Top 10 Mistakes Made by Federal Employees — Part 7: Making the Wrong Survivor Benefits Selection

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Speaker 1:
Welcome back to the Federal retirement Show. I'm your host, Val Majewski with American Benefits Exchange. And as always, I really appreciate you taking the time out of your busy schedule to join us to view our content. That's what we're here for. You, the federal employee who's looking for information when it comes to your benefits and retirement situation. We have a lot of episodes I highly recommend. If you'd like this one. Go back and view our previous content. Go back and view all the episodes that we've had. There's over 160 of them now, and hopefully we have answered all the questions that you might have. If for some reason we did not answer a question that you have, go to our website, Federal Retirement Show.com fill out the form one of our experts across the country, if it is not me personally, will be reaching out to you to get you the information we're looking for. Now we're in the middle of a series called The Top ten Mistakes Made by Federal employees, and I'll do a subtitle of how you can avoid them as well. So we're in the middle of this series, and we're talking about a pamphlet that I wrote years ago called The Top ten Mistakes Made by Federal Employees and giving you a fresh new perspective on those mistakes. Hopefully you're not making any of these mistakes, but if you are, we can find ways in which to remedy them. So this is going to be mistake number seven today.

Speaker 1:
I'd highly recommend go back and view the previous episodes and find the first six mistakes, and then join us for the the final ones as we're going through mistake eight, nine and ten in the coming weeks. So let's dive into today's content and talk about mistake number seven of the top ten mistakes made by federal employees. So as I mentioned, there's a pamphlet that I wrote years ago called The Top ten Mistakes. And we can get you a copy of it if you'd like. You can just watch all the episodes as well and gather all the information. We have this digitally as well as physical copies, but we are up to mistake number seven. Mistake number seven. And I will say this. This is not the only mistakes that federal employees make. These are not just the top ten. It's the top ten. It's not all of them. So we'll have a couple bonus mistakes in there as well as we continue throughout this series. But mistake number seven is making the wrong survivor benefits selection. Making the wrong survivor benefits selection. Now first let's do a quick little overview of what the survivor benefit selection is. This is when you retire. So you've gone through your years of federal service. You're eligible to retire. And this is you deciding if your spouse, your survivor, is going to get a portion of your pension in the event that you die first in retirement, the survivor benefit.

Speaker 1:
And as a Fers employee, because I'm going to say most of you watching this are Fers employees. If your CSRs reach out to us again and we'll go over the CSRS side of things, but we'll just say generally as a first employee, you have three choices that you can make. Three, you can choose zero survivor benefits, which means you pass away in retirement first. Then your surviving spouse will not get anything going forward. Your pension stops. There's the 25% option, which is the minimum. 25% is the smallest that you can leave, which means if you pass away first in retirement, your spouse will continue to receive 25% of your pension. Now, there is a cost for that or a reduction of your pension. The reduction while you're alive is 5% of your pension amount 5%. The final option is the max option. This is the most that you can leave your spouse, and that's 50%. So you pass away first. In retirement, you can leave your spouse 50% of your pension. And that's going to reduce your Fers annuity while you're alive by 10% 10%. So again the three choices are zero survivor benefits. In retirement you get the pension. But if you pass away first, nothing passes on to your surviving spouse. The minimum 25%. It's a reduction of 5% of your Fers annuity. But when you pass, if you pass first, they would get 25% going forward. And then the max option is 50%.

Speaker 1:
Same thing, except they would get 50% going forward. Now why is this a big mistake? That's the thing that we've been talking about. It's not just what the mistake is. It's why do I consider this a mistake? Why is choosing or selecting the wrong survivor benefit a mistake? Well, first of all, it's essentially an irrevocable choice. Now, you're not making this decision while you're working. This is something that you're going to complete during the retirement process when you're filling out your retirement paperwork. But or now the online application for retirement, you're going to choose if you want to elect a survivor benefit option or which survivor benefit option you're going to choose. Now, it's important to note also for those if you are married, the default option. I married at the time of retirement. The default option is the maximum. If you want to leave anything but the maximum, your spouse has to sign off on it. But this is essentially, as I said, an irrevocable choice. So let's say in an example that you chose the maximum survivor benefit and you saw a reduction of 10% of your pension while you're still alive. And five years down the road, you and your spouse are sitting there and you're going, you know what? We really don't need that survivor benefit anymore. And we can really use the 10% back into your pension check. Let's get rid of the survivor benefit. We don't need it.

