What is a joint and survivor annuity, and how does it work?

You’ve built a life together — but how will you ensure your partner is cared for after you’re gone? Joint and survivor annuities are designed to provide income for you and your spouse and will continue providing even after one of you dies. Unlike single-life annuities, which stop regular payments after the annuitant's death, a joint and survivor annuity can provide an income for your loved one after you’re gone. Learn more about:

• How joint and survivor annuities work

• Your options for joint and survivor annuity payment structures

• Benefits and drawbacks of this annuity type

• How to purchase a joint and survivor annuity

What are joint and survivor annuities?

A joint and survivor annuity is a type of annuity that provides an income for two people while either one is alive. While commonly used for spouses, you may name a domestic partner, dependent, or other person as the joint annuitant.

Joint and survivor annuities are used to help provide a steady stream of income in retirement. If one of the annuitants dies, the annuity continues providing income to the surviving annuitant until their death. Considering 48% of American workers are concerned about their retirement funds lasting, joint and survivor annuities may ease that worry.¹

You can typically choose between a higher initial benefit, with a lower benefit paid to the surviving spouse, or a lower initial benefit that remains level after one partner’s death.

How a joint and survivor annuity works

To purchase a joint and survivor annuity, you'll need to fund it. If you want to start receiving income benefits right away, you can typically purchase it as an immediate annuity with a lump sum payment; for example, from a CD or IRA rollover.

If you want to defer income for some years you can use a lump sum for this as well, but choose to also make ongoing contributions. A fixed deferred annuity lets your money grow tax-deferred at a guaranteed rate of interest; if you want more growth opportunity – and are willing to accept investment risk – you can opt for a fixed index, RILA, or variable annuity.

Then, you'll designate primary and secondary annuitants and arrange for a payment schedule when you are ready to begin taking guaranteed income. Payments will begin and continue as scheduled in your annuity contract (usually monthly or annually) until the death of one annuitant. After that time, payments continue for the surviving annuitant but may be lower depending on the details of the annuity contract.

Plan options

With a joint and survivor annuity, you can typically customize various options, which may include:

• Immediate vs deferred: Immediate annuities pay out right away. With deferred annuities, you don’t begin receiving payments until a specified date in the future.

• Fixed vs. increasing payout: Decide whether payments remain fixed or change by a fixed percentage to keep up with inflation.

• Optional guarantee period: If both annuitants die during the guarantee period, a beneficiary can receive payments until the guarantee period ends.

Surviving spouse payout options

You can also choose how you want payments to change after the death of one spouse. Some options include:

• 100% joint and survivor annuity: With this option, payments remain level for the lifetime of both the annuitants.

• 50% or ½ joint and survivor annuity: A 50% joint and survivor annuity reduces the payments by half after any guarantee period when one annuitant dies.

• ⅔ joint and survivor annuity: This reduces the payments by 2/3 after any guarantee period when one annuitant dies.

In any case, the IRS requires that qualified joint and survivor annuities must pay between 50% and 100% of the payment amount to the survivor.²

Joint and survivor annuity hypothetical example

Michael and Jamie are both retired and wish to have a steady stream of income to help fund their lifestyle. They purchase a joint and survivor annuity, funding it with a one-time lump sum of $250,000, and select the 100% option with a 10-year guarantee period. Based on their age, purchase amount, life expectancy and other factors, payments are set at $1,000 per month. 

If either Michael or Jamie dies, the other receives $1,000 monthly. If both die within the 10-year guarantee period, their daughter Casey, (the named beneficiary) receives $1,000 monthly until the guarantee period ends, at which point payments stop altogether. 

Who should consider joint and survivor annuities?

Joint and survivor annuities can be well-suited to married couples who are relatively close in age or who have similar life expectancies. And generally speaking, annuity benefits are more appropriate for people at or near retirement age and those with a low tolerance for risk or a conservative investment approach.

Benefits of joint and survivor annuities

There are several reasons why people elect a joint and survivor annuity as part of their retirement plan:

• Predictable income: Annuity payments are reliable and guaranteed to continue.

• Lifelong payments: You or your spouse will continue to receive payments for the rest of your life.

• Support for the surviving spouse: This kind of annuity continues to provide payments to your spouse after you die, or to you after your spouse dies.

• Supplement other income: Joint and survivor annuities can be a useful complement to other retirement income, such as Social Security, or can augment a life insurance policy (or survivorship life insurance, which is a form of joint life coverage).

Drawbacks of joint and survivor annuities

Joint and survivor annuities may not be the right choice for your situation. Some disadvantages may include:

• Lower payments: Because the payments must cover both of you for your lifetimes, you’ll likely receive a lower payment with this annuity type than you would with a single-life annuity.

• Inflation risk: Unless (and even if) your payments adjust for inflation, your payments could lose value over time.

• Loss of access: Funds invested in an annuity are unavailable for other investment opportunities or expenditures.

• Reduced benefits in the event of early death: Because nothing in life is certain, there is a risk that you and your partner could both die before you’ve received the full value of your joint and survivor annuity.

Tax implications

As with any form of income, there are tax considerations to be aware of with joint and survivor annuities. These are affected by the way you fund the annuity, whether through pre-tax or post-tax money.

With joint and survivor annuities funded with pre-tax dollars, such as 401(k) money, taxes are deferred until you begin taking payments and are then assessed at your regular income tax rate.

With joint and survivor annuities funded with post-tax dollars, you'll generally only pay tax on the returns as they are withdrawn. An experienced financial professional can guide you to the right strategy when adding a joint and survivor annuity to your retirement portfolio.

Joint and survivor annuity vs. single-life annuity

Single life annuities cover only the life of one annuitant, as the name implies. This type of annuity does not cover your surviving spouse. However, monthly income payments are typically higher than with a joint and survivor annuity.

One more thing: a joint and survivor annuity is not the same as a jointly owned annuity

It’s important to understand that joint and survivor annuities are not the same as jointly owned annuities.

How to get a joint and survivor annuity

You can purchase a joint and survivor annuity from an insurance company that carries this product. You should consult with a trusted financial professional to help you find the right annuity for your needs, with the features and options that fit your financial goals.

Is an annuity right for your retirement goals?

Connect with a nearby financial professional who can help you decide.