Joint And Survivor Annuities: The Annuity For Couples.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Understanding your annuity options is crucial when planning for retirement, especially for couples who need to ensure that both partners are provided for in their later years. Two popular choices are Joint and Survivor Annuities and the Joint Life Payout option on a Guaranteed Lifetime Withdrawal Benefit (GLWB). Depending on your financial goals and needs, both options offer unique benefits and drawbacks.

Key Takeaways:

  • A joint and survivor annuity guarantees a lifelong income for the participant and provides a survivor annuity for the spouse.
  • It is an ideal choice for retired couples who want fixed payments with low fees and simplicity.
  • The Joint Life feature on a guaranteed lifetime withdrawal benefit ensures that the withdrawal benefit extends for the lifetime of both spouses. Any remaining balance is passed down to a beneficiary as a lump sum death benefit.
  • Joint life payouts on a GWLB are also fixed payments, but they give you more control over your money as they do not require annuitization and the opportunity to earn interest on your money through the market; however, that trade-off does come with higher fees.
Joint And Survivor Annuities

What is a Joint and Survivor Annuity?

A joint and survivor annuity is an insurance product specifically designed for retired couples who seek a reliable and guaranteed monthly income that will continue as long as either spouse lives. Unlike a single-life annuity that ceases payments upon the annuitant’s death, this type of annuity ensures that the surviving spouse continues to receive income.

Upon the death of one partner, the annuity continues to pay out to the surviving spouse. The percentage of the continuing payment after the first death can vary, typically ranging from 50% to 100% of the original payment. The main advantage of this type of annuity is the assurance that your spouse will continue to receive income after your death, which makes it a popular choice for retirement income planning.

Key Features of Joint and Survivor Annuities:

  • Lifetime Income: Payments are guaranteed for the life of both annuitants.
  • Continuity: Upon the death of one annuitant, payments continue to the survivor.
  • Flexibility in Payment: You can often choose the percentage of the benefit that continues to the surviving spouse.
  • Tax Advantages: Part of each payment can be considered a return of principal, potentially reducing tax liabilities.
Joint Life Annuity

Joint Life Payout on a Guaranteed Lifetime Withdrawl Benefit Annuity

A joint life payout with GLWB is an alternative to traditional annuitization found in joint and survivor annuities. GLWB stands for Guaranteed Lifetime Withdrawal Benefit, which is an add-on to variable annuities or fixed-indexed annuities. It allows you to withdraw a certain percentage of your annuity’s value each year, guaranteed for life.

100 Joint And Survivor Annuity

Key Features of Joint Life Payout on a GLWB:

  • Withdrawal Flexibility: You can withdraw a set percentage of the annuity’s value each year.
  • Market Participation: Opportunity to earn interest in the underlying investments with protection against market loss.
  • Continuation for Surviving Spouse: Payments remain constant and continue for the life of the surviving spouse.
  • No Annuitization: By not annuitizing, you retain control over your money.
Joint Life Payout On A Glwb

Comparing Joint and Survivor Annuities with Joint Life Payout

While both options aim to provide financial security for couples, there are several differences to consider:

  1. Market Participation: Joint life payouts with GLWB allow your investments to participate in the market, potentially increasing the value of your annuity through interest earned. Unlike fixed joint and survivor annuities, GLWB offers the opportunity to benefit from market upswings while protecting against downturns through a guaranteed withdrawal amount.
  2. Liquidity and Flexibility: GLWB provides more liquidity than traditional joint and survivor annuities. You have the option to withdraw sums within limits without fully annuitizing your investment, thus retaining access to a portion of your funds.
  3. Fees and Complexity: Joint and survivor annuities offer a guaranteed income with simplicity and limited fees, as your payments are predetermined. Joint life payouts with GWLB have higher fees due to the market participation. Also, depending on the annuity, the market it is tied to can be complex.
  4. Death Benefits: One significant advantage of GLWB is the possibility of leaving a lump sum death benefit to heirs, which is not typically available in a traditional joint and survivor annuity.
  5. Payment Flexibility: GLWB allows you to start or stop withdrawals and does not require the complete annuitization of your funds. This feature can be particularly valuable if your financial needs change over time.
Joint And Survivor Annuities Vs. Joint Life Payout On A Glwb

Conclusion

We typically recommend the joint life payout option with a GLWB for several reasons. It is essentially the same as a 100-pay joint and survivor annuity, but it provides the opportunity to earn interest, gives you more liquidity, provides a lump sum death benefit to a beneficiary after both parties have passed, and allows you to stop withdrawal payments should your financial situation change. Once annuitized, a joint and survivor annuity does not allow you these options. For those reasons a joint life payout as part of a GLWB is our choice.

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Frequently Asked Questions

What is the difference between a joint life payout and a joint and survivor annuity?

They both provide income for the duration of both spouses’ lives. Joint and survivor annuities can be 100 pay, 50 pay, or 75 pay. These determine how much the surviving spouse receives. In a joint life payout, the amount stays constant. You also have the ability to earn interest on your funds and retain liquidity by not annuitizing.

What is a 50% joint and survivor annuity?

A 50% joint and survivor annuity is an insurance policy that pays out an income to two people, typically a married couple, during their retirement. The payments continue until both individuals have passed away. The payments will be reduced by 50% when the first spouse dies.

What is a 100% joint and survivor annuity?

A 100% joint and survivor annuity is an insurance policy that pays out an income to two people, typically a married couple, during their retirement. The payments continue until both individuals have passed away. The payments will not be reduced when the first spouse dies.

What is a 75% joint and survivor annuity?

A 75% joint and survivor annuity is an insurance policy that pays out an income to two people, typically a married couple, during their retirement. The payments continue until both individuals have passed away. The payments will be reduced by 25% when the first spouse dies.

What is a survivor annuity benefit?

A survivor annuity benefit is a financial provision ensuring continued annuity payments to a designated beneficiary, usually a spouse, after the death of the annuitant.

What is a waiver of joint and survivor annuity?

A waiver of joint and survivor annuity is a formal relinquishment of the right to receive a joint and survivor annuity, typically chosen by spouses in favor of alternative benefit options.

Are joint and survivor annuities offered in employer-sponsored plans?

Yes, joint and survivor annuities are often offered as the default option for couples married at the time of retirement in employer-sponsored qualified plans.

What is a QJSA?

A Qualified Joint and Survivor Annuity (QJSA) is a type of retirement payout option typically found in company pension plans. It provides a lifetime income to the retiree, and after their death, it continues to provide a percentage of the original amount to the surviving spouse. The percentage depends on the pension plan’s terms, but it’s commonly 50% to 100% of the original payment. This ensures that the spouse receives financial support after the retiree’s death.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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