Everything we’re going to discuss are basic principles; you should have a one-on-one conversation about your specific situation. Deciding if survivor benefits are worth it for you relies not only on your financial needs but also on your health and your family’s health. It will always be different for everyone.
Survivor benefits are based on your high three average and years of service. It will pay out up to half of your FERS pension to your surviving spouse for the rest of their lives. But there are some things to consider before you select this option:
If you were to pass away, your spouse may not be able to maintain their lifestyle or survive without that half of your pension. In that case, you might opt for survivor benefits or have life insurance in place to make sure that your spouse is covered upon your passing.
If your spouse doesn’t need that monthly income in retirement, should you pass away, then it might not be something you would choose to pay into.
Survivor benefits from the federal government primarily pass spouse-to-spouse. If your spouse were to pass away before you or before the benefit was fully paid out, the survivor benefits would not pass down to your family. If you had a life insurance policy in place, that money would trickle down to your family if your spouse passed away. Although life insurance is an alternative to survivor benefits, you would either need to have set that up years in advance or be in excellent health for it to be a viable option. If you are not in great health and can’t get a life insurance policy to cover that loss, well, then survivor benefits might be a better option.
Although survivor benefits are primarily spouse-to-spouse, you can pass it on to children with special needs. Again, I want to reiterate that it is always a case-by-case situation. If a child with special needs were collecting benefits elsewhere, the survivor benefits could interfere with those other benefits. So, it’s crucial to sit down and talk with your financial advisor about your specific needs because there’s no cookie-cutter answer to whether yes, you should take survivor benefits or no, you should not.
Another thing to consider, say you retire at age 60 with 27-30 years of service, and you pass away at age 80, and in that time frame, you paid approximately $50,000 for survivor benefits. Your spouse would need to survive you by at least four and a half to five years to recoup all of the money you put into that policy. This would be the time that you need to consider your spouse’s health.
Civil service employees are different from FERS employees in that the spouse of a CSRS employee would not have Social Security to rely on if you do not take the survivor benefit or have other alternatives like life insurance in place.
The best advice I can give you when it comes to selecting survivor benefits would be to contact a financial professional like myself, who specializes in federal benefits and retirement.
– Galen Bargerstock
President of Government & Civil Employee Services, LLC/Financial Professional