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What is a Joint and Survivor Annuity?

Published on: Aug 05 2021
By Olivia Faucher

Simply put, an annuity is a long-term investment, issued by an insurance company, that is designed to prevent retirees from outliving their income. However, annuities can become complex because there are numerous special options available for an annuitant to add to his or her annuity contract. One such option is to make the annuity a joint and survivor annuity. Continue reading to learn what a joint and survivor annuity entails. 

What is a Joint and Survivor Annuity? 

A joint and survivor annuity is a specific type of annuity that is established for the benefit of two annuitants instead of one. Most commonly,  joint and survivor annuities are purchased by married couples who want to ensure that both spouses have secure lifetime income. When a couple sets up a joint and survivor annuity, the annuity makes monthly payouts for as long as one of the two spouses is alive. Both spouses have guaranteed lifetime income because the annuity will continue to make monthly payouts until both spouses die, regardless of who dies first. 

Joint and survivor annuities are also commonly called joint life annuities. 

A joint and survivor annuity makes sure either person will continue to receive monthly income for as long as it is needed. Some joint annuity plans include a third person, a beneficiary who may receive the remaining payouts if both spouses were to die early (before reaching the life expectancy that was determined by the insurance company). 

Since the payouts are being split between two people, the monthly payouts from a joint and survivor annuity will be smaller than the payouts from a single life annuity purchased with the same initial investment. Additionally, the payouts that the surviving spouse receives upon the death of their significant other may also be less than the amount that the annuitants received as a couple. Read the following example of a joint and survivor annuity to better understand this concept. 

Example of a Joint and Survivor Annuity:

John and Christine are a married couple who decided that it would be in their best interest to purchase a joint and survivor annuity. John and Christine purchase the annuity with a lump-sum premium investment of $150,000 when they are both 55 years old. They decide to defer the payouts until they reach the age of 70, and they decide that they would like their annuity to grow at a fixed interest rate. The couple also designates their daughter, Nicole, as the beneficiary of their annuity assets in the event that both spouses pass away before they reach their life expectancy (Christine’s life expectancy is 87, while John’s is 84).

Over the next 15 years, John and Christine’s initial investment grows according to their fixed interest rate. Once the couple is 70 years old, they begin to receive monthly payouts of $1,064. The payouts continue at this amount for the next 15 years, until John passes away at age 85. Upon his death, Christine continues to receive monthly payouts from the annuity. However, now the payouts have been decreased by ½ because John passed away. Christine continues collecting monthly payouts of $532 for the next 5 years until she passes away at age 90. Since both spouses reached their life expectancy, the insurance company does not owe anything to their daughter Nicole. 

Advantages of a Joint and Survivor Annuity:

  • Setting up an annuity with joint benefits ensures lifetime income for both spouses. Joint annuities provide peace of mind and ensure that the surviving spouse will be able to maintain his or her quality of life. 
  • Joint and survivor annuities can be customized. Investors can decide if they would rather defer their payouts or begin to receive them immediately, and investors must also decide if they want the annuity to have a fixed or variable interest rate. 

Drawbacks of Owning a Joint and Survivor Annuity:

  • Smaller monthly payout due to the fact that the money is being split between two people. Plus, the surviving spouse’s payouts are reduced upon the death of their significant other. 
  • Once an annuity is set up, the annuitant generally cannot alter its payout structure. This means that someone who sets up a joint and survivor annuity and later realizes that it is not ideal for them cannot switch it to be a single-life annuity or vice versa. 

Bottom Line

Whether or not a joint annuity is right for you and your spouse depends upon your needs and your retirement goals. It is important to consider both the benefits and the downsides that come with owning a joint and survivor annuity. Couples who are considering buying a joint and survivor annuity should consult with a financial professional about if that type of policy will be right for them. 

Special thanks in preparing this summary of “What is a Joint and Survivor Annuity?” goes to Bob Carlson, leader of the Retirement Watch advisory service and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets.



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