Do you remember the days when you could walk across the stage at your high school graduation and, the very next day, walk from local business to local business and count on finding a solid job that would offer you insurance and benefits, including a pension plan? Do you remember when you could put in 30 years with a company and receive a full retirement pension? For most investors, that is a bygone era. Fortunately, there are investment options that give you that same sense of security and a firm guarantee when it comes to your retirement income.

rules for joint and survivor annuitiesAn annuity can guarantee a set monthly income amount for your retirement until the day you die. However, if you are married, you may be wondering how to protect your spouse financially as well. What happens to your joint income should one of you pass before the other? What are the joint and survivor annuity rules that you should know and understand?

Explore how, with the help of a trusted financial advisor, you can gain back that once common sense of security and peace of mind by making an educated decision when purchasing annuities that will complement your unique retirement situation—and guarantee financial stability for both you and your spouse. While many of today’s state of the art annuities offer lifetime income riders for the benefit of the annuitant and surviving spouse, this discussion will focus on the annuity options available as part of the basic annuity contract common to most annuities available today and not the riders.

The Pros and Cons of Joint and Survivor Annuity Rules

In order to make an educated investment decision when purchasing an annuity, you must work with a trusted and experienced advisor; however, you should also know some of the pros, cons, and benefits when it comes to joint and survivor annuity rules. You wouldn’t purchase the first car you happen to see on the lot. Instead, you would do your research and determine what type of vehicle meets your lifestyle requirements. Investing in a joint and survivor annuity is no different.

Let’s explore some of the benefits, and downsides, when it comes to your joint or survivor annuity options:

  • Joint and survivor annuity benefits: In the event of your death, your survivor will be able to maintain their lifestyle by continuing to receive the monthly installment payments that you both will grow accustomed to throughout your retirement together.
  • Joint and survivor annuity downsides: The downside to the joint and survivor annuity option is that you will give up a portion of your monthly income in order to ensure that the regular payment installments won’t end upon your death. You will need to sacrifice now in order to benefit later.
  • Single life annuity benefits: The greatest benefit of purchasing a single life annuity is that you will receive higher installment payouts This equates to more money to enjoy in your retirement years, but no income for your survivor after your death.
  • Single life annuity downside: If you choose the single life annuity option, most annuities will not allow you to change your payout option once you have begun to receive payments.

If you want to ensure the financial security of your survivor, but don’t want to have to give up the extra income that the single life annuity option affords you in your retirement, you may want to consider a refund annuity.

What Is a Refund Annuity?

We would all like a guarantee that once a retirement plan is set in motion, everything will go as planned to allow us to live out our days in financial bliss. While this may be true for many retirees that do their homework and work with a trusted wealth management expert, the reality is that life is not always predictable.

Many refund annuities offer the same joint and survivor payout options, but they also contractually allow a named beneficiary to receive all of your initial investment in the event you are unable to begin drawing money due to an early death.

One way to ensure that your financial investment in your annuity is protected in the event that you pass away before you have a chance to use your annuity benefits is to invest in a refund annuity. Many refund annuities offer the same joint and survivor payout options, but they also contractually allow a named beneficiary to receive all of your initial investment in the event you are unable to begin drawing money due to an early death. If you don’t fully use the money you deposited into the annuity, your beneficiary is compensated based on the unused portion.

While some annuities are now building a refund option into their contractual structure, you must ensure this is the case before you purchase your annuity. A trusted insurance expert will be able to steer you in the right direction and help you wade through the complex waters of annuity contracts.

An Alternative Investment Strategy to the Joint Annuity Option

If you still choose to invest in a single life annuity over a joint and survivor annuity option, there is a financial product available that allows you enjoy the higher income of a single life annuity and still protect the survivor, or other heirs.Simply pay a monthly premium on a personal life insurance policy to ensure that your survivor will receive a benefit upon your death. If you are in good health and would like to explore investment alternatives that do not require you to give up a large portion of your monthly annuity payout amount, funding a life insurance policy on yourself using a portion of your annuity payout may be a viable option for you.

When you work with a trusted insurance advisor, this is a strategy that can be beneficial for your loved ones well after you have passed, as well allowing you to enjoy your retirement savings in full. It’s crucial to explore all income planning and annuity options with an expert before making a financial decision for your retirement. As Dwight D. Eisenhower once said, “Plans are nothing; planning is everything.”

A joint and survivor annuity, especially when combined with a solid life insurance policy, is a great substitute for a pension plan, guaranteeing you a monthly income for the remainder of your retirement, as well as your survivor’s.

If you are among the majority of retirees that no longer have a pension plan, knowing the joint and survivor annuity rules is imperative for you. A joint and survivor annuity, especially when combined with a solid life insurance policy, is a great substitute for a pension plan, guaranteeing you a monthly income for the remainder of your retirement, as well as your survivor’s. The only way to ensure you are making the right financial decisions for your estate, though, is to sit down with a trusted financial expert who can assess your unique financial landscape.

The team at Howard Kaye Insurance has been advising clients on annuities, estate planning, and life insurance for more than 55 years. We have developed strategies specifically for using annuities and life insurance to maximize wealth into retirement and beyond. Contact our team of advisors at 800-DIE-RICH to discuss the pros and cons of joint and survivor annuities for married couples.

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