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

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By on November 23, 2015 in Q&A with 0 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.

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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.