A Question of Survival

Survivor benefits can be a confusing issue for federal employees, not to mention one that many don’t like to spend too much time contemplating. Here are a couple of recent questions I’ve received about survivor benefits, and my responses.

FERS Survivor Benefit

My husband and I are both federal employees and are planning to retire in the next year or two. Since we both have had lengthy federal careers (30-plus years each!) and our salaries are similar, we feel that we don’t need to elect a survivor benefit for each other. Is there anything we should consider?

Congratulations on your long career in federal service and best wishes on your upcoming retirement! In your case, under the Federal Employees Retirement System, you will each be entitled to maintain health insurance, but you should consider the option of providing a survivor annuity for each other anyway. That way, you can be sure that each spouse will have adequate income no matter what happens. Consider the following examples:

No Survivor Benefit: In this case, either spouse would receive the following: an unreduced FERS benefit, a Social Security retirement benefit, and the balance in their Thrift Savings Plan account. The surviving spouse would get a federal retirement benefit (only their own), Social Security (the higher of the two benefits), the balance of both TSP accounts and life insurance proceeds, if applicable.

Maximum Survivor Benefit: Either spouse would receive a reduced FERS benefit (to provide for a spousal annuity), a Social Security retirement benefit and their TSP balance. The surviving spouse would receive a FERS unreduced retirement (since they no longer need to provide a survivor annuity), half of the late spouse's unreduced retirement, Social Security retirement (the higher of the two benefits), the balance of both TSP accounts and life insurance proceeds, if applicable.

So you should ask yourself:

• Can I live on my own FERS retirement and the higher of our two Social Security benefits when we had twice as much lifetime income before?
• What if we live beyond our life expectancy and spend our retirement savings? Will the remaining income be enough to cover our day-to-day expenses?
• Have we planned for the possible need for long-term care?
• Have we considered our differences in age, income, and spending and saving habits?
• What about life insurance? Most term insurance, such as that provided under the Federal Employees Group Life Insurance program, is reduced in retirement or is very expensive to continue. Whole life insurance is permanent, but is very expensive—possibly more than providing a survivor benefit.

Try putting numbers to the two examples above to see if it makes sense financially to waive the survivor benefit election.

Social Security Survivor Benefit

I am eight years older than my wife. My Social Security retirement benefit will be substantially larger than hers. I am holding off on filing for my Social Security retirement benefit until I am 70 years of age. When I pass, will my wife receive my Social Security benefit that I received at 70 or what I would have received at full retirement age (66 years, seven months)?

As long as she is at her full retirement age (67 if she was born in 1960 or later) for Social Security, she will be entitled to the amount you were receiving at the time of your death. 

Another issue that may affect your wife’s Social Security widow’s benefit amount is whether she is entitled to her own earned retirement benefit and, if so, what age she was when she began receiving her own Social Security. 

If she is already receiving benefits as a spouse, her benefit will automatically convert to a survivor’s benefit after Social Security receives a report of death. If she is also eligible for retirement benefits, but hasn't applied yet, she has the option to apply for retirement or survivors benefits and switch to the other (higher) benefit later. 

If she is already receiving retirement benefits, then she can only apply for benefits as a surviving spouse if the retirement benefit that she receives is less than the benefits she would receive as a survivor.

If she becomes entitled to retirement benefits less than a year after filing for her own retirement benefits, then she might be able to withdraw her retirement application and apply for survivor benefits only. This Social Security Administration booklet explains some of your rights and responsibilities when you receive retirement or survivor’s benefits. Another one explains survivor's benefits in more detail. And here’s one on four tips for widows.