Which is Better to Put in Place for My Wife: Survivor Benefit or Guaranteed Life Insurance?

By on November 23, 2015 in Q&A with 14 Comments

Q: I will be retiring at the end of November 2017. Do I take a full survivor benefit for my wife which I estimate will be $226.00 that is deducted from my monthly retirement, or do I take some kind of guaranteed life insurance that would guarantee her an income should I pass before her? I am currently 55; my net annuity after deductions is estimated at $2,553.00 per month. I am under FERS, am 8 yrs older than my spouse, carry FEHB on my spouse and statistically am likely to predecease her.

A: If it is important for your spouse to have FEHB coverage after your death, then you will want to elect some level of survivor benefit from your FERS pension. It doesn’t have to be full (50%), as a less than full survivor benefit (25%) will allow her to continue FEHB enrollment after your death. If you elect no survivor benefit, your spouse will not be allowed to continue enrollment in FEHB after you die.

Another consideration is that your FERS pension (and therefore any survivor benefit related to it) will receive cost of living adjustments, while the death benefit of the life insurance (and therefore any income stream derived from it) will lose value due to inflation.

If I were you (which, of course, I am not), I would elect at least a less than full survivor benefit for the purpose of guaranteeing my wife a survivor benefit. You may want to compare whether it makes sense to get: 1) a full survivor benefit; 2) a less than full survivor benefit and buy insurance with the balance of the cost of a full survivor benefit; 3) a less than full survivor benefit and investing/spending the balance of the cost of a full survivor benefit.

When I retired I got a less than full survivor benefit from my CSRS pension for my wife (albeit for reasons different than FEHB coverage) and investigated purchasing life insurance with the balance of the cost of a full survivor benefit. The life insurance option didn’t make sense for me, so we invested/spent the rest.

I hope this is helpful.

John Grobe’s latest book, The Answer Book on Your Federal Employee Benefits, has just been released by LRP Publications. The book is written in an easy to understand question and answer format and covers all areas of federal benefits from the perspective of an employee at various stages of their career. Order your copy at shoplrp.com.

© 2016 John Grobe. All rights reserved. This article may not be reproduced without express written consent from John Grobe.

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About the Author

John Grobe is President of Federal Career Experts, a consulting firm that specializes in federal retirement and career transition issues. He is also affiliated with TSP Safety Net. John retired from federal service after 25 years of progressively more responsible human resources positions. He is the author of Understanding the Federal Retirement Systems and Career Transition: A Guide for Federal Employees, both published by the Federal Management Institute. Federal Career Experts provides pre-retirement seminars for a wide variety of federal agencies.

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