Death is something no one likes to think about or plan for. But regardless of how much we think about it, it is a natural part of life. For some of us it comes later and for some of us it comes sooner. There is really no way to know, but there are some things that we can do to make sure those that we leave behind are taken care of.
For the purposes of this article I will focus on those that are near or already in retirement.
Survivor Annuities
This can be a really important benefit for a surviving spouse. When you’re filling out your retirement paperwork, you have the option to elect a full survivor annuity. What this means is that your spouse will be eligible for 50% of your pension if you were to pass away first. To be eligible for this option however, your pension will be decreased by 10%. There is also an option for a reduced survivor annuity which would give your spouse access to 25% of your pension if you were to pass away, and this option would only decrease your pension by 5%.
For example, let’s say your full pension was $30,000 and you elected a full survivor annuity. Your pension would decrease to $27,000, but your spouse would be eligible for $15,000 if you were to pass away first. If your spouse was to pass away first, then your pension would go back to the original $30,000.
Electing a survivor annuity is not only important to provide potential income for your spouse, but also to allow them access to FEHB if you were to pass away. I’ll address this in the next section.
FEHB
Your spouse will only remain eligible to keep your health benefits plan if the following three criteria were met.
1. You must have been enrolled in FEHB when you died.
2. Your spouse must have been covered under your plan at that point as well.
3. Your spouse must be eligible for a survivor annuity. As I mentioned above, if you do not elect a survivor annuity on your retirement paperwork, your spouse will not be able to continue FEHB without you. This single consequence can make a difference of thousands of dollars very quickly.
If all three of these points are met, your spouse can continue your plan and can even convert to a different type of plan within the FEHB program if desired.
Children who are covered under the plan can continue coverage as well until they reach age 26.
Life Insurance (FEGLI)
Whoever you designate as your beneficiary for your life insurance would be entitled to the proceeds. It is essential to keep these beneficiaries up-to-date as your family situations change. For example, if you forgot to remove your ex-spouse from your beneficiary designation, they would still be entitled to your life insurance proceeds regardless if you were married again or not. A beneficiary designation will even trump your will and other estate documents.
It is important to remember that at age 65, your basic life insurance under the federal plan will start to decline by 2% per month unless you decide to pay for more coverage. If life insurance is important to your financial plan, make sure that you address this issue.
Long Term Care Benefits
While a federal worker or a federal retiree is still alive, their spouse is able to enroll under the federal long term care insurance program. Once the federal retiree passes away, their spouse will only be eligible to enroll if they have a survivor annuity.
Thrift Savings Plan (TSP)
At the death of the TSP participant, the account will transfer to whoever was the beneficiary. (Another reason to keep your beneficiaries up-to-date.) The beneficiary will then be able to decide if they want to keep the funds in the TSP or transfer it to a different account.
Social Security Survivor Benefits
If a federal worker had enough social security credits then their surviving spouse will be eligible for at least a portion of their benefit. If the survivor is at full retirement age, they generally receive 100% of the workers benefits amount. If a survivor is between ages 60 and their full retirement age, they are eligible to receive 71%-99% the workers benefit amount. And regardless of their age, if a survivor has a child younger than 16, they are eligible for 75% of the workers benefit amount.
Conclusion:
I never write these types of articles to scare people about death. My goal is to get people the plan for their future so that they can enjoy life as much as possible. If we do our best to be prepared for whatever comes our way, then we are much more likely to live a full life without regrets.