Speaker 1:
You can't cancel it. It's set in stone at that point. They're really the only two ways that you can make a change. And there is a little bit of a caveat. I will say this. There's a little bit of a caveat. There's generally like an 18 month window after you retire where you can make a modification. In most cases, it's only to increase your survivor benefit selection. But just in general, once you make that choice, it's set in stone. There's only two ways you can change it. Let's say you were not married at the time of retirement. Single. You wouldn't have chosen a survivor benefit. And then you get married. In retirement. You can add the survivor benefit to your pension, right? It would reduce your pension. And then if something happened to you, your spouse will continue whatever election you had. The second is what if your spouse dies first in retirement? So you chose a survivor benefit selection, whether it's the 50 or the 25%, and you didn't pass away first, your spouse passed away first. Then you can have the ability to cancel your survivor benefit, regain your full pension, but you do not get back any of the money that you put into the plan, or that you lost at 5% or 10%. Those are really the only two life changing events that would allow you to change your survivor benefit selection in retirement. So it's irrevocable. Basically, I say basically, right, I don't want to, but make assume that it's going to be set in stone.

Speaker 1:
You can't change it. You want to make sure that you're choosing the right selection, okay. By choosing it, it will reduce your pension. So the minimum is 5%. The maximum is 10% reduction of your pension. That cost is a percentage. So as you're getting cost of living adjustments in your pension, your pension should be going up over time. It should be increasing. Well, what is also increasing the reduction amount. That's not a level cost. It's not 5% at the beginning. And that's that's it. It's a 5% reduction going forward. So as you see an increase the theoretical cost for that and I should say theoretical, but the, the the cost that you feel increases as well because it's a percentage. So you want to make sure you're choosing the right, the right benefit, the right selection and know the consequences of that selection. The last thing is the federal employee health benefits are attached to it. And this is more for the people that are choosing to go without a survivor benefit, because it's not just whether you choose one and choosing the right one. It's even if you make it an election to not take on a survivor benefit, understand the consequences thereto and the mistake that can be made. Your federal employee health benefits are attached to your survivor benefit selection. Now what does that mean? That means that while you're alive.

Speaker 1:
Well, I'm going to back up here. Let me give you an example. Let's say I'm a federal retiree and I chose not to take a survivor benefit. No survivor benefits. I want to get the maximum pension. I don't want to see any reduction. Maximum benefit. No survivor benefits. Okay, great. Great. While I'm alive, myself and my spouse are going to be covered by my health insurance. Okay. Federal health benefits are going to be for both of us. I'm getting a maximum pension. No survivor benefits. We enjoyed my health insurance while I'm alive. Now, let's say I die first in retirement. And I did not select that survivor benefit. Number one, my spouse will not get anything going forward. My pension stops. And two. So does my health insurance. It dies with me. So if your spouse is 100% dependent on your health insurance, and you want to make sure 100% that they can continue your health insurance if you die first as the retiree, then you need to at least elect the minimal survivor benefit of 25%. No survivor benefit. No health insurance continuation. Now, in my opinion, this is my opinion. You can feel free to disagree. And if you do disagree, reach out to me. I'd love to have the conversation. I think the survivor benefit is a bad piece of life insurance. Why? Because well, let's look at how does life insurance work? Life insurance. Think about your family. You pay a premium, there's a cost.

Speaker 1:
And if something happened to you, your spouse or beneficiary, whoever gets a lump sum, tax free death benefit life insurance works here. Same type of thing. There's a cost. That cost is variable. It doesn't stay level like a real life insurance plan would. In a lot of cases, like an individual life insurance plan, it's a variable cost. It goes up, regular life insurance is level. And when somebody dies using the survivor benefit, it's not a tax free lump sum benefit they get. It's a taxable monthly benefit for the rest of their life, and there's no guarantee of how long that's going to last and how much money they're going to get from the benefit. Where in a real life insurance plan, it's a tax free lump sum, and they know exactly what they're going to get and can do with that money, whatever they want. So there's there's a few more points in there too. But just generally I'm not a fan of the survivor benefit, but I still do recommend it in the cases where you will 100% need to ensure that your spouse can continue the health benefits. So if you have further questions of this, if you're contemplating the survivor benefit, you want to avoid this mistake and ensure you made the right choice when it came to your survivor benefit election, reach out to us. We can review it with you. Again, it's federal retirement Show.com fill out the form.

Speaker 1:
We'll be in touch. We'll review your whole situation and answer any specific questions that you have about your survivor benefit election. So I really hope that you enjoyed this episode, especially mistake number seven. In our series of the top ten mistakes made by federal employees, go back and view our previous content. There's a lot of great stuff, but even if you want to start with this series, mistake number one, two, three, four, etc. and we're going to finish with eight, nine, and ten in the coming weeks. I have one last favor to ask if you liked today's video, you like today's content, or you're listening to it on just an audio based platform, refer us to a friend. There's a lot of federal employees that still need our help that we want to reach. Refer us to a colleague, somebody else you work with that can use this information. Maybe it is somebody that's retiring soon and they need to know what are all the options and how does the survivor benefit work? This episode will be perfect for them, but refer this show, this podcast to your federal employee colleagues, those that you work with, because we want to help out as many as possible. So I thank you for your attendance and taking the time out of your day. Again, my name is Val Majewski with American Benefits Exchange. You've been watching the federal retirement show and look forward to seeing you on a future episode.

