How Are Joint Life Annuities Invested?


Quick Answer

The money in a joint annuity is invested in conservative stocks, bonds and index funds by the insurance company. Payments are then made to the annuitants from both principal and capital gains.

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Full Answer

When signing up for an annuity, the purchaser irrevocably signs over the total initial deposit to the insurer. The purchaser is then guaranteed payments based upon the type of plan selected. In the case of joint annuities, payments are made to the purchasing annuitant and one designated beneficiary. Typically, this is a spouse or dependent. Payments continue until one of the annuitants dies. If a joint and survivor annuity is purchased, payments continue until both annuitants have died.

If a variable joint annuity is purchased, the regular payments may be adjusted to match the performance of the principal invested in the annuity. Due to the turbulence of the stock markets, these types of annuities are not suitable for the risk adverse. A fixed joint life annuity will guarantee a set income each month regardless of portfolio performance, but this is likely to be lower than the payments from the best performing variable vehicles.

Due to the likelihood of a joint life annuity lasting longer than a single life annuity, the monthly payments will be lower. Additionally, most joint life annuities reduce the monthly payments upon the passing of the first annuitant. This can vary between a 33 percent and a 50 percent reduction in payments.

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