Delivered on: Tuesday, August 20, 2024

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Leaving Your Federal Pension to Your Children (or Others)

How to protect your CSRS or FERS pension for someone other than your spouse—and what to know before you do.

• ELIGIBILITY: The types of people eligible to receive your federal pension after you die
• BENEFIT: The amount this benefit would provide upon your death
• COST: The cost to you while you’re living in retirement
• RULES: The timeline and strict qualifications for electing this benefit

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Prefer to read instead? A transcript of this webinar is below:

Hello and welcome everyone to the FedImpact webinar today on leaving your federal pension to your children or somebody else. Today’s session is going to be jam-packed, full of information that you probably haven’t heard before, so we’re excited to get started.

I’m Chris Kowalik. I will be your presenter today. I’m always delighted to be able to do these topics because it allows us to do a deeper dive or maybe take a different perspective on how these benefits work, and really unpack them to help you guys understand what you have available to you, so I’m super excited to be able to do that today.

Leaving your federal pension to your children or others

Leaving your federal pension to your children or others, right? You might have somebody else in mind that you’re thinking about, today’s session is all about how to protect that CSRS or FERS pension for someone other than your spouse and what to know before you do.

In true government fashion, the government has not made this a simple program and the complexities in it are where the hiccups really bubble to the surface, we want to make sure that you truly understand how this program works before you think you’re going to jump into it.

Agenda

Our agenda today, we are going to talk about eligibility, the types of people eligible to receive your pension other than your spouse once you die, what the benefit is that they’re going to receive when you die, how much you have to pay while you’re still living in retirement to be able to have this coverage for them, and then what the rules are to be able to get into this type of program.

What this webinar will NOT cover

I’m not going to be able to go into all the depths of the regular Survivor Benefit Program that we typically find for spouses, but rest assured we did an entire webinar on that topic. I’m going to have the support team drop that into the notes section, so that you will see that in the chat area, and if you need to go watch it, just save that link.

You can always find it on our website, but that way, it’s nice and direct for you and you can go and really get your head straight on survivor benefits. I’ll do just a quick overview today, but I’m not going to be able to get into all the nitty-gritty on the Survivor Benefit Program.

Exploring the option of leaving your pension too…

Today’s session is about exploring the options of leaving your pension to a someone else versus your spouse. But I have to give some context of the spousal survivor benefit side to show you how this contrasts with when you name somebody other than a spouse and how it really works.

Fair Warning!

I have some fair warning for you guys today. It is entirely possible you’re not going to like either one of these programs. This is the government’s way that they’re planning to solve your problem, but I want to remind you all, and if you didn’t watch the webinar that we did on the ProFeds Planning Principles, I want to kind of bring this one to the surface.

Principle number five is it’s okay not to like the government solution to your problem, but you still have a problem that needs a solution. If your problem is that your spouse or someone else in your life needs income after you die and you want to be able to try to do that through this program, you still have a problem even if you don’t like the way the government’s going to solve this.

Your problem is someone needs money after you die, and now we have to figure out a way to do that. Either it’s the government program or something else or maybe a combination. But here’s what I implore you to be thinking about today. Even despite all the intricacies and the rules and all the weirdness that the government puts into this program, please don’t confuse not liking how they plan to solve your problem, with believing you don’t have one.

You have a problem. The problem is you want someone to get money after you die and you’re looking to a government program to see how they plan to solve that problem, what the options are to be able to do that. But don’t confuse not liking how the government plans to solve your problem with believing you don’t have one. We might have to look someplace else to solve this problem, but I want to show you today how this works through the government lens.

How the Survivor Benefit Plan works

We have to start with understanding what the Survivor Benefit Plan is. In retirement, the Survivor Benefit Plan allows a federal employee to protect not the whole thing, but a portion of their monthly retirement check for another person. Normally, it’s the spouse. Today, of course, we’re going to expand that view a little bit.

In the event that the retiree passes before this other person that’s been named, the Survivor Benefit Plan allows for a portion of that pension to continue to be paid. An employee will make the decision on electing the survivor benefit when they go to retire, so that is on the retirement application. You see those numbers listed off to the right-hand side for our CSRS and FERS employees.

