When we talk about CSRS Survivor benefits – most people think of the survivor annuity.
But Civil Service Retirement System employees have several choices when it comes to survivor benefits. The following items have important survivor benefits or beneficiary designation options that you should know about:
- CSRS Survivor Annuity or Pension
- FEHB Health Insurance
- FEGLI Life Insurance
- CSRS Voluntary Contributions Plan
- Last CSRS Paycheck
- Social Security (in some cases)
- TSP – Thrift Savings Plan account
But let’s talk about the primary Civil Service survivor benefit – the CSRS survivor annuity…
CSRS Survivor Annuity
When you retire from CSRS, you can choose to provide your survivor with a survivor annuity.
When you pass away, your survivor will continue to receive a portion of your pension every month.
There are three different survivor annuity options you can choose…
- Full Survivor Annuity – 55% of your full pension
- Reduced Survivor Annuity – 55% of a portion of your pension
- No Survivor Annuity
If you are married, you must have your spouse’s written permission to select anything other than the full survivor annuity.
Let’s talk more about each of your choices…
1.) Full CSRS Survivor Annuity
If you go with the full survivor annuity – your survivor will receive 55% of your monthly pension after you pass away.
It will cost you 10% of your monthly CSRS pension to provide this survivor annuity. And this reduction will be permanent. Your CSRS pension will be reduced by 10% every month as long as you draw your pension.
It doesn’t matter if you pass away 1 year, or 100 years after you retire: each month, your pension will be reduced by 10%. But, when you pass away, your survivor will receive 55% of your pension for the rest of their life.
Example of Full CSRS Survivor Annuity
For an example, let’s say your CSRS pension was going to be $2,000 a month.
When you select the full survivor annuity at retirement, your pension will be reduced by 10% ($200). You would now receive $1,800 a month during retirement.
If you die, your survivor will receive 55% of your CSRS pension each month – which works out to be $1,100.
Your Regular CSRS Pension (before reduction) = $2,000/month
Cost of Survivor Benefit (10% reduction) = $200/month
Monthly Pension You Receive in Retirement = $1,800/month
What Survivor Will Receive After You Pass Away = $1,100/month
***If your survivor is someone other than your spouse – your cost may be higher than 10% – but the benefit amount to your survivor would be the same.***
2.) Reduced CSRS Survivor Annuity
When you choose a reduced survivor annuity – you can choose to offer 55% of a part of your CSRS pension.
This might sound a little tricky – when you fill out the form – you write in the annual amount of your pension that you would like to be subject to a 55% survivor annuity.
So, if you wanted to provide your survivor with $5,500 a year, you would write in $10,000. Of course, you can’t write in an amount that is greater than your regular CSRS pension. But you can choose any dollar amount you would like.
The cost for this benefit is 2.5% for the first $3,600 of annual survivor benefit and then 10% of the amount of your pension subject to the survivor benefit above $3,600.
Example of Reduced CSRS Survivor Annuity
Let’s continue with our example where your monthly CSRS pension is $2,000 a month.
At retirement you choose a reduced survivor annuity benefit. Let’s say you want your survivor to receive $5,500 a year/$458 a month.
The cost will be 2.5% of $3,600 + 10% of $6,400 = $90 + $640 = $730 a year/or $61 a month
Your Regular CSRS Pension (before reduction) = $2,000/month
Cost of Survivor Benefit = $61/month
Monthly Pension You Receive in Retirement = $1,939/month
What Survivor Will Receive After You Pass Away = $458/month
***If your survivor is someone other than your spouse – your cost may be higher – but the benefit amount to your survivor would be the same.***
3.) Choosing No CSRS Survivor Annuity
You do have the option of not offering any survivor annuity. Married CSRS will need to get their spouse’s permission to make this choice.
Unless you are in a unique situation where you don’t have a survivor, it usually makes sense to consider some form of survivor annuity.
Even if your spouse or survivor doesn’t need the money – there are important reasons your should consider choosing some type of survivor annuity.
