What is a 'Joint And Survivor Annuity'

A joint and survivor annuity is an insurance product that continues regular payments as long as one of the annuitants is alive. A joint and survivor annuity must have two or more annuitants, and is often purchased by married couples who want to guarantee that a surviving spouse will receive regular income for life. Annuities are generally used to provide a steady income during retirement.

BREAKING DOWN 'Joint And Survivor Annuity'

With a joint and survivor annuity, monthly payments are typically reduced 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 - $ 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 which options are provided for income payments, 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. Receiving a single life annuity may be done only with written approval from the primary annuitant’s current or former spouse.

Guaranteed Payment of the Principal of a Joint Survivor Annuity

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 is paid to the annuitants’ estate or to a named beneficiary in a lump sum.

Example of Joint and Survivor Annuity

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% of annual income into their accounts. The amount would increase by 0.5% annually and stop at 5%. Benefits would be paid in the form of a qualified joint and survivor annuity as defined under the Employee Retirement Income Security Act. Participants could choose to start drawing benefits after age 62 but before age 70.

  1. Immediate Payment Annuity

    An immediate payment annuity is an annuity contract that is purchased ...
  2. Straight Life Annuity

    A straight life annuity is a retirement income product that pays ...
  3. Cash Refund Annuity

    A cash refund annuity refunds to a beneficiary any sum left over ...
  4. Annuitization

    Annuitization is the process of converting an annuity investment ...
  5. Annuitant

    An annuitant is a person who receives the benefits of an annuity ...
  6. Annuity

    An annuity is a financial product that pays out a fixed stream ...
Related Articles
  1. Retirement

    Explaining Types of Fixed Annuities

    Learn about this popular retirement tool, its pros and cons and how annuities work to create a guaranteed regular stream of retirement income.
  2. Retirement

    Buying Annuities in a Low Interest Rate World

    Learn if buying an annuity makes sense in a low interest rate environment. Also discover the different types of annuities and how interest rates affect them.
  3. Retirement

    How a Fixed Annuity Works After Retirement

    These popular investments can provide a steady stream of income during your retirement years. Here are the details.
  4. Financial Advisor

    Advising FAs: Explaining Annuities to a Client

    Conceptually speaking, annuities can be thought of as a reverse form of life insurance.
  5. Retirement

    What Is the Best Age to Get an Annuity?

    Optimizing the benefits of an annuity means guaranteeing a stream of income you can't outlive.
  6. Retirement

    Are Annuities Retirement-Only Investments?

    Learn more about why annuities are generally purchased and the way that they can positively and negatively affect an individual preparing for retirement.
Hot Definitions
  1. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  2. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  3. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  4. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  5. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  6. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
Trading Center