When it comes to FERS retirement planning, no decision carries more emotional and financial weight than your survivor benefit election. At GovRet.com, we've helped thousands of federal employees navigate this critical choice. It's not just about numbers—it's about securing your spouse's financial future and ensuring peace of mind for both of you.
Understanding Your FERS Survivor Benefit Options
FERS offers three main choices for married employees:
- Full Survivor Benefit (50%): Your spouse receives 50% of your unreduced annuity after your death
- Reduced Survivor Benefit (25%): Your spouse receives 25% of your unreduced annuity
- No Survivor Benefit: Your pension stops completely upon your death (requires spouse's notarized consent)
But understanding what these options truly mean requires looking beyond these simple descriptions.
The True Cost of the FERS Survivor Benefit
The survivor benefit isn't free—it reduces your monthly pension:
- Full benefit (50%) costs 10% of your gross annuity
- Reduced benefit (25%) costs 5% of your gross annuity
- This reduction is applied before taxes, reducing both gross and net income
- The reduction continues for your lifetime, even if your spouse predeceases you
For a retiree with a $3,000 monthly annuity, the full survivor benefit reduces their monthly income by $300—that's $3,600 annually.
What Your Spouse Actually Receives
The survivor annuity is calculated based on your unreduced annuity, not your reduced amount:
- With the 50% option, your spouse receives 50% of what your annuity would have been without the reduction
- With the 25% option, they receive 25% of your unreduced annuity
- The survivor benefit includes annual cost-of-living adjustments (COLAs)
- Benefits continue for your spouse's lifetime, regardless of remarriage after age 55
Using our $3,000 example, your spouse would receive $1,500 monthly with the 50% option or $750 with the 25% option.
Beyond the Annuity: FEHB and the Survivor Benefit
The survivor benefit decision impacts more than just income—it determines whether your spouse can maintain Federal Employee Health Benefits (FEHB) coverage:
- A surviving spouse must receive some level of survivor annuity to remain eligible for FEHB
- Even the 25% survivor benefit option preserves FEHB eligibility
- Without a survivor annuity, your spouse loses FEHB coverage upon your death
- The value of lifetime FEHB coverage often exceeds the cost of the survivor benefit
For many retirees, this FEHB connection is the most compelling reason to elect a survivor benefit.
Running the Numbers: Is the Survivor Benefit Worth It?
Let's analyze the financial aspects with a typical scenario:
- Federal retiree with $4,000 monthly annuity
- Cost of 50% survivor benefit: $400 monthly
- Potential survivor benefit: $2,000 monthly
- Value of FEHB coverage: Approximately $8,000-$15,000 annually
The break-even point? If the retiree dies after about 10-15 years, the surviving spouse will receive more in benefits than the couple paid in reductions.
Alternatives to the Survivor Benefit
Some financial advisors suggest alternatives to the survivor benefit, but each has significant drawbacks:
Life Insurance
- Pros: Potentially larger benefit, no reduction in annuity
- Cons: No COLAs, premiums increase with age, may become uninsurable, doesn't preserve FEHB
TSP/Investment Portfolio
- Pros: No reduction in annuity, potential growth, flexibility
- Cons: Investment risk, no guaranteed income, doesn't preserve FEHB
Combination Approach
- Elect the 25% survivor benefit (to preserve FEHB)
- Use life insurance or investments to supplement income
- Reduces annuity by only 5% while maintaining key benefits
Use GovRet.com's survivor benefit calculator to compare these options with your specific numbers.
Factors That Should Influence Your Decision
Consider these critical factors when making your survivor benefit election:
- Age difference between you and your spouse: Larger differences increase the value of the survivor benefit
- Health and family longevity: Consider which spouse is likely to live longer
- Your spouse's retirement income: Would they have sufficient income without your annuity?
- Alternative health insurance options: Does your spouse have other reliable health coverage?
- Your other assets: Do you have substantial savings, investments, or other pensions?
The more dependent your spouse would be on your pension, the more compelling the survivor benefit becomes.
Special Situations and Considerations
Court-Ordered Former Spouse Benefits
If you're divorced, your court decree may require providing a survivor benefit to a former spouse:
- This may limit what you can offer a current spouse
- The combined benefits cannot exceed 50% of your annuity
- The cost of a former spouse benefit is the same as for a current spouse
Insurable Interest Option
For unmarried retirees who wish to provide for someone financially dependent on them:
- Available for a person with an "insurable interest" (financial dependency)
- Higher cost than regular survivor benefit (10-40% reduction)
- Provides 55% of your reduced annuity
- Must pass a medical examination in most cases
Changing Your Election After Retirement
Your survivor benefit election is generally irrevocable with limited exceptions:
- If your spouse dies, you can have the reduction eliminated
- If you divorce, you may be able to eliminate the reduction (unless court-ordered)
- If you remarry, you can elect a survivor benefit for your new spouse within 2 years
These limitations make your initial decision particularly important.
The Decision Process: A Step-by-Step Approach
Follow these steps to make an informed survivor benefit decision:
- Calculate your expected FERS annuity
- Determine the cost of each survivor benefit option
- Inventory all other income sources your spouse would have
- Evaluate health insurance options without FEHB
- Consider your spouse's life expectancy
- Discuss priorities and concerns with your spouse
- Model different scenarios with GovRet.com's calculator
This isn't a decision to make alone—involve your spouse in the conversation.
The FEHB Loophole: A Minimum Survivor Benefit
Some advisors suggest this little-known strategy:
- Elect the smallest possible monthly survivor annuity ($1)
- This preserves FEHB eligibility with minimal annuity reduction
- Requires specific language on your retirement application
- May face scrutiny from OPM
While technically possible, this approach carries risks and isn't right for everyone.
The Bottom Line
The FERS survivor benefit decision requires balancing financial considerations with emotional security. For most federal couples, some level of survivor benefit makes sense—particularly to preserve valuable FEHB coverage.
The full 50% benefit provides the most comprehensive protection but at the highest cost. The 25% option offers a middle ground, preserving FEHB eligibility while reducing the impact on your monthly income.
Use GovRet.com's survivor benefit analyzer to model different scenarios with your specific numbers. Our tools help you visualize the long-term impact of each option, ensuring you make a decision that provides both financial security and peace of mind for you and your spouse.
Remember: this decision isn't just about maximizing dollars—it's about protecting the people you love.