The Best Annuity for Married Retirees


Many Americans are struggling in retirement. A recent study commissioned by Americans for Secure Retirement reported that 60% of middle-income new retirees would run out of money in retirement unless they reduced their standard of living by 24%.

Figuring out how to get the most out of your retirement dollar is an important part of your retirement planning. If you have access to a pension plan in retirement, you may want to consider the choice between the single-life annuity and joint-and-survivor benefits payment plans.

A single-life annuity makes set monthly payments to you, the pension holder, as long as you live. The joint-and-survivor benefit option, meanwhile, reduces your monthly pension benefits in favor of continuing payments to your spouse after your death.

The amount of the reduction depends on how large those continuing payments are, and many plans offer 50% to 100% of the pension payment to the surviving spouse. Your pension payments are typically reduced by about 10% for the 50% benefit amount, and about 20% for the 100% benefit.

To help work through this decision, you can turn to the online Pension Planning calculator from You'll need to enter age and life-expectancy figures for you and your spouse, as well as your expected retirement age and pension details.

The calculator assumes you would use term life insurance to support your surviving spouse in the absence of joint-and-survivor pension benefits. It determines the lump sum payment required to provide an income equivalent to the joint-and-survivor benefit for the duration of your spouse's expected life.

Suppose you plan to retire at age 62, and your spouse is four years younger than you are. Your life expectancy is about 75, and your spouse's is closer to 80. Your single-life annuity payment is $1,500 a month, whereas your 100% joint-and-survivor benefit is $1,100. Both pension payments automatically increase for the cost of living.

According to the calculator, you stand to fund a more comfortable retirement by opting for the single-life annuity and putting some of your monthly savings toward term life insurance. (This calculation assumes that term life insurance costs about $10 for every $1,000 of coverage -- note that rates can vary greatly depending on your health and lifestyle.)

Clicking on the report tab at the bottom of the calculator takes you to the specifics. By selecting the single-life annuity, your pension payments will be $400 a month more than the $1,100 joint-and-survivor benefit payment. You can use $139 of that money to pay for a term life insurance policy worth $166,824. This policy will produce the same $1,100 a month in income when you die -- assuming your spouse invests the entire sum and receives an average return of 6%.

The details of the above scenario depend largely on the cost of term life insurance and the difference between the single-life annuity and joint-and-survivor benefit options. Your circumstances may vary: You may not qualify for life insurance -- or it may be too costly, making the joint-and-survivor benefits the right plan for you and your spouse.

Your decision will also depend on your spouse's estimated life expectancy. If he or she outlives you by a number of years, then your insurance policy will need to be much larger in order to cover the additional payments.

To understand all your options, change the calculator's input values to present different scenarios. That way, you can be sure to get the most out of your retirement dollar while also making sure your spouse is financially secure after you're gone.


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