If you’re married and thinking about buying an annuity, one of the biggest decisions is this:
Should you choose a joint-life annuity so income continues to your spouse, or should you take a higher single-life payout and use life insurance to protect them instead?
This question becomes even more important when there is a large age gap between spouses.
A joint-life annuity can provide income for both lives, but the payout is usually lower. A single-life annuity may provide more income while you’re alive, but the payments can stop when you pass away.
So which option is better?
The answer depends on your spouse’s age, health, income needs, other assets, and whether life insurance is actually affordable and realistic in your situation.
Need help choosing the best annuity for your unique situation? Have questions about getting an annuity? If so, it’s best to speak with an annuity specialist. Watch this short video to see how I can help you do this (at no cost to you!)
Tip: See how much an annuity could pay you using my annuity calculator
What Is a Joint-Life Annuity?
A joint-life annuity is designed to pay income for two people, usually a married couple.
Instead of income being based only on your life, the insurance company calculates the payout based on both lives. That means the income can continue after the first spouse passes away.
This can be a great option if your spouse depends on that income.
For example, if you pass away first, your spouse may continue receiving annuity income for the rest of their life, depending on the contract terms.
The trade-off is simple:
More protection usually means a lower payout.
That lower payout can feel frustrating, especially if your spouse is much younger than you. But the reason is straightforward. The insurance company may have to pay income for a much longer period of time.
💡 Pro Tip: If your spouse would struggle financially without your annuity income, a joint-life payout is usually worth serious consideration.
👉 Want help comparing joint-life annuity options? Schedule a call here.
Why a Single-Life Annuity Pays More
A single-life annuity pays income based on one person’s life.
Because the insurance company only has to cover one lifetime, the payout is usually higher than a joint-life payout.
That can be attractive.
For example, a $500,000 annuity with a husband age 58 and wife age 47 showed a major difference between joint and single payout options. The joint payout was around $53,000 per year, while the single payout was around $65,000 to $67,000 per year, depending on the option shown.
That extra income can make a big difference in retirement.
But there is a catch.
If you choose a single-life payout and you pass away after the account value is depleted, your spouse may receive nothing from that annuity.
No remaining account balance.
No death benefit.
No continued income.
That is why a single-life annuity can be risky when a surviving spouse still needs income.
When Life Insurance Might Protect Your Spouse
Some retirees consider another strategy:
Take the higher single-life annuity payout, then buy life insurance to protect the spouse.
The idea is that if you pass away, your spouse receives the life insurance death benefit. They could then use that money to replace income, buy their own annuity, pay bills, or protect their lifestyle.
In theory, this can work.
But in real life, there are several things you have to check first:
- Can you qualify for life insurance?
Your health matters. If you have medical issues, coverage may be expensive or unavailable. - Is the premium affordable?
Permanent life insurance can be costly, especially later in life. - Will the coverage last long enough?
Term insurance may expire before your spouse needs it. Permanent coverage may be safer, but it often costs more. - Is the death benefit large enough?
The policy needs to replace the income your spouse would lose. - Will the policy stay in force?
If premiums become too expensive and the policy lapses, the strategy fails.
Life insurance can be powerful, but it is not automatically better than a joint-life annuity.
💡 Pro Tip: Do not compare a joint-life annuity against life insurance without looking at real numbers. Premiums, health ratings, payout differences, and spouse income needs all matter.
👉 Want help seeing whether life insurance or a joint annuity makes more sense? Schedule a call with me here.
The Age Gap Problem: Why Younger Spouses Change the Math
A large age gap can make this decision more complicated.
If one spouse is 60 and the other is 40, a joint-life annuity may have to account for income lasting decades longer.
That usually lowers the payout… a lot!
From the insurance company’s perspective, they may be on the hook for income payments for 40, 50, or even more years.
That is why some people with much younger spouses look at single-life payouts. The income can be much higher.
But again, the problem is protection.
If the older spouse dies and the annuity income stops, the younger spouse may still need money for many years.
That is where you have to ask:
Would my spouse be okay financially if this annuity income disappeared?
If the answer is no, then a single-life annuity without another protection plan may be dangerous.
When a Single-Life Annuity May Still Make Sense
Choosing a single-life annuity does not mean you do not care about your spouse.
Sometimes it can make sense.
For example, a single-life payout may work if your spouse has:
- Their own pension
- Their own retirement accounts
- Separate assets
- Strong Social Security income
- Life insurance protection
- Other guaranteed income sources
- Enough savings to live comfortably without your annuity income
If your spouse already has dependable income, you may not need to reduce your annuity payout just to protect them.
But if your spouse depends heavily on your income, the single-life option deserves extra caution.
You Usually Do Not Have to Decide Immediately
One important point many people miss is this:
With many annuity contracts, you may not have to choose single-life or joint-life income when you first buy the annuity.
You often choose when you activate the income rider payout.
That can give you flexibility.
You might buy the annuity today, let it grow, and plan for a joint payout later. But when income begins, your situation may look different.
Your spouse may have other assets.
You may no longer need the same level of protection.
Your health, income needs, or marital status may have changed.
That is why it is important to compare payout tables before making the final decision.
The same annuity contract may show different payout rates for single-life and joint-life income.
The benefit base may be the same, but the payout percentage can be different.
That difference can create thousands of dollars per year in extra income.
💡 Pro Tip: Before activating income, compare the single-life and joint-life payout options side by side. Do not guess.
👉 Want help comparing payout tables across annuity carriers? Schedule a call with me here.
Joint-Life Annuity vs. Life Insurance: Which Is Better?
There is no one-size-fits-all answer.
A joint-life annuity may be better if:
- Your spouse depends on your income
- You want simple lifetime income protection
- Life insurance is too expensive
- You cannot qualify for life insurance
- You want income to continue automatically after death
Life insurance may be better if:
- You can qualify at a reasonable cost
- You want the higher single-life annuity payout
- Your spouse could use a lump sum instead of monthly income
- You have other assets and want flexibility
- The policy death benefit is large enough to replace lost income
A single-life annuity with no backup plan may be risky if your spouse needs income after you pass away.
A joint-life annuity may pay less, but it can provide peace of mind.
The best answer depends on the math.
You need to compare:
- The single-life payout
- The joint-life payout
- The cost of life insurance
- Your spouse’s future income need
- Your health
- Your spouse’s age
- Other retirement assets
- Tax considerations
- Longevity risk
This is exactly why comparing multiple carriers matters.
Some insurance companies may offer much better joint-life payouts than others. Others may not be competitive at all when there is a large age gap.
Conclusion
When deciding between a joint-life annuity and life insurance, the real question is not just:
Which one pays more today?
The better question is:
Will my spouse still be financially secure after I’m gone?
If the answer is yes because they have their own pension, savings, Social Security, or life insurance, a single-life annuity may be reasonable.
But if your spouse needs your annuity income to maintain their lifestyle, a joint-life annuity may be the safer option.
I can help retirees compare annuity options independently, across multiple carriers, so they can see what actually pays the most income and which structure fits their retirement plan.
Need help with finding the best annuity for your retirement?
Click here to schedule a call with me.
On the call, I can help you:
- Determine what type of annuity is best for you
- Find the highest paying annuities for your unique situation
- Answer any other questions you may have