Joint & Survivor

MR. WATSON: A Joint & Survivor has two annuitants. This option pays until both annuitants die, and there are different types. There's

• a joint and full survivor annuity
• a joint and two-thirds survivor annuity
• a joint and one-half survivor annuity.

With each of these options, both annuitants are guaranteed life income. So if I die, my wife continues getting an amount for the rest of her life, however long that is. It could be the full amount, two thirds, or half, depending on the option we chose, but she’s paid for the rest of her life - not just until the bucket is empty like before.

MR. WATSON:  Once both annuitants are dead, it stops. So there is no beneficiary. Let’s say we annuitize today and six months later we’re killed in an accident.  Where does the rest of the money go?

STUDENTS:  The insurance company keeps it?

MR. WATSON: Right. But’s it’s guaranteeing income for two lives.  So if both of us or either of us lives way beyond our life expectancy, it still pays until we’re both dead.

MR. WATSON: Let's do an example. These are all for the same annuity.  So my wife and I have a joint annuity, and when we’re ready to annuitize it the insurance company will give us these options:

• A joint and one-half will pay, let's say, $1,400 a month while both are living, then $700 to survivor.
• A joint and two-thirds survivor would pay $1,200 a month a month while both are living, then $800 to survivor.
• A joint and full survivor will pay $1,000 a month a month while both are living, then $1000 to survivor.

MR. WATSON: The fractions above refer to the amounts the survivor will receive when the first annuitant dies and, of course, the numbers I'm using here aren't real numbers, they're just examples.

MR. WATSON: Now, look. You have a joint and full survivor that will pay $1,000 a month. With a joint and full survivor, if I die first or if she dies first, the survivor gets the full amount, $1000. Does that make sense?

STUDENTS: Yes.

MR. WATSON: That's why they call it a "full survivor."

MR. WATSON: But the joint and one-half is going to pay us a lot more while we're both living. Do you agree?

STUDENTS: Yes.

MR. WATSON: But the survivor takes a risk. So when the first guy dies, the survivor is going to only get half of that. If you want to go somewhere in between, go with the joint and two-thirds. That will pay you $1,200 a month while you're both living and the survivor will get two-thirds of that or $800.

MR. WATSON: The more risk the survivor is willing to take, the higher the original monthly amount will be while both annuitants are still living.

MR. WATSON: Pensions do this. When you retire from the military, when you retire from anything, you have these choices to make. But, they call it a pension. Really, they are annuity payout options.

Period Certain - (Does NOT pay for life)

MR. WATSON: This is the only option that does not pay for life. Notice this option does NOT say "Life". This is not based on life expectancy. This only pays out for a certain period of time. The state lottery uses a 30-year period certain. Only pays for 30 years and then it’s done.