A joint and survivor annuity is designed to provide payments:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A joint and survivor annuity covers two lives, typically spouses, and continues to make payments as long as either person is alive. Payments often continue in full or at a reduced percentage, such as two-thirds or one-half, after the first annuitant dies, so the survivor retains an income stream. Because payments may last for two lifetimes, the amount of each check is typically lower than under a single-life annuity, but the security for the couple is higher. This option is popular in retirement planning because it protects the surviving spouse against outliving the income.
Why the other options are wrong
- B) Stopping payments at the first death describes a joint-life income arrangement. A joint and survivor annuity, by contrast, is designed specifically to keep the income flowing to the survivor.
- C) A fixed-period guarantee is the period-certain option, under which payments run for a stated number of years. The joint and survivor option is tied to two lives, not to a fixed calendar term.
- D) The survivor under a joint and survivor annuity is typically the other annuitant, who is a party to the income stream. A contingent beneficiary receives death benefits, which is a different mechanism.
Memory hook
Joint & survivor = income for two lives. First to go, the survivor keeps the checks coming.