What is a Joint-Life Payout?

A joint-life payout is a retirement-benefit payout method whereby a retiree receives benefits from the retirement plan until he or she dies, and the retiree's spouse or partner then receives benefits from the same plan until he or she dies too.

How Does a Joint-Life Payout Work?

Let's say John Doe buys an annuity with a joint-life payout. Ten years later, he retires and annuitizes the contract, which means he tells the annuity provider that he would like to begin receiving benefits. He receives monthly payments of, say, $1,800, which he and his wife use to support themselves in addition to Social Security.

This goes on for 20 years, and then John dies of a heart attack. Because the annuity has a joint-life payout, the payments do not end. Instead, John's wife continues receiving $1,800 a month, even though the annuity was in his name.

Why Does a Joint-Life Payout Matter?

In a joint-life payout, the checks keep coming as long as at least one of the two spouses is alive. In turn, joint-life payouts guarantee income for a person's spouse or partner after the person dies. They can secure the future of a person who has not worked outside the home for several years or who would not have income without the support of the retiree. The option is in contrast with the single-life option, which ceases benefit payments after the retiree (in our example, John Doe) dies.

It is important to note, however, that joint-life payouts cost extra, sometimes in the form of lower monthly payments or higher fees. That's because the pension or annuity must base its payments on the life expectancies of two people. Also, the survivor's monthly benefits are often less than the amount the retiree receives.