Joint and Survivor Annuity

A joint and survivor annuity is an insurance contract designed for couples that guarantees a regular lifetime income so long as either spouse is alive. It differs from a single-life annuity, which stops payments when the annuitant dies.

How it works

You pay a premium (a lump sum or series of premiums) to an insurance company or receive the option through an employer-sponsored plan.
The insurer converts that consideration into regular payments for the lifetime of the annuitants.
Payments depend on:
the amount invested,
the ages and life expectancies of both individuals,
whether the annuity is fixed (steady payments) or variable (payments linked to investment performance),
the chosen survivor benefit level (how much continues to the surviving spouse).
Survivor benefit choices typically reduce the initial payment. A common structure lowers the survivor’s payment by 30%–50%, but you can elect a lower initial payment that continues unchanged to the survivor.

Key decisions to consider

Payment type: fixed vs. variable.
Survivor percentage: full survivor benefit vs. partial reduction.
Refund provisions: whether any remaining principal is paid to beneficiaries if both die early.
Fees and commissions: annuity fees average about 2.3% of the annuity’s value and can be higher for complex products.

Employer-sponsored annuities

Employers may offer single-life or joint-and-survivor options.
For qualified employer plans, the joint-and-survivor annuity is often the default for married participants. A single-life option generally requires the spouse’s written, notarized consent.

Refund provisions

Installment refund: If both annuitants die before total payments equal the original principal, the insurer continues monthly payments to the estate or a named beneficiary until principal is returned.
Cash refund: The remaining principal balance is paid in a lump sum to the estate or beneficiary.

Advantages

Provides longevity protection for both spouses and reduces the risk that one spouse outlives retirement income.
Particularly valuable when spouses have different life expectancies and one is likely to survive many years beyond the other.

Disadvantages

Generally poor choice for younger couples because returns are low relative to market investments and fees are comparatively high.
Immediate annuities typically make more sense around or after traditional retirement ages (commonly after age 65).
Changing family patterns and similar life expectancies between spouses (e.g., partners of similar age) can reduce the relative benefit of the joint feature.
Fees and complexity can erode value, especially for variable or rider-enhanced contracts.

When it may be appropriate

Couples close to or in retirement who prioritize secure, predictable lifetime income and want to protect a surviving spouse from losing income after the first death.
When longevity risk (the risk of outliving savings) is a primary concern and other estate or liquidity needs are addressed.

Bottom line

A joint and survivor annuity is a retirement-income tool that trades upside potential for guaranteed lifetime payments that continue to a surviving spouse. It can be a prudent choice for couples who prioritize income security and longevity protection, but costs, survivor options, and individual circumstances (age, life expectancy, tax and estate plans) should be carefully evaluated before purchasing.