What is a Joint Annuity?

Posted in Annuity , Life Insurance

August 17th, 2009

If you have vowed to your beloved, “In sickness and health, to death do your part,” then you may consider the additional step of purchasing a joint annuity for the both of you. Joint annuities are a type of insurance policy. With a joint annuity, two individuals will get paid apredetermined periodic benefit throughout both of their lifetimes. Typically, the joint annuity terminates upon the death of the first spouse listed in the policy.

Joint annuities can be a great budgeting tool for those enjoying retirement. Since annuity benefits pay fixed amounts for a period of time, those planning to become retirees can invest their money into this financial instrument to ensure that their spending is paced properly. Generally, the money for joint annuities is paid into the account while the participants are still employed. The participants can opt to do either one large payment amount or other scheduled periodic payments.

Joint annuities have tax benefits to them, which make this type of investment extremely enticing to those who have substantial amounts of money to their names. When those of a higher net worth opt into joint annuities, they can use the financial instrument as a way to transfer large sums of money or reduce their taxable income amount.

When it comes to deciding on an annuity investment to help aid in retirement planning, it is important to realize that the options include one beneficiary or two. When you choose for the couple to be listed in a joint annuity, the monthly payout will be lower than if you chose a single life annuity. It is important to select your annuity structure wisely from the get go as traditionally, once you choose one type of payment plan, you cannot alter the decision and switch it to another.