The Best Annuity for Married Retirees

Suppose you plan to retire at age 62, and your spouse is four years younger than you are. Your life expectancy is about 75, and your spouse's is closer to 80. Your single-life annuity payment is $1,500 a month, whereas your 100% joint-and-survivor benefit is $1,100. Both pension payments automatically increase for the cost of living.

According to the calculator, you stand to fund a more comfortable retirement by opting for the single-life annuity and putting some of your monthly savings toward term life insurance. (This calculation assumes that term life insurance costs about $10 for every $1,000 of coverage -- note that rates can vary greatly depending on your health and lifestyle.)

Clicking on the report tab at the bottom of the calculator takes you to the specifics. By selecting the single-life annuity, your pension payments will be $400 a month more than the $1,100 joint-and-survivor benefit payment. You can use $139 of that money to pay for a term life insurance policy worth $166,824. This policy will produce the same $1,100 a month in income when you die -- assuming your spouse invests the entire sum and receives an average return of 6%.

The details of the above scenario depends largely on the cost of term life insurance and the difference between the single-life annuity and joint-and-survivor benefit options. Your circumstances may vary: You may not qualify for life insurance -- or it may be too costly, making the joint-and-survivor benefits the right plan for you and your spouse.