Here’s the deal, once the selection is made, there’s a very limited window to change it, so chances are you’re going to be stuck with that decision for the remainder of your lifetime. It’s also important to know that any of the monies paid out of this program are fully taxable to whomever is receiving the money, whether that’s your spouse or someone else that you may be naming. Just like it’s taxable to you as an employee when you’re going to receive the money as a retiree, it’s also going to be taxable to whomever is receiving it after you die.

Survivor Benefit Plan (SBP) – Spousal Benefit

Like I mentioned before, in order for me to explain how these other options might work for the Survivor Benefit Plan, I need to start with explaining briefly how the spousal benefit works, just to give a little bit of context to today’s session.

Eligibility to leave your FERS pension to a spouse

Let’s start with the eligibility to leave your FERS pension to a spouse. By spouse, I’m referring to both a current or a former spouse. You have the choice to protect 0%, 25%, or 50% of your pension to be paid out to that person when you die. There is no health screening required. You are automatically allowed in if you want it, and this is a great backup plan, especially for people who don’t have any other kind of income protection for a spouse. We’ll talk more about that here in a bit.

The other piece I want to kind of bring to the forefront is in this box here at the bottom. For a former spouse, you only want to elect them as a survivor annuitant on your retirement application if you are voluntarily naming them to receive a benefit.

If you have a court order that mandates benefits be paid to them, you do not want to make an election for that person on your application to retire. That is a separate election. Only name them on your application if you are voluntarily giving them benefits. Otherwise, the court order will take precedence.

That will always be paid first and then OPM looks to your retirement application to see if there’s an additional benefit elected for them. We will talk more about that here in just a bit. I’ll explain how we’re going to be able to expand on that topic. Just give me a few minutes.

What are the survivor benefits for a current or a former spouse?

Well, the maximum benefit that can be left is 50% of the FERS pension. This is payable when you die. And the cost to you as a FERS retiree will be 10% of your FERS pension. For as long as you are living in retirement, you are going to give up 10% of your pension for the protection that you are leaving for a spouse or a former spouse.

Just to give a little bit of an example here, let’s say we have John who has a FERS pension of $30,000 a year. If he was going to provide the maximum benefit to his wife, he would pay $3,000 a year and his wife would get $15,000 a year when he dies.

Keep in mind, I’m just looking at that very first year of retirement, but every time John gets a cost of living adjustment in retirement and his pension goes up, the benefit waiting for his wife when he dies also goes up. The thing that a lot of people don’t realize though is that the cost continues to go up because it’s 10% of an ever-increasing pension number, just keep that in mind.

That’s not necessarily good or bad. The benefit and the costs are going up in tandem with one another, but it is something to factor into the overall cost in retirement.

Entitlement for a Current Spouse

Let’s switch gears here and talk a little bit about the entitlement for a current spouse. Your current spouse is entitled to receive the maximum benefit that’s allowable, remember, that’s 50% of your pension. If your current spouse agrees to take less than 50% of your pension, they have to provide their notarized consent.

You might wonder why they might elect something less than what they’re entitled to. You’ll see why as we go through the rest of today’s material. Here’s the deal though. If your current spouse wishes to keep the FEHB plan, the health benefits program, after you die, you had to have elected either 25% or 50% of your pension to be protected through the Survivor Benefit Plan.

If you were to elect zero, your spouse can keep FEHB while you’re living in retirement, but once you die, they’re immediately removed from FEHB. It’s important to realize that there are consequences even beyond them having a continued pension to electing or not electing the survivor benefit.

I do want to make a special note too as it relates to a current spouse, if you have a former spouse in the mix that had a better attorney than you did and the entire survivor benefit was awarded through a court order, it will completely eliminate the benefit that your current spouse is entitled to, that they otherwise should have received.

If there was a portion of that survivor benefit that was awarded, then your current spouse will be entitled to whatever’s left over. And that’s always a fun conversation to have with a current spouse of how the former spouse got the first bite of that apple and perhaps ate the whole thing. We want to make sure that we understand how a court order may very well affect these benefits, and there’s way more to this story than what I’m explaining here, but I want to give it just a little bit of a highlight to get that on your radar if in fact you do have a former spouse.

