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A joint life annuity is a type of retirement account usually taken out by couples. Annuities guarantee payouts for a certain term based on both actuarial tables of mortality and how much is paid into the account. A joint life annuity allows payments to continue to one spouse or partner even after the other has died.
Generally, annuities are purchased either with a large deposit or regularly scheduled payments over a period of several years. Once retirement is reached, a couple with a joint life annuity may begin receiving payments from the account, which may vary in size based on the amount paid in and the life expectancy of the account holders. Annuities are offered through insurance companies, which use actuarial tables to determine how long an account holder is likely to live in order to determine a payment schedule. The idea of an annuity is to guarantee a fixed income for life; with a joint life annuity, the goal is to provide an income for both partners.
Since spouses may die at different times, it may be important to some couples to ensure that the surviving spouse has a guaranteed source of income that is not dependent on the other spouse. With a joint life annuity, if a wife dies 10 years after payments begin, the husband would continue to receive payouts until his death, even if it was many years later. Payments are usually somewhat smaller than single annuities, as the total life expectancy of both partners will generally be higher than that of one single person.
A joint life annuity can be invested at either a variable or fixed rate to increase funds. Variable rate annuities depend on the stock market, and may make more or less depending on the particular whims of the market at the time. Fixed rate annuities will usually offer a slightly lower-than-likely outcome than variable rate investments, but provide the comfort of knowing that the interest earned will never drop below the fixed rate. Discussing investment options with a financial investment professional is often recommended, as he or she may be better able to read the market for clients and recommend successful strategies.
Some joint annuities contain what is called a “certain” clause, that allows the annuity to provide for beneficiaries for a certain period of time should both account holders die. Certain periods are usually set in 10 year intervals, and can be useful for those who wish to ensure provision to children or heirs. If a joint life annuity account has a certain period of 10 years, this means that payments will continue for 10 years, regardless of whether the account holders are alive. If a husband dies three years after beginning payouts, and a wife dies a year later, beneficiaries would receive payments for the remaining six years of the certain period.