Joint Annuities

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A joint annuity is one in which the annuity pays out over the lifetimes of either the primary annuitant or the joint annuitant. An annuity is a contract that pays a specified or continuous amount of money over a specified amount of time, including the lifetime of the individual.

An annuity is much like a loan in reverse in that the annuitant, or individual, pays a company a set sum of money and the company pays the sum back to the annuitant over time with interest.

How Joint Annuities Work

Generally an annuitant purchases an annuity to be paid for the remainder of that lifetime of that individual after retirement. However, riders can be attached to the annuity to include a joint annuitant or survivor annuitant. This joint annuitant usually receives payment from the annuity should the primary annuitant die. Some options for a joint annuity are:

• Joint & Survivor reducing on First or Either death: Full annuity payments are made as long as both the primary annuitant and the joint annuitant are alive. Once either the primary annuitant or the joint annuitant dies then a reduction in payments of up to 75% of the original are paid to the surviving annuitant until death.
• Joint & Survivor with period certain: Full payments are received until the death of either the primary annuitant or joint annuitant, after which payments are reduced. If, however, death occurs during a pre-determined period, full payments are received by the survivor until the period of time (for example a ten year period certain) has expired. Once the period certain has finished, reduced payments are made to the surviving annuitant.
• Joint & Survivor reducing only on death of primary annuitant: level payments are made for the term of contract provided the primary annuitant has not died. Upon death of the joint annuitant, payments are not reduced, however, if the primary annuitant should die, payments to the joint annuitant are reduced.
• Joint & Survivor with Installment Refund: Any Joint & Survivor annuity contract can contain an installment refund in which payments are generally reduced. In return, if both the primary annuitant and the joint annuitant die before the premium is repaid, the remaining premium is paid to the beneficiary in level annuity installments.
• Joint & Survivor annuity with cash refund: This is the same as the joint annuity with installment refund except instead of the beneficiary receiving the remainder of the premium in installments, it is paid in one lump sum.
• Adding a period certain to a joint annuity also allows the beneficiary to receive full credit and payments for the remaining premium should both the annuitant and joint annuitant die before the period certain has passed.

Most of the above riders are available for a full (100%) rider to the surviving annuitant or beneficiary or a reduced (50%-75%) payout to the surviving annuitant or beneficiary. If the joint annuity is chosen as a full payment of equal value to the surviving parties after the primary annuitant’s death, the payments will automatically be less during the primary annuitant’s life that those of an annuity that reduces after the primary annuitant’s death. Generally, payments during a period certain are also less than after the end of the period certain.

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