Special Notes & Highlights

Let’s review some special notes and highlights that I have for the spousal SBP program. If we were to ask your spouse what percentage of your pension they want to keep getting when you die, what do you think they’re going to say? They’re probably not going to say 50%. They’re certainly not going to say 25% or nothing.

Most of the time, they’re going to say, “Well, I’d like to get all of it,” we have to understand that even the very best of the government solution to a spousal survivor benefit situation is that they only get half of your pension. We just have to recognize that that is the limitation of the government program.

But if you’re not married and you have no former spouse, you will simply not be able to participate in the program that we just reviewed, the spousal survivor benefit election. You may be able to choose another form of survivor benefits called the insurable interest option, which is what we’re going to review next.

Survivor benefit Plan (SBP) – Insurable Interest

The insurable interest survivor benefit program sure gets interesting pretty quickly, but I’ve chosen to do today’s session because I think that there is some misinformation when people hear parts of the insurable interest program but don’t really understand how the whole thing works.

Eligibility to leave your FERS pension to someone other than your spouse

Let’s talk about first the eligibility to leave your first pension to someone other than your spouse. You are allowed to leave a portion of your pension to someone other than your spouse, but they must be considered, what we call, an insurable interest.

And before I go through the list of people, an insurable interest is an insurance term that refers to someone who is related to you closer than a first cousin and has reasonable belief to have financial gain from your continued life. Meaning, you financially contribute to their life or you have shared property in which you have an interest in, they have an interest in, and if you were to die, that leaves them in a lurch with that property, for instance.

Here’s the list of people who are automatically considered insurable interest people. The first is a spouse, and you might be wondering like, “Chris, you just said, if I leave my pension to someone other than my spouse, but then the spouse is on the list.” There’s a reason for that and that would be if you had a former spouse take up the entire survivor benefit, you could presumably add your spouse as an insurable interest. It’s a little bit of a inside baseball here as far as how this part works.

Next is a former spouse. Then we have a blood or adopted relative closer than first cousins, that would be a parent, one of your children, siblings, nieces, nephews, that type of thing. And then a person to whom you are engaged to be married. It’s important to realize that only one person can be named as an insurable interest, you can’t have a slew of people. If you have multiple children, you can’t name all of them. It is one single person.

Survivor Benefits to an Insurable Interest

What are the benefits available to an insurable interest? Well, the only allowable benefit to an insurable interest is 55% of either the CSRS or FERS pension, whichever one you qualify for, after it has been decreased by the cost of the benefit.

It’s not quite as straightforward, right? Spousal survivor benefit was 50% of your pension. This is 55%, which on the surface sounds better, but then the benefit or the percentage of the pension has to be reduced by the cost of the benefit. I’ll show you the math here in just a second, and we’re going to ask you to pull out some of the good math skills that you remember back from grade school and apply them here.

Next, we’ll talk about the cost. The cost is kind of interesting with the insurable interest and why it makes it such a undesirable program because the cost is dependent on the age difference between you, the retiree, and the person you’re naming as the insurable interest. Let’s see how that looks.

The cost of leaving your pension to a non-spouse

The age differences are listed on the left-hand side. In the event that you’re naming someone who’s older than you, the same age as you, or less than five years younger than you, it will cost you 10% of your pension. In that respect, it would be the same as the survivor benefit, although the benefit that they would receive would not be the same. You’ll see that here in just a second.

In the event that, say, it’s 10 to 14 years younger, you’re going to give up 20% of your pension. Perhaps you plan to name a child that’s 30 or more years younger than you, you’re going to give up 40% of your pension while you are living to have this protection in place. This is not a slam dunk program and one that causes a pretty big gulp to happen when you see the cost of these benefits.

Example of a FERS employee retiring with a $30,000 pension

Let’s take a look at an example of a FERS employee retiring with a pension of $30,000 per year. If they name an insurable interest who is the same age as they are, then the coverage provided, meaning the benefit that that person is going to receive when the retiree dies, is 55% of the pension after it’s been reduced by the cost.

It’s important that we do the math in the right order here, we’re going to reach back to our grade school days. Pull back that math mantra of Please Excuse My Dear Aunt Sally, right? We know we have to do parentheses first, then exponents, then multiplication, division, addition, subtraction, right?

