Before you submit your FERS retirement application, there are a three crucial questions to consider. Without all the facts, you may make decisions that permanently affect your net retirement income. Even worse – the wrong decision can impact the financial security of your spouse when you pass away.
Which Survivor Benefit Works Best For Your Financial Situation?
Electing a survivor benefit reduces your monthly annuity (pension). Though your spouse automatically gets the 50% (maximum) survivor benefit, there are two other options:
- 50% (Maximum) Survivor Benefit: A10% reduction of your monthly annuity allows your spouse to receive 50% of your pension if you pass away and continue their FEHB coverage.
- 25% Survivor Benefit. Less costly than the 50% survivor benefit, the 25% option results in a 5% reduction of your monthly annuity and your spouse can continue their FEHB coverage if you predecease them.
- 0% Survivor Benefit. This option costs you nothing but, without a survivor benefit, your spouse loses their FEHB coverage upon your death.
If you choose a partial benefit or no benefit at all your spouse will have to sign a waiver.
“The only automatic waiver of the 5-Year Rule is when you accept an early retirement offer from your agency.”
Can You Satisfy The 5-Year Rule For Continuing FEHB In Retirement?
A big advantage of continuing FEHB into retirement is that the federal government continues to pay up to 75% of your overall FEHB premium. To be eligible, you must meet two requirements:
(1) You have to eligible to retire on an immediate annuity which begins to accrue no later than one month after the date of your final separation.
(2) You’ve been continuously enrolled (or covered as a family member) in any FEHB plan (not necessarily the same plan) for the five (5) years of service immediately preceding retirement (or, if less than five years, for all service since your first opportunity to enroll).
Time covered under TRICARE can count as long as you are covered under FEHB when you retire. The only automatic waiver of the 5-Year Rule is when you accept an early retirement offer from your agency.
Is It Worth Keeping FEGLI Option B In Retirement?
During your career, FEGLI’s basic term life insurance is appealing because Uncle Sam pays for 33% of your premiums. However, if you added FEGLI Option B, premiums become progressively more expensive as you age. Before you drop FEGLI Option B, see if you can get more bang for your buck with a permanent life insurance policy from a private carrier. If you need help weighing the pros and cons, consider working with an FRC® trained advisor.
