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Should You Leave Some of Your Pension to Your Spouse?

What are the considerations for federal employees under FERS to leave survivor benefits to a spouse?

As a FERS (Federal Employees Retirement System) employee, your pension is often a key part of your retirement plan. It provides an income stream for the rest of your life with increases for inflation. It is an extremely valuable benefit to have. 

A question that many FERS federal employees ask as they retire is if they should leave a portion of their pension to their spouses as a survivor benefit if anything was to happen to them.

On the surface, it can seem like a simple decision. As we dig a little deeper, however, there are a number of things to consider.

Basics of Pension Survivor Benefits

When you fill out your retirement application, you will have 3 options for survivor benefits. They are summarized in this chart:

Survivor BenefitCost While You are Both Alive
50%10%
25%5%
0%0%

The first option (and default option) is a full survivor benefit which is 50% of whatever your pension is. For example, if your monthly pension is $3,000 then your spouse will be eligible for $1,500 if you were to pass away first. 

However, this benefit is not free. The cost is that your pension will be decreased by 10% when you are both alive. For example, if your full monthly pension is $3,000 then you’ll only receive $2,700.

You can also elect the 25% or 0% survivor benefit and the cost will decrease accordingly. 

Important Note: The full survivor benefit (50%) is the default option and your spouse is entitled to it if they want it. This means that to be able to elect any other option (25% or 0%), your spouse will have to sign and have it notarized. 

Don’t Lose Your Health Insurance

One of the biggest ramifications for not leaving your spouse a survivor benefit is that once you pass away, they will no longer be able to stay covered under FEHB.  

To allow your spouse to keep FEHB, you can elect either the full benefit (50%) or partial benefit (25%). For a spouse to keep your insurance once you pass, they have to be receiving a pension check from the Office of Personnel Management (OPM).

This can be a big deal so make sure you choose wisely. 

Those with a Former Spouse

Many divorce decrees have a provision that gives former spouses the survivor benefits. If you have a former spouse, you will want to check your divorce decree to see what they are entitled to. 

If your former spouse is entitled to your survivor benefits, it may be more complicated to provide a survivor benefit to a current spouse. 

Can I Change My Mind?

There is a small window of time where you can change your mind about the survivor benefits. Once you start receiving your regular pension payments, you will have 30 days to either increase or decrease the election. As before, a decrease will have to be notarized by your spouse. 

Once that 30 day window has passed, you will have another 17 months to increase your election if you desire. During this 17 months, you can only increase benefits and not decrease them. If you do make changes during this 17 months, you will have to make a payment for the payments that you would’ve paid if you would have elected it at retirement. 

What if My Spouse Passes First?

If your spouse was to pass away first and you had elected a survivor benefit, your pension will no longer be reduced by either 10% or 5% but you will not receive any compensation for the amount that you already paid into the system before your spouse passed. 

What if I get Married in Retirement?

For someone that retired as a single person but got married in retirement, they will have an opportunity to give their new spouse survivor benefits. But to do this, they will have to make a payment to cover the pension reduction they would have had between retirement and getting married. This can be substantial depending on how far the retiree is into retirement and their pension amount. 

Final Thoughts

It is important to note that just because a spouse has survivor benefits does not mean that they are set up for success. You will want to make sure that considering all the income that your spouse will be left with (Social Security Survivor Benefits, Your Pension Survivor Benefits, etc.) they will be able to continue their standard of living if you were to pass first. 

In my experience, a surviving spouse needs more than just 50% of the income that they had when both spouses were alive but again, you will have to take a good look at your own situation to know what makes sense for you. 

About the Author

Dallen Haws is a Financial Advisor who is dedicated to helping federal employees live their best life and plan an incredible retirement. He hosts a podcast and YouTube channel all about federal benefits and retirement. You can learn more about him at Haws Federal Advisors.

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