Can an Annuity Be Held in Joint Names?

Can an Annuity Be Held in Joint Names?
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About 48 percent of individuals who invest their money own an annuity. Annuities are an excellent way to set yourself up for a comfortable retirement. In fact, two-thirds of financial advisors will strongly suggest annuities for retirement. If you are married, there are joint annuity options that you can invest in for both you and your spouse. Let's see how they differ from an individual annuity in terms of payout cycles and amounts, as well as whether one could be the best fit for you.

Important Terms for Annuities

There are several terms to think about when referring to annuities. The owner of the annuity is the person who sets up the terms of the annuity including length, maturation date and amount of money contributed and dispersed. It is normal for the owner to be the recipient of the benefits.

However, it is possible for the annuity owner to set up the account for another individual. This person is called the annuitant. The annuitant is the individual whose life determines the annuity payouts. For example, a parent can set up an annuity for their child with disabilities who will need financial support if the parent should pass away before them.

An annuity owner can also set up the account with joint annuitants such as in the case of husband and wife. In this situation, the disbursement would be different than a single annuitant. Even if there are two annuitants, one must take ownership of the annuity so as to establish and maintain the account.

Joint Annuitants Powers and Privileges

Because the joint annuitant is not typically the owner of the annuity, they are restricted with what they can and can't do with the annuity. The annuity owner is the primary and singular contributor to the annuity even though the annuitant draws on it later in life. No contributions can be made from the joint annuitant.

In addition, the joint annuitant may not make any beneficiary changes in the contract. Only the owner is allowed to make contract changes to the annuity.

If the joint annuitant is young, that will work as an advantage. Because insurance companies base the payout on several factors such as gender, age and life expectancy, they want to invest in healthy individuals. The owner of the annuity can then have payments spread across many more years and have the contributions tax-deferred much longer than if the joint annuitant was older.

Some Things to Consider About Jointly Held Annuities

Although you may want to add that second person onto your annuity, it is a good idea to ask the insurance agent for a comparison in numbers and years. Usually, a joint annuity distributes less each payment because it is going to two people rather than just one and if the annuitant is much younger, it'll be spread out over many more years.

Another very important thing is to name the joint annuitant as the beneficiary so they receive the owner's amount of benefits after death and vice versa. This would be called a joint and survivor annuity. A disadvantage of this is that the surviving party would not be able to get a lump sum of the deceased party's portion to cover funeral expenses.

Overall Considerations for Joint vs. Single Annuities

If you are able to get a side-by-side comparison of joint versus single annuity options, it will help to see if the benefits outweigh the costs. Remember to calculate any other retirement benefits to ensure the best fit for your overall retirement financial security.