Final answer:
A Joint and Survivor option in a life insurance or pension plan pays out to the beneficiaries throughout their lifetimes. It is crucial for financial security in retirement, especially considering the effects of inflation on fixed incomes.
Step-by-step explanation:
The settlement option that pays throughout the lifetimes of two or more beneficiaries is called a Joint and Survivor option. This type of payout structure is common in cash-value (whole) life insurance policies, which feature both a death benefit and a cash value component. The cash value serves as an account that the policyholder can use during their lifetime. The Joint and Survivor option guarantees continuous payments to the surviving beneficiaries, providing financial security and income despite life's uncertainties.
Retirees often depend on pensions, known to economists as defined benefit plans. These are fixed annual payments set at retirement, regardless of changes in the cost of living due to inflation. This can lead to a significant erosion of purchasing power over time, emphasizing the importance of careful planning and potentially the consideration of inflation-adjusted options or additional financial products to secure retirement income.