2. Protection Against Longevity Risk: With joint and survivor annuities, the risk of outliving the retirement income is reduced, as the annuity payments continue for as long as either spouse is alive.
  3. Potential Tax Benefits: In some cases, joint and survivor annuities may offer tax advantages, such as a stepped-up basis for the surviving spouse, which can help minimize tax liabilities.
  4. Estate Planning Advantages: Joint and survivor annuities can be an effective estate planning tool, allowing the annuitant to provide for their spouse or designated beneficiary after their passing.
  5. Peace of Mind: Knowing that the surviving spouse or beneficiary will have a guaranteed source of income can provide peace of mind and financial security during retirement.
  6. Spousal Support: Joint and survivor annuities ensure that the surviving spouse can maintain their lifestyle and cover essential expenses, even if they have limited financial resources of their own.
  7. Protection Against Inflation: Some joint and survivor annuities offer inflation-adjusted payouts, which can help preserve the purchasing power of the annuity payments over time.
  8. Potential for Higher Payouts: Joint and survivor annuities generally provide higher payout rates compared to single-life annuities due to the extended period of payment and increased risk assumed by the insurance company.

An annuity designed as a joint and survivor policy offers several key advantages, primarily peace of mind for married retirees as they plan for long-term financial security.

Annuities provide more secure income streams for the surviving annuitant due to extended payment terms; tax liabilities are spread out over more time, which could help those in a higher tax bracket have reduced overall taxes.

Prior to making any definitive decisions about an annuity of this sort, it’s wise to carefully weigh its advantages and disadvantages before making a choice. Consulting a financial advisor may help you assess if this option fits with your retirement planning strategy for both of you.

Considerations and Limitations

  • Initial payout amounts may be lower compared to single-life annuities.
  • Individual annuity payments may be reduced to accommodate the survivor benefit.
  • Choosing a joint and survivor annuity locks in the chosen beneficiary.
  • Annuities may not be suitable for individuals with no dependents or beneficiaries.
  • The longevity of both spouses or beneficiaries impacts the overall value of the annuity.
  • The age and health of participants affect the payout amounts and cost of the annuity.
  • Joint and survivor annuities may have fewer options for customization or flexibility compared to other annuity types.
  • It’s important to carefully evaluate and compare different joint and survivor annuity options to select the most suitable one for your specific needs.

Although annuities offer peace of mind, tax advantages, and customizable features, it’s essential that they match your retirement goals and needs before selecting one.

Joint and survivor annuity payments typically fall shorter than single-life annuities due to being shared among two people instead of just one, plus being taxed as taxable income when taken out; however, annuity payments tend to be taxed at a lower rate than other forms of taxable income.

Comparison with Other Annuity Options

AspectJoint and Survivor AnnuitySingle-Life Annuity / Lump-Sum WithdrawalPeriod Certain Annuity
DefinitionProvides income to both spouses or beneficiariesProvides income to an individual or allows for a one-time lump-sum withdrawalProvides income for a specific period
Lifetime IncomeYesYesNo
Continuation of PaymentsYes, to surviving spouse or beneficiaryPayments cease upon death or withdrawalPayments cease after specified period
Potential Reduction in Individual PaymentsYesNoNo
Survivor BenefitYesNoNo
Flexibility in PayoutLimitedYesNo
Tax ImplicationsTaxable income for recipientTaxable income for recipientTaxable income for recipient
Estate PlanningProvides for spouse or beneficiary after deathN/AN/A
Longevity Risk CoverageYesNoNo

Case Studies and Examples

Joint and survivor annuities make sense for married couples with similar life expectancies, but are less suitable as investments for young people who may benefit more from other investments, such as exchange-traded funds (ETFs).

An annuity owner or participant funds their annuity with either a lump sum payment or series of payments over time, then enters into its accumulation phase – growing tax deferred until such time as they decide to start receiving regular income payments – typically around retirement age.

At the death of an annuitant, payments continue to the surviving annuitant for either a predetermined or guaranteed number of years before either stopping altogether or making one lump sum payment to beneficiaries.

Joint & survivor annuities are an attractive retirement planning solution for couples who want the assurance of receiving income after both spouses have passed on. Although payouts typically fall shorter than single life annuities, they offer peace of mind.

Factors to Evaluate When Selecting a Joint and Survivor Annuity

  1. Age and Health of Participants: Consider the life expectancy and health condition of both the primary annuitant and the secondary annuitant to determine the appropriate payout duration.
  2. Financial Goals and Objectives: Assess your financial goals and objectives, such as income needs and desired legacy, to ensure the joint and survivor annuity aligns with your long-term plans.
  3. Duration of Joint and Survivor Annuity: Decide on the duration of the joint and survivor annuity, whether it should cover the lifetime of the surviving spouse or a predetermined period.
  4. Payout Amount and Schedule: Evaluate the payout amount and schedule offered by different annuity providers, ensuring they meet your income requirements and provide sufficient financial support.
  5. Survivor Benefit Percentage: Consider the percentage of the survivor benefit offered by the annuity, as it affects the amount the surviving spouse or beneficiary will receive after the primary annuitant’s death.
  6. Cost and Fees: Compare the costs and fees associated with different joint and survivor annuities, including any administrative charges or mortality expenses.
  7. Insurance Company Ratings: Research and assess the financial strength and ratings of the insurance companies offering joint and survivor annuities to ensure stability and reliability.
  8. Professional Guidance: Seek guidance from a financial advisor or annuity specialist who can provide personalized advice based on your specific financial situation and goals.

An annuity can be an ideal retirement income security option for couples looking to secure their futures together, although selecting the appropriate type will depend on your unique situation and individual life expectancies. Working with a financial advisor, couples should establish a retirement budget and estimate their income needs before selecting their annuity type.

Selecting a joint-survivor annuity may depend upon other sources of retirement income such as pension benefits, savings and financial wealth. People who rely heavily on nonpension income tend to opt less often for this annuity than those already comfortably wealthy.

Consider whether or not your surviving spouse can afford funeral and burial expenses when selecting an annuity plan. If the costs are significant, selecting a lump sum payout option could make more sense than choosing another form. It is essential to evaluate all possible types of annuities to find one best suited to you and your family’s needs.


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