Speaker 2:
Well, the job market these days can be tough for anybody, but especially older workers really concerned about either losing their job and then having to find a new one in a tough job market or, you know, other concerns within the workplace. And AI is increasingly becoming a part of that workplace, including finding a new job. Well, joining me to talk more about that is Carly Roskowski with AARP. She is the VP of financial resilience programming there. Hi, Carly. How are you?

Speaker 3:
I'm good. Matt, thanks so much for having me today.

Speaker 2:
No problem. Thanks so much for being a part of the discussion here. And it's a very important one. I mean, first of all, as we kind of set the the sort of baseline, I guess, for our conversation, what are people saying about their concerns about either, you know, losing a job, I'm finding a new job at a certain age. I know that you all have some new research that kind of delves into that.

Speaker 3:
Yes we do. And the labor market is is quite challenging right now. Many people who have jobs are staying put. We're calling that sort of job hugging. You might have heard that term. So older workers who have been laid off, or those who retired and want to go back to work, may have more difficulty finding a job than they have in the past during this, this current climate. Our recent research shows that about a quarter of the older workers we surveyed are concerned about losing their job within the next year. And more than two thirds, about 67% of older workers, believe it would be difficult to find a new job right now.

Speaker 2:
Yeah, well, it's, uh, it really is a concern, obviously, for a lot of folks then. And so, you know, I mentioned AI there. You know, it's it's sort of taking over our lives a bit. Um, and, and I think it's gone from maybe this sort of like, scary unknown thing to just this sort of tool that we're all using, um, in one way or another. How are workplaces, especially in the job search? Or that maybe the the candidate search? If you're talking about the the companies position, they're like the candidate search, uh, part of things, how are they using that? And I guess as a, as a follow up to that, how can candidates for jobs actually use that to their advantage?

Speaker 3:
Yeah. So the job market has changed dramatically in recent years, with AI playing a much bigger role, both on the employer side and the job seeker side. So we encourage older workers to embrace this technology, including AI, and use it to help with their job search. You can use it to help write your resume and cover letters. It can also provide information or research on the companies that you're interested in or you're applying to. And it can even predict the types of questions that may be asked during an interview.

Speaker 2:
Wow. And so, you know, what are some tips that you may have for older job seekers who are either, you know, updating their resume, maybe looking at using different AI tools to to either help with that or other aspects of the job search process.

Speaker 3:
Job seekers should focus on making sure that their resume highlights their skills and experience and not their age. So we recommend your resume be no more than two pages long. Focus on your recent experience. Include your credentials, but you don't have to include your graduation dates. Take off your street address and maybe ditch that old AOL or Hotmail email address for a more modern service like Gmail. But we also talk a lot about making sure that your resume includes industry specific terms or keywords straight from the job descriptions that you're applying to. Because some employers are using AI based tools to do an initial review or scan of candidates. And if you have these keywords or specific terms, it can improve your chances of making it past those sort of first digital gatekeeper rounds.

Speaker 2:
Yeah, we talk about the changes in the workplace and in the job seeking area. It really is crazy how things do evolve over time. And, you know, I mean, as we talk about older workers and, and folks going either going back to the workplace or, or just being in the workplace for a long time and bringing that experience to the table. Aarp, I know, often really highlights the benefits that come with that. You know, people of different generations working together. What does that look like right now in 2026?

Speaker 3:
Yeah, there are five generations in the workplace today, which is fantastic. And we see and research shows that multi-generational teams bring together different perspectives, different skill sets and different ways of solving problems. We hear from younger workers that collaborating with older colleagues provides them opportunities to learn new skills, and contributes to maybe a more productive work environment. Our recent research shows that 90% of all workers enjoy working with people of different ages.

Speaker 2:
Yeah, I often have enjoyed that as well, like just getting that when I was younger, like, you know, getting that experience and, and all of that just from people who have been there and done that in the workplace. I always thought was just so helpful. And really, they really do just bring a lot to the work that they do. And along those lines, what resources are out there for, uh, you know, from AARP, I should say, for older Americans who may be looking for work right now.

Speaker 3:
Job seekers can go to AA. To find expert advice, tools, resources including AARP and Indeed's job search platform, which offers thousands of curated job listings. Help with your resume and interview prep.

Speaker 2:
Very good. Well, we will direct our listeners in that direction. Um, Carly Raskowski is VP of Financial Resilience Programming at AARP. Carly, thank you so much for spending a few minutes with me. I really do appreciate it.

Speaker 3:
Thank you Matt. Have a wonderful day.

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