What If My Spouse Doesn’t *Need* the Money?
Let’s say you don’t think your survivor will need a survivor annuity because they have plenty of money.
You should still consider offering a survivor benefit.
The reason? Two words… Health Insurance.
If your spouse is not receiving a survivor annuity benefit – they will not be eligible for FEHB health insurance after you die.
Even if your spouse is on your FEHB plan during retirement – if you die and don’t provide a CSRS survivor annuity for your spouse – they will lose their FEHB health insurance.
For this reason – I recommend that Federal Employees consider offering *at least* the reduced survivor annuity.
Even if your spouse won’t need the money – having health insurance will still be very important.
Who Counts as a Survivor?
For many people, their spouse is their primary survivor.
But what if you’re not married, and you want to provide a survivor annuity for that special person in your life?
If that person has an ‘insurable interest’ in you – chances are that you will be able to list them as your survivor.
However, there will be an extra cost to count this person as your survivor and your cost for the survivor annuity options may be dramatically higher depending on their age.
When anyone other than a spouse is your survivor, OPM will look at the age difference between you and your survivor. The younger your survivor – the higher your cost to provide a survivor annuity benefit.
Important Information for Divorce/Re-Marriage
If you are divorced or re-married, you need to pay special attention to your survivor benefit choices.
Every case is unique. I have seen situations where the Federal Employee was required to provide full survivor benefits to their former spouse – and other cases where no survivor benefits were required.
You will want to consult your attorney and court documents if you have any questions about what is required for your situation.
The CSRS VCP Annuity is Different than CSRS Survivor Annuity
As a CSRS, you have great retirement benefits. One of your best retirement benefits is the CSRS Voluntary Contributions Program (VCP). But surprisingly many CSRS Federal Employees have never even heard of the CSRS VCP. You can find out more about the CSRS Voluntary Contributions program by clicking here.
Here’s what you need to know for our purposes here: the VCP is an incredible benefit when used correctly. But there is a part of the VCP that allows you to choose an annuity that also has survivor benefits. However the CSRS VCP Annuity and it’s Survivor Annuity options are very different from your regular CSRS Survivor Annuity that we’ve been discussing here. Click here to read more about why the CSRS VCP Annuity is usually a bad idea.
Most Important Things You Can Do
One of the most important things you can do for your loved ones is to make sure they will be taken care of if you pass away.
- Taking care of all of your beneficiary designations
- Having a will/trust in place
- Make sure you have enough life insurance
- Having all of your financial documents in order
- Establishing a relationship with a financial planner that you *both* like and trust
Even if it makes you a bit uncomfortable – you owe it to your loved ones to make sure that they will be taken care of even after you’re gone.
CSRS Have Unique Financial Planning Considerations
Federal employees really do have unique financial planning considerations that most generic planning misses. And as a CSRS, you have even more unique benefits to consider. Unique benefits that many people don’t understand.
Are you looking for a financial planner who understands your CSRS benefits?
I’m Micah Shilanski. I’m a CERTIFIED FINANCIAL PLANNER™ professional who specializes in helping federal employees get the most out of their federal retirement benefits.
I’m the founder of this website, Plan-Your-Federal-Retirement.com. I’ve written articles for FedSmith.com, and been featured in other articles for NARFE and GovExec.com. I’ve also written a book on the CSRS Voluntary Contributions Program.
But my most important experience comes from helping my financial planning clients. Most of my clients are federal employees just like you. I’ve helped individual CSRS Federal Employees step-by-step through the entire federal retirement process.
I’ve seen the mistakes that people (and even some professionals!) can make with CSRS benefits, and I want to help you avoid them.
I help my clients understand their federal retirement benefits and make the best choices for their personal situation. We even help our clients review their SF-50s to make sure their creditable service will be correct. Most financial planners don’t even know what an SF-50 is.
If you’re interested in having personal help, the first step is to schedule a personal consultation. Find out more about a personal consultation and why my approach to financial planning is different.
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