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How Does a Joint and Survivor Annuity Work?

how does a retirement annuity work

A joint and survivor annuity ensures both retiree and spouse will have retirement income.

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An annuity is a monthly retirement payment guaranteed to last as long as you live. The joint and survivor option -- or requirement in some cases -- expands that lifetime benefit to the retiree and a spouse. The terms of a joint and survivor annuity depend on the source of the annuity and the terms you select before the annuity payments start.

Annuity Functions

At its simplest an annuity is a lifetime monthly payment, usually paid in retirement. The payment continues for as long as the person receiving the annuity is alive. When the covered retiree dies, the checks stop coming. A joint and survivor annuity option extends the annuity payment coverage to the initial individual and a beneficiary, usually the spouse of a retired person. The monthly annuity payments continue until the second person dies -- it does not matter who dies first or second. The idea behind a joint

and survivor annuity is that both individuals in a marriage are dependent on the retirement income provided by the annuity and a joint and survivor annuity makes sure either one continues to receive the payments for as long as they are needed.

Annuity Sources

An annuity can be a type of insurance policy sold by a life insurance company. For the annuity, you pay a lump sum to the insurance company and the company pays the guaranteed annuity benefit. An insurance annuity can be on a single life or the buyer can elect a joint and survivor benefit. Insurance companies differentiate between a deferred annuity where the lump sum earns interest and the payments start at a later date and an immediate annuity -- a stream of monthly payments as discussed here. Retirement plans provided by employers, governments or unions may also be in the form of an annuity or give retirees the choice of lump sum and/or annuity payments. The traditional, defined benefit retirement plan is a form of retirement annuity.

Joint and Survivor Options

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