Here, we just have really two of those components, so we have to do the parentheses first, which is $30,000 minus the 10% of that pension, which is the cost for someone the same age as the retiree, which is $3,000, that will give us $27,000.

Then we multiply that by 55%, which gives us $14,850 per year that that person will receive for the duration of their lifetime, including cost of living adjustments on top of that. We know the cost to the retiree off to the far right-hand side. We’ve already identified that, which was 10% of $30,000 or $30,000 per year.

The next scenario is someone who’s 10 years younger than the retiree. Maybe this is a younger sibling, something like that. We’ve got 55% of the pension after it’s been reduced by the cost, the cost has creeped up there. Now, it’s 20% of $30,000 a year or $6,000. Now the benefit for that person is $13,200 per year, but the cost to you doubled. Very important that you’re recognizing this.

Let’s look at the scenario where perhaps we have a child or a niece or a nephew who’s 30 years younger than you as the retiree. We would have 55% of the pension minus the cost, now, it’s going to cost you $12,000 a year from your pension to provide this benefit to this person. Let’s call them your child.

They would only receive $9,900 per year, but it’s costing you $12,000 a year while you’re living in retirement to do it. Will the math ever work out? Maybe. I suppose it depends on how long your child lives and all of that, but for you to give up such an incredible percentage of your pension while you’re living seems to be a deal-breaker for most people.

Comparing Survivor Benefit Options (FERS pension $30,000)

Here’s what I’d like to do just to give everybody a little perspective. We’ve already seen all these numbers. We’re just going to put them all next to each other. I want to compare the survivor benefit options for a FERS pension of $30,000 per year. The spousal benefit, you see that in the second column here. The benefit they will receive is $15,000 per year and it’s going to cost you $3,000 a year to provide it.

An insurable interest who’s the same age or less than five years younger, $14,850 a year, and it costs you that same amount of $3,000. But once we start getting into these benefits where someone is considerably younger than you, the benefit that they receive and the cost that you bear while you’re still living in retirement, the math doesn’t work here for most people. This is untenable to pay this amount of money for this little benefit comparatively.

And certainly when you get to someone who’s 30 years younger than you, you are paying more every year than they will receive. If they live another 50 years beyond when you do, that’s a different story, but we don’t know that that’s how that’s going to work.

And certainly for someone who has multiple children, good luck breaking that news over Thanksgiving dinner that one of your children is going to receive this and the other isn’t.

This program isn’t really designed for this purpose and I want that to be very clear for everybody watching today because when you’re like, “This doesn’t make sense,” well, it doesn’t make sense because the government actually doesn’t want you to do it, they’ve made it pretty complicated here and you’re going to see why it’s even more complicated here in just a second.

Special Notes & Highlights – Insurable Interest (SBP)

Some special highlights, specifically on the insurable interest survivor benefit. On the surface, this might sound like a good plan. Before you got into any of the details and saw the numbers, you’re like, “Oh, cool, I can leave this to somebody other than my spouse. Great.” But the insurable interest option requires a couple of things.

The first is it requires insurability, meaning you have to go under full underwriting as if you are applying for a life insurance policy, and you have to be healthy enough to qualify for this plan. Before I told you that, you might be thinking, “Well, I’m sick. I don’t have a long life expectancy. I’d like this to at least go to somebody. If it’s not going to go to me, I want it to go to somebody.”

But one of the rules is that you have to be healthy enough to qualify for this. It’s not perfect health, but it’s darn near close to be able to get into this program.

The next thing I wanted to just bring to the surface is it provides less than the normal spousal survivor benefit. No matter how old that person is, they’re getting less than what they would’ve received as a spousal benefit, and that’s sometimes neither here nor there. You don’t necessarily know, but that’s the only context that we can provide here as far as how it compares to the spousal portion of this program.

And then next, providing this to someone considerably younger is just unaffordable, how much you have to give up in your pension to provide a benefit that may or may not be paid for a long period of time because life happens, illnesses, accidents. Who knows what happens and what might cut short the ability for your child or someone else that you’re naming to be able to receive this benefit for a long time?

