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Single Life vs. Joint and Survivor Pension Payout Options

How Do Married Retirees Choose?

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Document date: September 01, 2003
Released online: September 01, 2003

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

Note: This report is available in its entirety in the Portable Document Format (PDF).

Executive Summary


This study measures the share of married retirees with pension annuities who forgo survivor protection and examines the factors influencing their decisions. It also measures the share of retirees whose decisions to forgo survivor protection can be justified by its high costs or low benefits, such as the presence of other types of financial protection for the spouse, poor health of the spouse, and low income.


Retirees in traditional defined benefit (DB) plans generally choose between single life annuities, which provide regular payments until the death of the pension recipient, and joint and survivor annuities, which continue to make payments to the spouse after the death of the retired worker. For a given pension, a single life annuity generates higher monthly payments than a joint and survivor annuity, because it generally provides payments for a shorter period of time. Married retirees who select the joint and survivor option typically accept lower monthly payments when both they and their spouses are alive, in return for insurance against the risk that they will die before their spouses and leave them with insufficient income. Whether retirees are willing to accept this trade-off may depend on a number of factors, including their economic situation and desire for additional income to meet current consumption needs, the availability of other resources that could protect the surviving spouse in the event of widowhood, and the relative life expectancy of each spouse.

Federal law encourages survivor protection by requiring employers that sponsor DB pension plans to offer joint and survivor annuities as the default payout option and by requiring pensioners to obtain the written consent of their spouses before they may choose a single life annuity. Proposed congressional legislation would strengthen these safeguards by extending them to employers that sponsor defined contribution (DC) plans.


The analysis estimates a probit model to examine the decision to receive a single life annuity instead of a joint and survivor annuity. The covariates in the model consist of variables designed to capture the costs and benefits of survivor protection, including both financial and nonfinancial factors. The model is estimated on a sample of 763 married men and 386 married women receiving life annuities from their former employers in the 1992-2000 waves of the Health and Retirement Study (HRS).


Overall, 28 percent of married men and 69 percent of married women opt for single life annuities instead of joint and survivor annuities. Although this choice may jeopardize their spouses' economic security if they become widowed, most married retirees appear to make their pension payout decisions by rationally balancing the costs and benefits of each type of annuity. For example, the results indicate that retirees are more likely to reject survivor protection when:

  • the spouse has access to alternative sources of survivor protection, such as pension coverage in their own names;
  • they have limited pension wealth, increasing the financial pain of trading current pension income for survivor protection;
  • they expect to outlive the spouse; and
  • the relationship with the spouse is weak.

After accounting for other sources of spousal survivor protection, the affordability of spousal protection, and health status, only 7 percent of married men and 3 percent of married women reject spousal survivor protection without evidence of potentially compelling reasons.


The analysis suggests that additional public efforts to encourage joint and survivor annuities are unnecessary, because most men already accept survivor protection when they retire and almost all of those who decline survivor protection appear to have legitimate reasons for their decisions. Persistent high poverty rates among elderly widows may justify additional policy initiatives to improve their retirement security, such as increasing Social Security's survivor benefits or minimum benefits. Among retirees taking annuities, it is unlikely that additional efforts to encourage joint and survivor annuities in employer-sponsored DB plans would substantially improve economic outcomes for widows in later life.

Current law may not, however, adequately protect the spouses of workers in DC plans, soon to be the dominant type of employer-sponsored retirement plan for retiring workers. Federal law does not require most employers with DC plans to offer annuity options or most DC plan participants to obtain the consent of their spouses to take their retirement benefits as lump-sum payments instead of as annuities. Lawmakers have recently proposed extending the spousal protections available in DB plans to DC plans. Given the apparent lo w rates of annuitization among DC plan participants, these proposals may have merit.

About the Authors

Johnson is a senior research associate, Uccello is a consultant, and Goldwyn is a research assistant, all in the Income and Benefits Policy Center at the Urban Institute. The authors gratefully acknowledge financial support from the Society of Actuaries (SOA) and the Actuarial Foundation, as well as helpful comments from the SOA's Project Oversight Group. They also appreciate the efforts of Steve Siegel, the project director at SOA. The opinions expressed here are those of the authors and do not necessarily reflect the views of the SOA; the Actuarial Foundation; or the Urban Institute, its board, or its sponsors.

Note: This report is available in its entirety in the Portable Document Format (PDF).

Topics/Tags: | Retirement and Older Americans

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