Joint And Survivor Annuity

A joint and survivor annuity is an insurance product that continues regular payments as long as one annuitant is alive. A joint and survivor annuity must have two or more annuitants and married couples often purchase them to guarantee a surviving spouse receives a regular income for life. Annuities are generally used to provide a steady income during retirement.

With a joint and survivor annuity, insurers typically reduce monthly payments by one-third or one-half for the surviving annuitant. For example, Sarah and Paul’s joint and survivor annuity pays them $6,000 monthly. When Sarah dies, Paul receives $2,000 to $3,000 monthly. The terms of the annuity payout depend on the source of the funds and options chosen before payments begin.

When purchasing an annuity from an insurance company, the company decides what income payment options it will provide, including single or joint and survivor options. However, employer-sponsored qualified plans must make the joint and survivor annuity the automatic option for couples married at the time of retirement. An individual may receive a single-life annuity only with written approval from the primary annuitant’s current or former spouse.

If an annuity purchased through an insurance company has an installment refund provision, the company must pay out an amount equal to the original value of the annuity. If both annuitants die before monthly payments have exceeded the principal, monthly payments continue going to the annuitants' estate or to a named beneficiary. Also, if an annuity has a cash refund provision, and both annuitants die before monthly payments have exceeded the principal, the balance of the principal goes to the annuitants’ estate or to a named beneficiary in a lump sum.

In July 2016, Rep. Joseph Crowley, D-N.Y. introduced legislation to improve access to retirement savings plans in the workplace. The Secure, Accessible, Valuable, Efficient Universal Pension Accounts, or SAVE UPs Act, would require small businesses of 10 or more employees without a current retirement plan to enroll each employee in an individualized retirement account. Employees could defer up to 3 percent of annual income into their accounts. The amount would increase by 0.5 percent annually and stop at 5 percent. Benefits would come in the form of a qualified joint and survivor annuity as defined under the Employee Retirement Income Security Act. Participants could draw benefits after age 62 but before age 70.