When planning your FERS retirement, calculating your surviving spouse’s income after you pass away is a crucial component of your financial strategy for the future. Here’s a quick overview to help you get started.
FERS Survivor Benefits
For FERS participants, you can elect to have your survivor receive 50% of your base annuity when you pass away, or 25% of your base annuity. The reduction in your FERS annuity amounts to 10% for the 50% survivor benefit and a 5% reduction for the 25% survivor benefit. It’s important to understand that the term, base annuity, refers to the annuity amount before any other reductions are made (insurance premiums, tax withholdings, etc.).
Though electing a survivor benefit reduces the annuity you receive when you retire, it provides your spouse with guaranteed income when you pass away and they will continue to be covered under FEHB. If your spouse passes away before you, contact the Office of Personnel Management (OPM) to remove the deduction from your monthly benefit. For complete information go to www.opm.gov/support/retirement/faq/survivor-benefits/.
“If you delayed your Social Security benefit until age 70, your survivor will receive the increased amount.“
Social Security Survivor Benefits
Your surviving spouse can file for benefits any time between age 60 and their full retirement age. If they start survivor benefits at an earlier age, the amount will be reduced a fraction of a percent for each month before their full retirement age.
If they file at their full retirement age, they’ll receive 100% of your benefit. However, if you elected an early benefit before you died, their benefit will be based on the reduced amount. On the other hand, if you delayed your Social Security benefit until age 70, your survivor will receive the increased amount.
If both of you were at full retirement age and receiving benefits at the time of your death, your surviving spouse will receive the higher amount of the two benefits. For complete information go to www.ssa.gov/benefits/survivors/#anchor1.
TSP Spouse Beneficiaries
Once the TSP confirms your spouse is your beneficiary, they’ll establish a Beneficiary Participant Account in their name. They will not be able to take out TSP loans or make contributions to their Beneficiary Account. However, they can withdraw from the account and make inter-fund transfers. Remember– the same TSP withdrawal rules apply: taxes on distributions, RMDs and early withdrawal penalties.
If there’s an outstanding TSP loan, funds will not be distributed until the outstanding amount has been foreclosed on (your estate or survivors cannot repay a TSP loan). The distributed funds are considered taxable income to your estate, not your beneficiaries. For complete information go to www.tsp.gov/bulletins/14-4/.
