Should a Survivor Annuity Be Part of Your Retirement Planning?

Some financial planners believe that a survivor annuity is a good choice, while others may encourage you to forgo a survivor annuity and to purchase life insurance with the money you “saved” by not electing a survivor annuity. Here are several considerations.

Survivor annuities were discussed in an earlier article. That article was long enough without looking at the pros and cons of survivor annuities. Speaking of pros and cons, Will Rogers once asked: “If con is the opposite of pro, does that mean that Congress is the opposite of progress?”

Some financial planners believe that a survivor annuity is a good choice, while others may encourage you to forgo a survivor annuity and to purchase life insurance with the money you “saved” by not electing a survivor annuity.
There is no 100% correct answer as to what is right for you, as your choice will depend on your circumstances. Things you should consider follow:
If your spouse is not also a federal employee, or is not otherwise entitled to post-retirement health insurance in his/her own right, you must consider the availability of FEHB coverage for your spouse if you die first.
As we covered in the previous article, a survivor annuity is required if you want your spouse to be able to continue enrollment in FEHB after your death. A full survivor annuity is not required, but as least some level of survivor annuity must be chosen. This would mean a 25% survivor annuity for a FERS retiree and a “less than full annuity” for a CSRS retiree.
Other items to consider in the health care area are:
  • If you and your spouse are 65 or over, would Medicare alone be sufficient for your needs?
  • If you are retired military, would Tricare suffice?
  • Could you “save” enough money by not getting a survivor annuity to afford a good Medicare supplement?
Another consideration is whether your spouse will outlive you. If your spouse does not outlive you, all the money you contributed for a survivor annuity would have been for nothing. Looking at longevity factors can help you estimate “who will die first”. Some factors are:
  • The difference in age between you and your spouse
  • Gender differences, as women tend to live longer than men
  • The current health and health history of you and your spouse
  • Family health histories of your family and your spouse’s family
Sometimes, after reviewing the longevity factors, an answer to the “should I or shouldn’t I” question becomes clear. Sometimes it doesn’t.
Other sources of retirement income can also shine some light on your decision. How much retirement income will you bring in? How much will your spouse bring in? Can the surviving spouse get by without the extra income from a survivor annuity? Would you get more joy from spending the money while both of you are alive, than once one of you has passed?
If you are considering purchasing life insurance in lieu of a survivor annuity, you need to fully understand the insurance policy. For example:
  • What kind of policy is it? Often, only term policies will throw off a large death benefit for a reasonable cost if you are purchasing insurance in your 50s or 60s.

o   If it is a term policy, what is the term?

–Does it expire in a certain number of years? If so, what do you estimate your odds are of expiring before the policy does? If the policy expires before you do, you will have paid all the premiums for nothing.

–Does it get more expensive as you age? Do you know what the premiums will be when you are 80?

  • If it isn’t term insurance, do you understand how it works?
  • How is the insurance company rated by rating agencies?
  • Is the agent trustworthy?
You might have decided to read this article to get an answer to the question of whether or not you should elect a survivor annuity when you retire. Unfortunately (actually fortunately), we are not all alike. There is no one size fits all answer. Hopefully the questions posed in the article can bring you closer to the decision that is right for you and your spouse.

Agencies can request to have John Grobe, or another of Federal Career Experts' qualified instructors, deliver a retirement or transition seminar to their employees. FCE instructors are not financial advisers and will not sell or recommend financial products to class participants. Agency Benefits Officers can contact John Grobe at to discuss schedules and costs.

About the Author

John Grobe is President of Federal Career Experts, a firm that provides pre-retirement training and seminars to a wide variety of federal agencies. FCE’s instructors are all retired federal retirement specialists who educate class participants on the ins and outs of federal retirement and benefits; there is never an attempt to influence participants to invest a certain way, or to purchase any financial products. John and FCE specialize in retirement for special category employees, such as law enforcement officers.