Factors

Next up, private sector options through life insurance plans are far more flexible with more controls that are in your hands. I want to show you how this works. I want to walk through several factors just to really bring this all together for everybody on today’s session.

Spousal Survivor Benefit (SBP)

I’ll start with the spousal survivor benefit. As far as your need to be healthy, you don’t need to be healthy to get the spousal survivor benefit. You are automatically allowed in if you want this plan. The maximum amount that can be protected for your spouse for CSRS is 55% of your pension. For FERS, it’s 50% of your pension.

You’re going to pay those premiums monthly from your pension check and the cost will continue to increase over time as your pension rises. You are allowed to have a current or a former spouse, if they have a court order, named and monthly payments will be paid out when you die to that person. For that spouse’s lifetime, they will receive a benefit for the remainder of their lifetime.

There are some rules if they marry too early in life and all of that. I’m not going to get into those details today, but this is generally how this works. And here’s something I kind of flippantly mentioned it at the beginning, but the premium that you’re going to be paying for the spousal survivor benefit, the good news is it’s pre-tax, meaning you don’t pay tax on that 10% that you’re turning around and paying for the premium.

The bad news is when that person receives the benefit, once you die and they start receiving those monthly payments, all of that is going to be fully taxable to them at whatever their tax rate is at that time. That’s the spousal benefit.

Insurable Interest Survivor Benefit (SBP)

As far as your need to be healthy, you must qualify to be able to get into this program, you have to be healthy enough to be able to do so. The maximum amount that can be protected is 50% of the pension after it’s reduced by the cost that we showed in the previous slide.

You’re going to pay those premiums monthly from your pension and it’s going to be based on that age difference between you and the person you are naming, and we know the cost will continue to increase. Right? The higher your pension is, the higher the cost is to provide this benefit.

You’re only allowed to give this payment to a person who qualifies as an insurable interest, so that list of people that we showed a few slides back. You can’t name other people, a friend for instance, as an insurable interest.

Next, as far as how it’s paid out when you die, these are paid in monthly payments for that person’s lifetime. And the same as the spousal survivor benefit, the premiums are going to be paid with pre-tax money, meaning you don’t pay tax on the premium that you’re paying into the program, but all of that money that gets paid out to that person you’ve named as an insurable interest will be taxable at their current rate.

Private Life Insurance

I’m not going to pitch any particular product. There are different versions of life insurance out there that can do pretty amazing things, but I just want to give a little perspective here.

If you were to purchase a life insurance policy designed to generate this kind of income that otherwise your family member would lose if you die, we know that first and foremost you have to qualify for life insurance. Right? You have to be healthy enough to be able to get it. The amount payable can be unlimited, the amount of life insurance that you can obtain.

Although, there technically is a ridiculous limit. None of us are going to hit that. That’s for the ultra-wealthy that are using life insurance for other reasons. We have an unlimited amount that we can go get.

These premiums are typically paid on a monthly basis and the cost is typically level because of the kind of policy you would be buying, where you’re locking in your premium at the time that you purchase it. You are allowed to name anybody that you wish to receive this benefit and it can be not just a person. If you run out of people that you like, you can also name an entity, a church, a charity, a cause that you care about. You are able to gift that money to someone else or through an entity that you wish.

Next step on the private life insurance side, how the money is paid out when you die, it all gets paid out in lump sum. It doesn’t get paid out in little monthly amounts over someone’s lifetime. All of it gets paid right away, so they can use it as they wish.

And then here’s something that’s pretty different on the life insurance side, the premium, you don’t get that initial tax advantage. You’re going to have to pay that premium with money that you’ve paid tax on, but the payout to your beneficiaries is 100% tax-free.

When I ask people in the workshops or when our speakers are out doing this day in and day out, they always ask the question, “Well, which one’s better, survivor benefits or life insurance?” And the answer is always, it depends, and what it depends on is your health.

If you are healthy enough to qualify for private life insurance, you can get as much coverage as you want. You can lock in your cost. You can name anybody that you wish to receive it. It’s all going to be paid out lump sum, so they can use it however they want or need, and it’s all going to be tax-free to them.

