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Survivor Benefits vs. Life Insurance

Brandon S. Christy, CPA, PFS

There are many considerations when deciding on survivor annuity benefits for your spouse.

The benefit of a survivor annuity is a "life insurance" feature that can provide 50-55% income replacement at a cost of about 10% of your monthly annuity. Keep in mind that the survivor annuity is required (at least the minimum election) to provide FEHB for surviving spouses.

Also, while the reduction in the retiree's annuity will reduce current taxable income, the surviving spouse will pay tax on a portion of the benefits. COLAs will apply to the survivor's benefit, thus there is inflation protection.

Life insurance itself has a different set of pros and cons. The premiums are paid with after-tax dollars, so the insurance benefits are tax-free.

Additionally, a lump sum payout from insurance provides much greater flexibility in contrast to the survivor annuity. If the spouse predeceases the federal employee, the beneficiary can be changed, guaranteeing the benefit will be paid out to heirs.

However, can life insurance compete with the cost of the survivor annuity? Often, yes, though not always. An employee does have to be deemed "insurable" to qualify for life insurance, so people with severe health issues may need to elect the survivor annuity.

Survivor Benefits vs. Life Insurance
Survivor Benefits vs. Life Insurance

About the Author

     Brandon S. Christy, CPA, PFS, is the President of Christy Capital Management (CCM) and founder of the Retirement Benefits Institute (RBI).
     RBI has provided benefits and retirement training sessions to thousands of federal employees. A schedule of upcoming training sessions (which are provided at no-cost for federal employees) can be found at:
     CCM offers retirement analyses for federal employees, building in financial and tax planning concepts for a comprehensive view of retirement. For a no-cost consultation or other planning needs, contact CCM toll-free at 866-331-7749 or visit

The information contained in this article should not be used in any actual transaction without the advice and guidance of a tax or financial professional who is familiar with all the relevant facts. The information contained here is general in nature and is not intended as legal, tax or investment advice. Furthermore, the information contained herein may not be applicable to or suitable for the individuals' specific circumstances or needs and may require consideration of other matters.