Key Takeaways
- Survivor benefits can provide ongoing financial support for your loved ones, even after you’re gone.
- Planning ahead and understanding survivor benefits can protect your family from financial stress during a difficult time.
A Future-Proof Safety Net for Your Family
When we think of retirement, we often envision relaxing years ahead, but it’s just as crucial to consider the future for those who depend on us. Federal survivor benefits are one of the most significant ways you can ensure that your family is cared for financially after your passing. Survivor benefits within public sector retirement systems are available to most federal employees, including those in both the Civil Service Retirement System (CSRS) and the Federal Employees Retirement System (FERS).
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What Are Federal Survivor Benefits?
Survivor benefits are designed to provide ongoing financial support to the families of federal employees after they pass. Essentially, a portion of your federal retirement benefits can continue to go to your spouse or other designated dependents. These benefits usually come from your pension or annuity and are paid out as regular monthly payments.
For both FERS and CSRS, there are specific rules on how benefits are paid out, who qualifies to receive them, and what steps you need to take during your career to ensure they are properly set up.
Eligibility Requirements: Are Your Family Members Covered?
The most common beneficiaries of survivor benefits are spouses, but these benefits can also cover eligible children and, in certain circumstances, former spouses. Let’s look at the main groups who qualify:
- Spouse: For a spouse to receive survivor benefits, they generally need to have been married to the federal employee for at least nine months at the time of death, unless the death was accidental.
- Children: Unmarried children under the age of 18 (or up to 22 if they’re full-time students) are typically eligible for survivor benefits. Benefits may also extend to adult children who are incapable of self-support due to a disability that occurred before age 18.
- Former Spouses: In some cases, a former spouse may be entitled to survivor benefits if a divorce decree mandates it.
The Two Types of Annuities for Survivor Benefits
When setting up survivor benefits, you’ll usually choose between two main types of annuities: a full survivor annuity and a partial survivor annuity. The choice impacts how much income your survivor will receive and the cost it adds to your retirement deductions.
Full Survivor Annuity
A full survivor annuity provides your spouse with 50% of your unreduced monthly retirement income. Although choosing the full survivor option reduces your own monthly annuity during retirement, it provides the most substantial ongoing financial support for your spouse after your passing.
Partial Survivor Annuity
A partial survivor annuity generally provides 25% of your retirement income to your spouse. It reduces the overall cost from your retirement annuity, making it a popular choice for those who want to balance between the monthly retirement income they receive and what they leave to their spouse.
Choosing the Right Survivor Benefits for Your Family
While survivor benefits offer a valuable source of income to your family, the choices can feel overwhelming. To simplify, ask yourself a few key questions to help guide your decisions:
- What are our household expenses? Consider the ongoing expenses that your spouse or family would need to cover if you passed. This could include housing, healthcare, education for children, and other necessities.
- What is our risk tolerance? If you’re comfortable with a reduced income now, a full survivor benefit option may offer the most peace of mind. However, if immediate financial flexibility is a priority, a partial survivor annuity may be a better fit.
- Do we have other financial assets? If you have significant savings or investments outside of your federal pension, this may allow for greater flexibility in choosing a lower-cost survivor option.
How to Apply for Survivor Benefits
Setting up survivor benefits is a straightforward process, and it starts with selecting the right options when you apply for retirement. Here’s what you need to know:
- Choose Your Survivor Benefit Option on Your Retirement Application: When completing your retirement application, you’ll be asked to specify your desired survivor benefit. Be sure to choose either full, partial, or none, depending on your family’s needs.
- Keep Beneficiary Records Updated: Circumstances may change, and so might your survivor beneficiaries. Keep all beneficiary records updated to ensure there’s no confusion or delay in benefit payments.
- Notify Your Agency’s Retirement Office: Your agency’s HR or retirement office can help facilitate your choices, ensuring that your survivor benefits are properly documented and communicated.
How Much Do Survivor Benefits Cost?
The cost of survivor benefits varies, typically based on the amount of annuity you want to leave for your survivor. In general:
- A full survivor annuity for a spouse costs about 10% of your retirement annuity, reducing your monthly benefit by that percentage.
- A partial survivor annuity usually costs around 5%, creating a lesser reduction in your monthly income but providing a smaller survivor benefit.
These costs are deducted from your retirement annuity each month, and they’re factored into your calculations when you elect your retirement options.
Special Considerations: FERS and CSRS Differences
While both FERS and CSRS offer survivor benefits, there are differences worth noting:
- CSRS: CSRS participants often have higher pension benefits than FERS employees, which can result in larger survivor benefits. However, because CSRS employees aren’t typically covered by Social Security, there are fewer offsetting benefits.
- FERS: FERS retirees often receive smaller pensions but have access to Social Security, which can supplement survivor benefits. This dual approach can offer additional financial security for a surviving spouse or dependents.
Federal Employees Group Life Insurance (FEGLI) as Supplemental Protection
Federal Employees Group Life Insurance (FEGLI) provides life insurance to federal employees and can act as an additional layer of security for your family. Unlike the survivor benefits from your retirement annuity, FEGLI can offer a lump-sum payment to your survivors, which may help them manage immediate expenses. While it does come at a monthly premium, this option can add valuable financial protection beyond standard survivor benefits.
Reviewing and Adjusting Survivor Benefits Over Time
Survivor benefit needs can change as life circumstances evolve, so it’s wise to periodically revisit your benefit elections and make adjustments if necessary. Major life events such as marriage, divorce, or the birth of a child can all impact the decisions around survivor benefits. Regularly reviewing your choices and staying informed about any policy updates ensures that your benefit elections always reflect your family’s current needs.
Preparing Your Family for a Stable Financial Future
Choosing survivor benefits is about more than just finances; it’s about peace of mind for you and the people you love. By carefully considering the options available through federal retirement systems, you can provide for your family even when you’re not there. From selecting the right type of annuity to keeping your paperwork updated, every step you take now will pay dividends for your family’s future stability.
Federal survivor benefits are just one piece of a comprehensive retirement plan, but they’re a powerful tool for creating financial security. Taking the time now to understand and optimize these benefits is a gift that keeps on giving.
