Single Life vs Joint Life Pension
The single life versus joint life pension election is the fundamental payout choice offered to retiring defined benefit plan participants, selecting between a higher monthly benefit that ends at the retiree's death (single life) and a lower monthly benefit that continues partially or fully to a surviving spouse (joint life).
The single life versus joint life pension election is one of the most significant and irreversible financial decisions a pension participant makes at retirement. Under the Employee Retirement Income Security Act (ERISA), defined benefit pension plans in the United States are required to offer a joint-and-50% survivor annuity as the default benefit form for married participants, meaning the default election provides at least 50% of the retiree's benefit to a surviving spouse. Waiving the joint-and-survivor option requires spousal consent in writing.
The single life annuity pays the maximum monthly amount for the life of the pensioner alone. Payments end completely upon the retiree's death, regardless of the age or financial circumstances of the surviving spouse. The joint-and-survivor annuity pays a reduced monthly amount but continues to pay a percentage — commonly 50%, 75%, or 100% of the pension amount — to the surviving spouse after the retiree dies.
The actuarial reduction for the joint annuity reflects the expected cost of the survivor continuation provision. The larger the survivor percentage and the younger (or healthier) the surviving spouse relative to the retiree, the greater the monthly reduction from the single life amount. A couple where the retiree is 65 and the spouse is 55 will typically see a larger reduction for the same survivor percentage than a couple of the same age.
The decision between single and joint annuity interacts with other household income sources. A couple with substantial other guaranteed income — significant Social Security benefits, other pension income, or a large fixed-income portfolio — may have a lower marginal need for the surviving spouse protection embedded in the joint pension annuity. Conversely, a couple whose primary income source is the pension may have a high need for the joint option to protect the surviving spouse's financial security.
Once elected and the first pension payment received, the annuity form is generally irrevocable. Some plans offer a pop-up provision that restores the single life benefit amount if the spouse predeceases the retiree, eliminating one of the primary drawbacks of the joint election. Plans with pop-up provisions are generally preferred when available and appropriately priced, as they reduce the permanent cost of the joint election in the scenario where the surviving spouse benefit turns out not to be needed.