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One key point to consider for married retirees is the election of a
survivor annuity for your spouse. If you elect a full survivor's annuity
your spouse will receive 55% of your annuity when you die. The cost for
this is just under 10% of your annuity. Some retirees consider
alternatives such as a large insurance policy. There are risks to that
approach.
Another concern is that if you don't elect a survivor annuity for
your spouse, she/her won't be eligible to participate in your Federal
Employees Health Benefits plan (FEHB) after your retire.
Read on for complete information.
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Options
Many approaching retirement debate whether or not to take a full survivor’s
annuity – which reduces their annuity by close to 10% – or to simply purchase a
large insurance policy, at less cost, instead. There are a number of options for
you to consider and each option has its own potential risks that need to be
evaluated.
Retirees can take a full or partial annuity or depending on your personal
situation and how much you saved through prudent investing you may be able
to forgo a full survivor’s annuity with some exceptions.
Regardless of what you decide you need to know several key facts. Your spouse
MUST agree to a reduced annuity and sign the waiver form included with your
retirement application. Also – and this is a critical issue – if you and your
spouse elect NO survivor’s annuity your spouse will not be covered under your
federal health insurance coverage when you retire. You MUST elect a minimum
annuity as described on your retirement application for your wife to be covered
under your Federal Group Health Insurance program. View the
CSRS and FERS minimums before electing your survivors benefits if you want
your spouse to be covered by the FEHB program.
I consider the insurance option too great a risk for most spouses. The
survivor's annuity is backed by the federal government. There isn't any third
party involved. If you and your spouse choose an insurance policy rather than
have your annuity reduced research the insurance company thoroughly before
making this decision. Insurance companies can go bankrupt and your spouse could
be left with nothing. I'm not saying that insurance should not be considered at
all, what I'm saying is that you must be very careful. If you decide to buy
insurance instead of electing a survivor's annuity you can check the insurer's
financial stability with several rating services. Make sure that the company you
intend to work with is rated high on their lists. A.M. Best ratings are free as
long as you register on-line and they are very easy to use. They rate the
financial strength of Insurance companies from A++, Superior to S (Rating
Suspended) and everything in between. Several services such as Weiss Ratings
charges $14.95 for a comprehensive rating. I found the A.M. Best site very easy
to use and all that I had to do was register to obtain unlimited ratings.
Insurance Rating Links
A.M. Best http://ambest.com/ratings/search.html
Moody's Investor's Service
http://www.moodys.com/
Standard and Poor's
http://www.standardandpoors.com
Weiss Ratings http://weissratings.com
NOTE: Many of these rating reports are also available at
public libraries.
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