I share this with you because I want you to remember that if you don’t love the way the government is willing to solve your problem, you have to look somewhere else to be able to do it. It’s not enough just to say, “Oh, I don’t like the way the government’s doing that. Never mind, I’m not going to do it.”

If you legitimately have a reason for someone to need income from you after you die, life insurance is not only a way to be able to do it, it is specifically designed to do it that way. And you have way more flexibility in who is named, how it’s all paid, how it’s going to be taxed. Right? All of that is within the controls of the life insurance contract.

And what I love is you have the flexibility to name anybody that you wish. Oh, you have three kids? Cool. Name all three kids as beneficiaries, and they all get equal payments. You want to name your spouse? Great. Name your spouse and name your kids as a backup. Name a niece or a nephew or your friend or a church or a charity or a cause.

You have tons of options available on the life insurance side that you do not have under the survivor benefits side, whether it’s spousal or insurable interest. It is important that you are working with someone who understands how the government Survivor Benefit Plan works, so that you can make the right elections there to protect things like health insurance for your spouse, and that we understand the type of life insurance that should be put in place instead of or in supplement to the Survivor Benefit Plan.

It’s not as simple as just going out and looking on the internet and finding a life insurance policy and putting it in place. How much is it? What kind is it? How does it function? Are there maybe some other perks that while we’re at it, you can add to it? Right? There’s all sorts of features available with private life insurance that you may not have explored yet, and I implore you to do that sooner rather than later, certainly well in advance of your retirement from federal service.

Survivor Benefit Plan (SBP) – SBP for Children

This next section that we are going to review is survivor benefits for children. I wish the government would’ve given a different name to this program because it’s confusing because people hear that there’s SBP for children and they think it’s the same thing as the SBP for a spouse, and I assure you it’s not. Let’s jump in.

Children’s Survivor Benefit

For children’s survivor benefit, this benefit that we’re going to show you has nothing to do with your pension at all. The children to qualify for this, they would receive the survivor benefit at no cost. This is automatic, but they have to be unmarried, dependent children.

They have to be under the age of 18 or 22 if they’re a full-time student. If they happen to be beyond the age of 22, they’re able to be paid this money if they’re disabled prior to the age of 18. Again, I’m not going to go into the details of what qualifies for that, but it’s significant.

Children who qualify for these rules that we’ve shown here would receive the same survivor benefits, regardless if their federal parent is still employed, or retired, or if the parent is under CSRS or FERS. I wish I could just stop right there and move on and everything be hunky-dory for this particular family, but there are some special rules. I’m going to show you how the benefit is calculated, and then the rule that probably means your child is not going to receive this.

The cost of Children’s Survivor Benefit for 2024

Let’s look at these different amounts. On the left-hand side of this table at the top, if there is one living parent who is married to the deceased parent, each child will receive $658 per month. That’s up to three children could receive that, or a total of $1,975 per month if there’s more than three children.

In the event that there is no living parent or there’s a living parent, but that parent was never married to the deceased parent, then that child would receive $787 per month up to three children or a total of $2,362 to split if there’s more than three children.

That at least gives you an idea of what the benefit is, and that all sounds great. I mean, at least the child is going to get that, but here is the deal, the thing at the bottom here, the coordination with Social Security. If a parent dies, a child could receive Social Security benefits off of that parent’s record, and if they do, this children’s survivor benefit will be reduced dollar for dollar for any benefit they receive from Social Security.

What this means is that that larger Social Security benefit that’s going to outweigh the $658 or the $787 per month, that will completely wipe out this benefit. The only people who we really see benefit from this are the children of CSRS parents who otherwise don’t qualify for social security, so there’s no benefit for that child to receive.

This is a little bit of a half-hearted benefit. I am not terribly excited about ever teaching this benefit because it’s like showing everybody the shiny object and then throwing it out the window, there’s nothing spectacular about this program.

It’s amazing when we have disabled children that need this benefit for a long time. Even their benefit is going to be reduced by this Social Security piece, but it’s what allows them to continue to have health insurance. So there are some good perks about this, but you have to really understand the intricacies of this benefit to know how it could even benefit your family. For most people, their child does not receive any of this benefit.

