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Lifetime Income Annuity: Single Or Joint Life

Stan Haithcock
February 26, 2024
Lifetime Income Annuity: Single Or Joint Life

Hello, Stan The Annuity Man, America's annuity agent licensed in all 50 states. That would include yours and yes, I do sell annuities, but only if they're appropriate and suitable. Let's talk about lifetime income annuities and whether you should set it up as single life or joint life. We're going to do that right now.

‌Okay, so you're looking at a lifetime income annuity. I mean, you're saying to yourself, should I do it as single life, or should I do it as joint life? Which one's better? Here's the bottom line. With annuities, there are no perfect answers. Just bad sales pitches, right? Nod your head. It's true. It is absolutely true. There are no perfect answers. It's customizable to what you want it to be. Let's cover single life.

‌Single Life

‌Single life is your life, and you can structure it as life only, which means that's going to be the highest contractual payment. Why? Because you're shouldering some of the risk. And when your Ferrari hits the tree, money goes poof. Evil annuity company keeps the money, but you had the highest payment while you were alive. Is that the only way to structure it? Absolutely not.

‌You can structure it so that 100% of the money goes to your list of beneficiaries of the policy when you pass away. You can set up a life with cash refund or life with installment refund. The difference between those two are pretty self-explanatory. Cash refund means your beneficiaries get a lump sum. An installment refund means they will get payments until the money's exhausted. But in both cases, the evil annuity company doesn't keep a penny. And you can also do what's called life with a period certain. You can choose the year. You could do life with 10 year certain, life with 20 year certain, life with 30 year certain, or life with 17 certain. You could pick a weird number like that. What that means is it's going to pay you for the rest of your life. But let's say you die early in a contract that's life with a 17-year period certain; let's just say you died in year five; there will be 12 more years of payments.

‌Joint Life

‌Once again customizable. So, let's jump over here to joint life. Joint life means that you can structure it with you and your spouse, you and your partner, you and your kid, you and whoever. Okay? Now within an IRA, you can structure it with you and your spouse or partner, but joint life means it will pay for both lives. What I like about that is let's say you're me. My wife's been married to me for 31 years. You're saying there's no way anyone could be married to you for 31 years. It is true. So, you got a joint life, and I passed away, and the income stream was coming in while I was alive.

‌Well, guess what? It will remain uninterrupted and unchanged for my wife's life, regardless of how long she lives. I always tell the story. A guy called me the other day and said, "I'm really looking to take care of my wife because she really doesn't care about investments. I just want to make sure that she has enough money to go see the grandkids." And that's going to be my wife when we have grandkids. He wanted to make sure that that money would be the same amount to her, uninterrupted and unchanged. I said, "Just think about it like this, Ernie, you die. She goes to the funeral, she sings the song, and everyone's crying, but she gets back in the car, and she drives home. She passes the bank where the Immediate Annuity, lifetime income, and annuity payments hit every month, and she glances at the bank. She's going to know that that payment will be the same."

‌He loved that. That's exactly what he wanted. And then we structured the backside of that so that when she passed away, any unused money went to the grandchildren, skipping the children. How about that? So, you can do that. You can customize it either way.

‌They're Still on the Hook

‌Let's go back over to the single life. What's that song? Single Life. No, I'm not going to sing that, but it was kind of a disco song. Single life is based on your life expectancy at the time you take the payments; interest rates play a secondary role. The income stream is a combination of return of principal plus interest. And let's just say that you live forever, and the accounts at zero. So, you've drawn down principal plus interest, and you've drawn down that amount to zero. What happens? You know what happens. They're on the hook to pay for the rest of your life. They, meaning the annuity company. Even if the accounts at zero, they're going to pay. There's no ROI or return on investment calculation until you die, and that's the benefit proposition that only annuities can offer.

‌Annuity Types

‌Let's go back over here to joint life. So, joint life is based on two lives at the time you take the payment. Again, you can tell us when you want that to be. We can give you that contractual number to the penny. And lifetime income doesn't always mean Single Premium Immediate Annuity or Deferred Income Annuity. It can also mean a QLAC or a Qualified Longevity Annuity Contract, or you can also get a lifetime income stream from an Income Rider, which is an attached benefit to a Deferred Annuity like a Variable Annuity or Indexed Annuity.

‌I know I'm hitting you with all this stuff. Let's go back to the middle, single life over here, joint life over here. You're looking for a lifetime income annuity. How do you get there? Which product fits? For income now, it's an Immediate Annuity. You ask two questions. What do you want the money to contractually do and when do you want those contractual guarantees to start? Got it? Let me do it again. What do you want the money to contractually do? When do you want those contractual guarantees to start? If the answer is I need income, the second part of that answer is I need income now; that's an Immediate Annuity. If you answer the question, what do you want the money to contractually do, I need income to start down the road? And you say, well, when do you want that income to start? I need it to start in 10 years. Okay, great. You need an income later quote, which would be either an Income Rider attached to a Deferred Annuity, like a Variable or Indexed Annuity, or a Deferred Income Annuity or a Qualified Longevity Annuity Contract.

‌I know what you're saying. Wow, that's a lot. That's a lot coming at me. That's why I'm here. Okay? That's the reason you need to go to The Annuity Man and use our proprietary annuity calculators to shop for the best contractual guarantee for your specific situation. And when I say your specific situation, that means customize to what you're trying to achieve. If you need income to start at a certain date, your date of birth or your wife's date of birth, we can run that. If you need an income stream, a specific monthly amount coming in every single month, we can reverse engineer the quote to provide the highest contractual guarantee and the company's bid on that.

‌That's the great part about annuities: they're commodity products. And these companies will bid on your specific situation and those specific quote parameters you give us that we put in the calculators to provide that quote for you.

‌Client Example

‌I got a call the other day, and a gentleman said, "My wife and I both have IRAs. We need income now." They'd gone through the two questions and needed income to start immediately, but they were wondering if they should do a joint life policy in each IRA. So, his IRA would be joint with her, and her IRA would be joint with him. Made sense. But I also said, think about this. Why don't you do a single life policy for each of you and have each of you be the beneficiary of the IRA? You get a higher payout, and they ended up going in that direction. That's not to say it's the best way to do it, but when you come to us, I'm going to provide you with alternative thoughts to what you're thinking.

‌They came in thinking we might want to do a joint life in both IRAs. And I said, well, you know what? Based on your specific situation, the income that you have coming in, and your overall investment picture, you might want to do a single life because a single life pays higher than a joint life because it's only on one life. The annuity company's on the hook to pay for one life. So, they chose that, and they structured it life with cash refund so that any unused money went to that spouse as the beneficiary, and it worked out because they got a pretty good bump on the income as compared to if they did both of those annuities joint life.

‌I hope that you have a better understanding of single and joint life annuities. If you have any questions, you can always book a call with us to discuss. Our proprietary annuity calculators are available to you 24/7, 365 on our website. Thank you for joining me today; I will see you on the next The Annuity Man blog.

Never forget to live in reality, not the dream, with annuities and contractual guarantees! You can use our calculators, get all six of my books for free, and most importantly book a call with me so we can discuss what works best for your specific situation.

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