Dale was sixty-one, three weeks from his last day at a federal agency, and sitting at his kitchen table with the retirement application. His wife, Marianne, was across from him with a highlighter. They got to the survivor annuity section and stopped. Checking "full" meant his check would shrink by 10 percent for the rest of his life. Checking "none" meant a bigger check now, and Marianne would need to sign a notarized consent.

"What happens to me if you go first?" she asked.

That question is the whole decision. The math is straightforward. The emotional part is harder.

What the election actually does

A survivor annuity is a monthly payment to your spouse (or sometimes a former spouse) after you die. You pay for it by accepting a permanently smaller annuity while you're alive. Your spouse doesn't pay anything directly. You do, every month, whether or not they ever collect a dime.

The cost depends on your retirement system.

FERS

You have two choices when you retire with a spouse:

  • Full survivor annuity: Your spouse receives 50 percent of your unreduced annuity. Your own annuity is reduced by 10 percent.
  • Partial survivor annuity: Your spouse receives 25 percent of your unreduced annuity. Your own annuity is reduced by 5 percent.

Say your FERS annuity is $3,000 a month before any reduction. With the full election, you'd receive $2,700. Your spouse would later receive $1,500 a month. With the partial election, you'd receive $2,850, and your spouse would later receive $750.

The full election costs you $3,600 a year. Over twenty years that's $72,000 in forgone income, before cost-of-living adjustments. That's real money. It's also the price of a lifetime income stream for your spouse that keeps getting COLAs.

The FERS Special Retirement Supplement, if you're eligible for one, isn't reduced by a survivor election. Only the basic annuity is.

CSRS

CSRS works differently, and for many people it's cheaper in percentage terms. The maximum survivor annuity is 55 percent of your unreduced annuity. The reduction is 2.5 percent of the first $3,600 of your annual annuity, plus 10 percent of everything above that. OPM can confirm the current formula and any updates.

Take a CSRS annuity of $48,000 a year ($4,000 a month). The reduction would be:

  • 2.5 percent of $3,600 = $90
  • 10 percent of the remaining $44,400 = $4,440
  • Total reduction: $4,530 a year, or about $377 a month

Your spouse's survivor annuity would be 55 percent of $48,000, or $26,400 a year. So you're giving up roughly 9.4 percent to leave your spouse a benefit worth 55 percent of the full amount. Still a real cost, but a favorable trade.

CSRS Offset employees fall under their own rules, so check with your agency or OPM on the details.

The spouse's signature matters

If you're married when you retire, the law assumes you'll elect the maximum survivor annuity. To choose less, or none, your spouse has to consent in writing, and the consent must be notarized. This isn't a formality. It exists because too many surviving spouses were left with nothing.

The same logic applies to your TSP. If you're married, your spouse generally has rights to a joint life annuity with a 50 percent survivor benefit unless they waive those rights in a notarized form. TSP withdrawals and annuity rules are on tsp.gov, and they change. Read the current forms.

What happens if circumstances change

Many people worry about being locked in. You aren't entirely.

  • If your spouse dies before you: Your annuity is restored to the full, unreduced amount. You'll need to notify OPM, and restoration typically starts the month after the death.
  • If you divorce: The reduction generally ends too, unless a court order awards a former spouse a survivor annuity. In that case the reduction continues.
  • If you marry after retiring: You have a limited window, generally two years from the date of marriage, to elect a survivor benefit for the new spouse. Your annuity is then reduced going forward.
  • If you retire single and later marry: The same two-year window applies.

There are also eligibility rules for the survivor. In general, a spouse must have been married to you for at least nine months before your death, or you must have had a child together, or your death must have been accidental. Remarriage before age 55 typically ends a survivor annuity. These details are worth confirming with OPM for your case.

The tax angle

Your annuity reduction comes off a taxable payment, so your after-tax cost is lower than the headline number. If you're in the 22 percent federal bracket, that $300 monthly reduction costs about $234 in take-home pay. Your spouse's survivor annuity is generally taxable too. Run your own numbers, and check irs.gov or a tax professional for how this plays out in your state.

When going without makes sense

Electing no survivor benefit isn't reckless in every case. It can make sense when:

  • Your spouse has a substantial pension or Social Security of their own and could live comfortably without yours.
  • You have enough in the TSP and IRAs to fund your spouse's needs if you die first.
  • One of you has serious health problems that change the math. (This cuts both ways, and you should be honest about whose health you're discussing.)
  • You're buying a term or permanent life insurance policy that does the job for less.

That last one needs scrutiny. Insurance premiums rise with age and health issues, and term policies expire. A survivor annuity can't be canceled, can't lapse, and rises with COLAs. If you're 62 and in decent health, pricing a policy that matches $1,500 a month for life will probably surprise you.

Dale and Marianne's math

Dale's FERS annuity was $3,200 a month. The full election would cost him $320 a month, or $3,840 a year. Marianne would receive $1,600 a month if he died first. She had a small pension and Social Security, but nothing close to what she'd need to stay in their house.

They ran a few numbers. To replace $1,600 a month for life using TSP savings, Marianne would need a very large nest egg set aside and invested conservatively. A life insurance quote for a sixty-one-year-old covering twenty-five years of that income was higher than $320 a month and would expire.

They elected the full survivor annuity. Dale grumbled about the check. Marianne put the highlighter away.

Before you sign

Ask yourself three questions:

  1. If I die first, can my spouse maintain their lifestyle without my annuity?
  2. Could I cover the same need more cheaply and reliably some other way?
  3. Does my spouse understand what they're giving up if they sign a waiver?

Then check current rules and forms with your agency HR office, OPM, and tsp.gov. Get the retirement estimate showing both options side by side. Seeing the dollar amounts on paper makes the choice clearer than any rule of thumb.

Whatever you pick, make it together. The check is yours, but the consequences belong to two people.