Retirement planning for fed couples, commonly referred to as dual feds, differs significantly from other couples. Both spouses typically qualify for federal pensions under FERS, and this dual-pension scenario can create a sense of financial security, as each spouse may assume their individual annuity will suffice for their retirement needs. With changes on the horizon and the federal workforce facing drastic reductions, it might be time to reexamine your retirement plans.
FERS Survivor Annuity
Many FERS annuitants opt to maximize their monthly payment and not elect a survivor annuity. They may feel that the deduction for this benefit (10% to 5% of your monthly annuity based on your election) is unnecessary because their fed spouse will also retire with an annuity and be eligible to carry their FEHB into retirement. This decision could backfire if one spouse faces a RIF and leaves federal service before they are entitled to an immediate annuity. The good news is, you have an 18-month window after you retire to change your survivor annuity election, though it requires a deposit to pay back the lack of deductions. If you’re a current retiree who fits within that time frame and is uncertain of your spouse’s job security, you could consider electing a survivor annuity and paying the deposit.
FEHB Coverage
When you retire with an immediate annuity, you are eligible to carry your FEHB coverage into retirement as long as you meet the 5-year continuity requirement (this includes being covered under someone else’s plan). This is an incredibly valuable benefit as the government continues to pay the same share of your premium that it did when you were employed.
Many dual feds probably opt for family coverage, but spouses with different healthcare needs may choose to be covered under separate self-only policies. Should you or your spouse lose their individual FEHB coverage due to separation, this is a Qualifying Life Event that would allow you to change your coverage outside of Open Season.
Who keeps the coverage? For active employees, insurance premiums are paid pre-tax, which can lower your tax bracket and subsequently your tax bill. This isn’t the case for retirees, your premiums are paid after tax. If you choose to keep your coverage with the active employee to get the tax benefit and they lose coverage, you will be able to re-enroll in FEHB.
Federal downsizing, driven by RIFs, VERA, DRP, and proposed benefit cuts, requires dual feds to proactively adjust their retirement plans. Assessing pensions, FEHB, TSP, and survivor benefits is critical, especially if one spouse faces separation. A specially trained Federal Retirement Consultant (FRC®) can help you take steps to maintain financial stability in times of uncertainty. For personalized guidance, schedule a free consultation today.
