Survivor Benefits Sound Generous—Until You Realize What Happens If You Choose Wrong

Key Takeaways

• Choosing the wrong survivor benefit election can permanently reduce your pension and leave your spouse or dependent without income security.

• You can only make changes to your survivor benefit election in very limited situations, so reviewing and updating your decision before retirement is essential.

Survivor Benefits Are a Critical Part of Retirement Planning

If you’re a public sector employee nearing retirement, the survivor benefit election is one of the most important decisions you’ll face. This choice doesn’t just affect you—it affects your spouse, your children, and anyone else you may wish to protect financially after your death.

The survivor benefit is the portion of your pension that continues to a surviving spouse or other eligible beneficiary. The default options may seem generous, but the wrong election can result in a permanent reduction to your annuity, a lack of income for your loved ones, or ineligibility for critical health insurance benefits.

Understanding how these benefits work under systems like the Federal Employees Retirement System (FERS) and the Civil Service Retirement System (CSRS) can help you avoid costly mistakes.

What Happens When You Elect a Survivor Benefit

At the time of retirement, you’re asked whether you want to provide a survivor annuity. If you’re married, the law requires that you provide the maximum survivor benefit unless your spouse consents in writing to a lower amount or to none at all. Your choice directly impacts two key areas:

• The monthly amount your survivor receives if you die.

• The monthly amount you receive while alive (your annuity is reduced to fund the survivor benefit).

Under FERS in 2025, you typically have these options:

• No survivor benefit: You receive your full annuity. Your spouse gets nothing after your death unless you had another life insurance or savings plan.

• Partial survivor benefit (25% of your unreduced annuity): Your annuity is reduced by about 5%.

• Full survivor benefit (50% of your unreduced annuity): Your annuity is reduced by about 10%.

CSRS retirees face similar options, although the exact reductions differ slightly. And once you choose, changes are generally not allowed unless you experience specific qualifying life events.

Survivor Annuity and FEHB Coverage

One of the most overlooked consequences of skipping a survivor benefit election is the impact on Federal Employees Health Benefits (FEHB) coverage. For your spouse to keep FEHB coverage after your death, you must:

• Be enrolled in a Self Plus One or Self and Family plan at the time of death.

• Have elected a survivor annuity of any amount, even partial.

If you elect no survivor benefit, your spouse loses FEHB coverage upon your death. There is no reinstatement.

This applies regardless of how long your spouse was covered while you were alive. It is a rule that can financially devastate families unprepared for long-term health expenses.

When You Can Change Your Survivor Election

In most cases, your survivor benefit election is locked in once your annuity starts. However, the Office of Personnel Management (OPM) allows changes only in specific situations:

• Divorce: You can modify or cancel the election.

• Marriage after retirement: You may elect a survivor benefit for a new spouse within two years of marriage, but your annuity will be retroactively reduced.

• Death of spouse: You can cancel the survivor benefit and restore your full annuity.

Outside of these exceptions, you cannot simply change your mind. This makes it essential to weigh your options carefully before retirement.

Common Misunderstandings That Lead to Mistakes

Misunderstandings about survivor benefits are common. Many public sector employees assume they can adjust their decision later or rely solely on life insurance. But the implications go deeper:

• You can’t change your mind after retirement without a qualifying life event.

• Life insurance payouts are not tied to pension continuation or health coverage.

• FEHB access is tied to your survivor annuity decision, not life insurance or will instructions.

These distinctions make it crucial to plan survivor benefits as part of a broader retirement and estate strategy, not as an afterthought.

Survivor Benefits and Cost-of-Living Adjustments (COLAs)

If your survivor receives an annuity, it will include cost-of-living adjustments based on the same formula as your retiree annuity. This helps protect against inflation. For 2025, the COLA increase is 2.5%.

Partial and full survivor annuities receive the same COLA percentage increases, which makes even a partial benefit more valuable over time. That compounding protection can be critical for surviving spouses who may live decades longer than the retiree.

Survivor Benefit for Children and Other Dependents

While most retirees focus on spousal benefits, there are provisions for children or other dependents in limited cases. Under FERS and CSRS:

• Children can receive a small fixed monthly annuity, but only until age 18 (or 22 if in full-time school).

• The benefit is only payable if the child is unmarried and dependent.

• This annuity is separate from and not impacted by your spousal election.

In some cases, if there is no spouse, this small child survivor benefit may be the only income available to dependent minors.

What Happens If You Die Without Electing a Survivor Benefit

If you were married at retirement and did not elect a survivor benefit (with spousal consent), your spouse will receive nothing from your pension after your death. They will also lose eligibility for FEHB.

For unmarried retirees or those who chose not to name a survivor:

• The pension ends upon death.

• Any remaining retirement contributions are paid in a lump sum to your designated beneficiary, if any.

This lump sum is often much less than the value of a survivor annuity, especially for longer retirements.

The Financial Impact of Each Option

Let’s break down the trade-offs:

• Full survivor benefit: Higher peace of mind for spouse but reduced monthly income while you’re alive.

• Partial survivor benefit: Middle ground; some protection and slightly higher income for you.

• No survivor benefit: Maximum monthly income while you’re alive, but no continuation for your spouse, no FEHB, and potential long-term hardship.

This decision often comes down to how long you expect to live, your spouse’s financial independence, and your other retirement assets.

How Survivor Benefits Work with Social Security

Survivor benefits are separate from Social Security spousal or survivor benefits. If your spouse qualifies for both, they may receive:

• Your federal survivor annuity

• Their own Social Security benefit or a survivor Social Security benefit (whichever is higher)

Coordination can be complex, especially if you are a CSRS retiree without Social Security coverage. In that case, your survivor annuity does not reduce their Social Security, but their own government pension might reduce the Social Security benefit they receive as your widow or widower due to the Government Pension Offset (GPO), which is still in effect in 2025.

Survivor Annuity vs. Life Insurance

It’s tempting to compare the cost of survivor benefits with a life insurance policy. But they serve different purposes:

• Life insurance provides a lump sum payout but does not provide ongoing income.

• Survivor annuity provides steady, inflation-adjusted monthly income for life.

In 2025, with increased life expectancies and rising healthcare costs, relying solely on life insurance could leave your spouse short on monthly cash flow. A survivor annuity guarantees stability.

Making an Informed Survivor Benefit Election

Before you retire, you should:

• Request an estimate from your agency’s HR or retirement office showing how each option affects your annuity.

• Review the implications for FEHB if you’re relying on your plan for your spouse’s future healthcare.

• Discuss long-term needs with your spouse and other potential survivors.

• Consider your other assets like TSP balances, home equity, or IRAs.

These steps help you choose based on facts, not just emotion or incomplete information.

Why You Need a Plan That Balances Today and Tomorrow

In 2025, retirement income planning has to be about more than just how much you get on day one. Survivor benefits ensure continuity, but the wrong decision can cause an irreversible income gap for those you leave behind.

A thoughtful survivor benefit election considers:

• Your spouse’s life expectancy and health status

• Your financial ability to afford a reduced annuity

• The value of keeping FEHB access after death

Failing to consider these factors may result in short-term gain but long-term loss.

Secure Your Family’s Financial Future

Making the right survivor benefit election is not just a retirement formality—it’s a long-term protection strategy for those you care about. The effects ripple beyond just your pension. They affect healthcare, income stability, and quality of life for your surviving spouse or dependent.

If you haven’t reviewed your survivor election or if you’re unsure how your choice will affect your family’s future, don’t wait. Speak with a licensed professional listed on this website to ensure your decision reflects your goals, values, and financial situation.