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When to Opt for a Joint Life Immediate Annuity

A basic, but important annuity question was the topic of a question and answer section in Kiplinger.  In “Choosing an Immediate Annuity,” Kimberly Lankford was asked about the difference between choosing an annuity that will last over your lifetime versus lasting over your spouse’s lifetime as well.  The person writing in is a 70 year old male with a 68 year old wife and in the article’s example they purchase an annuity with $100,000.  Choosing between a single life and a joint life annuity is a big decision with financial implications either way.  While a single life annuity pays more each year, a joint life is a little less risky because you will most likely receive payments for a longer time frame.  In addition to those options though, you can also buy an annuity that is guaranteed to pay you for a certain period of time, even if both spouses pass away quickly.

In the article’s example, the single life immediate annuity would pay out close to $8,000 each year.  You’ll need to compare different annuities before purchasing, but this is an average quote from a reputable insurance company.  If the 70 year old man chose a joint life annuity and added his wife on, their yearly payouts would decrease to $6.300, but would last as long as both of them live.  Surprisingly, it doesn’t cost that much more to add on a guaranteed time period in addition to the joint life annuity.  The couple can add a beneficiary for a time frame of ten years and still receive yearly payouts of $6,240.  If neither of them lives the entire ten years, their death benefits will pass on.  But if one or more of them is still alive after the ten years, their lifetime payments will continue on as scheduled.

Each family’s situation is different and that will help you determine which type of annuity is best for you.  Many people carry life insurance to help their spouse and children carry on financially after their death.  If you have permanent life insurance that will pay death benefits to your family, you may not need to add on the joint life option to your immediate annuity.  Some people like to have the certainty that they aren’t “losing out” in case they die prematurely, but others realize that annuities are less of an investment and more of an insurance against outliving your money.  If you don’t live, you no longer have the concern about your money.  But if you know that your spouse will depend on this same annuity income to carry them through after your death, it is worth the lower payments to make sure that you buy a joint life annuity to continue their financial support.

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