Joint Life vs Single Life Annuity in Retirement in Canada?

When you convert a portion of your retirement savings into a guaranteed income stream, one of the most important decisions you'll face is whether to buy a joint life or single life annuity. This choice directly affects how much income you receive each month — and what happens to that income if you die before your spouse. Understanding how each option works is a useful first step before sitting down with a retirement professional to look at your specific numbers.

What Is a Life Annuity?

A life annuity is a contract with an insurance company. You hand over a lump sum — often from an RRSP, RRIF, or non-registered savings — and in return you receive a guaranteed monthly payment for the rest of your life. You cannot outlive it. The monthly amount depends on how much you deposit, interest rates at the time of purchase, your age, and — critically — whether you choose a single or joint structure.

How a Single Life Annuity Works

A single life annuity pays income based on one person's life only. When that person dies, payments stop — unless a guarantee period was built in. Because the insurance company is only covering one lifespan, the monthly payment is typically higher than what you'd receive with a joint option.

This structure can work well for someone who is single, widowed, or whose spouse already has strong guaranteed income of their own — for example, a defined benefit pension or substantial CPP. The trade-off is straightforward: you receive more income during your lifetime, but if you die early, your surviving spouse gets nothing further from the annuity.

A guarantee period — commonly 10 or 15 years — can soften this. If you die within the guarantee window, your named beneficiary receives payments for the remainder of that term. This adds some protection without fully converting to a joint structure.

How a Joint Life Annuity Works

A joint life annuity covers two lives — most commonly a married or common-law couple. Payments continue as long as either person is alive. When one partner dies, the surviving spouse continues to receive income, though the amount may drop depending on the continuation percentage you chose at the time of purchase. Common options are 50%, 60%, 66⅔%, or 100% of the original payment.

The cost of this protection is a lower monthly payment from the start. Because the insurer is now accounting for two lifespans, your income will be less than with a single life option. The age and health of both partners at the time of purchase affects how much less.

For couples where one spouse has little guaranteed income of their own — modest CPP, no pension, and limited personal savings — the joint structure can be a meaningful safety net. It ensures the lower-income spouse still has reliable monthly income even after their partner is gone.

Key Factors That Influence the Decision

Neither structure is universally better. A few things worth thinking through:

Other guaranteed income in the household. If both partners already have CPP, OAS, and defined benefit pensions, the need for joint survivorship on an annuity may be lower. If one spouse has very little guaranteed income, it matters more.

Age gap between spouses. A large age difference affects how long the survivor benefit needs to last and how it's priced.

Health of both partners. Health affects life expectancy, which in turn affects how the annuity is priced. Someone in poor health may be offered a higher income through an impaired annuity in some cases.

Estate and legacy goals. Annuities are not an effective way to pass money to children or a charity. Once payments stop, there is nothing remaining for an estate. If leaving a legacy is a priority, an annuity may only make sense for a portion of your savings.

Other assets available to the survivor. A large non-registered portfolio or TFSA accessible to the surviving spouse may reduce the urgency of the joint continuation feature.

Taxes and Integration With Other Income

Annuity payments are taxable income in the year you receive them. For registered money — drawn from an RRSP or RRIF — the full payment is taxable. For non-registered money, a prescribed annuity calculation allows only the interest portion to be taxed, which can meaningfully reduce the annual tax hit. This distinction matters when you're thinking about how annuity income stacks up against OAS recovery tax thresholds or income-splitting opportunities with a spouse.

Making the Decision With the Full Picture in View

Choosing between a joint life and single life annuity is not a decision that should be made on monthly income alone. It depends on your household's complete income landscape, your spouse's financial position, the size of your other assets, and what you want guaranteed income to do for the rest of your lives. Marc Pineault, a retirement planner in London, Ontario, helps people work through exactly these kinds of questions — mapping out guaranteed income options alongside the rest of a retirement plan to see how the pieces fit together. If you're approaching this decision and want a clearer picture, you can book a consultation at calmmoney.ca.

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This article is for educational purposes only and does not constitute personalized financial advice. Please consult a qualified financial planner before making any financial decisions.