Special Notes & Highlight – Children’s Survivor Benefit

Some special notes and highlights for children’s survivor benefit. The children’s survivor benefit was designed to provide benefits while those children are young. Obviously, by the time most people are retiring from federal service, their children have simply aged out of this program. Even if they wouldn’t have qualified because of the Social Security benefits and everything that we talked about, the fact is the children are just too old by the time that parent dies. And that’s wonderful.

That’s wonderful that both the child and the parent have lived a long life, but I do want to point out that this isn’t a lifetime payout like the other two survivor benefits programs that we reviewed with the spousal and the insurable interest. They’re only paid until they reach that mark of the age cutoffs that we mentioned in the previous slide.

And most often, this benefit is completely wiped out by Social Security that that child is receiving, so a little bit of a half-hearted benefit, but it’s there, and in the rare instance that it will benefit for your family, I’m glad that it’s there.

Final Thoughts

Some final thoughts kind of looking at the overarching content that we’ve talked about today. Making a survivor benefit decision is super important and it deserves your sincere thought and planning. This is not the benefit that you want to wait until you go to retire to start thinking about.

If you’re going to do something about the survivor benefit decision, for instance, looking at life insurance, that all takes time and you don’t want to do that right as you’re completing your retirement application. You likely have a genuine concern for how your loved ones receive money after you die.

And remember, it’s okay not to love the government’s solution to your problem, but you still need to solve your problem. If you know that your loved ones need income that they otherwise would’ve had from you had you kept living, life insurance is designed to be able to do this. Survivor benefits through the government also are designed to do this, but in a much more contracted way.

There aren’t as many freedoms and control and flexibility that you have over the program. There are still flexibility and control, but it’s what the government has in their hand versus what you have in your hand. Very important don’t think that just because you don’t like the government’s solution that you don’t need to think about this anymore. We still need to solve that problem.

And frankly, I want you to consider all of your options well in advance of your retirement. Certainly if we have a current spouse in the mix and we have health insurance issues that we want to make sure they continue to have FEHB, there are very different ways that we approach the survivor benefit elections in that scenario versus someone who is looking for an insurable interest.

Because listen, if you didn’t have to be healthy enough to get that insurable interest program, we would recommend people do it all day long. Right? Even though it’s expensive, you can still have it, especially if we have somebody who’s terminal, someone who simply doesn’t have a terribly long life expectancy. If they’ve got young children, maybe grandchildren, whoever that might be, that benefit would be paid out forever. Yeah.

But the government’s smarter than that. They know that you have to be healthy enough to qualify for this plan because they’re going to protect their backside too and make sure that they’re not on the hook to pay out a benefit for a really long time, when they got very little premium from you.

So please consider all of your options well in advance of your retirement, so that by the time you go to fill out that retirement application, it’s somewhat of a formality. You’ve already technically made your decision. You’ve put whatever life insurance policies in place that you want, and you know exactly what you are doing in the survivor benefit election, not scratching your head and wondering, “Hmm, I wonder what this is.” That’s not the time, as you’re filling out retirement paperwork, to begin thinking about this choice.

Wrap Up & Next Steps

You all know that we are excited about helping federal employees retire with confidence. We do that of course through educating people to really understand what they’re looking at and what their choices are, as evidence by today’s session, but we do retirement workshops all over the country. This is in-person training. There is no cost to attend. These are sponsored sessions, so the fee’s already been paid.

The sessions are available for you to be able to attend at no cost. We encourage your spouse to be present too, so they can hear all of this firsthand. And we get to cover all the federal benefits topics at different depths because we only have seven hours to teach that day, but what I love about these workshops is that after them, in the weeks following the workshop, you have an opportunity to get some one-on-one help with a licensed professional that is capable of providing advice on these different topics.

Don’t listen to the water cooler expert who thinks they know what everybody in your office should be doing. Talk to a licensed person who is qualified to provide advice, so that you’re looking at the whole picture. You can see all of the retirement workshops that we have open for registration by going to fedimpact.com/attend.

Thank you all so much for joining us for today’s session. I hope you’ll stay tuned for benefits and news updates. You can find a workshop at fedimpact.com/attend, and you can register for our next webinar and of course see all the replays for our past webinars at fedimpact.com/webinar. Thank you all so much. We’ll see you next time.

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