Ask The Experts: Money Matters

By Mike Miles

Survivor benefits

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Q. My husband and I both work for the Postal Service. He is retiring March 1 under CSRS. I have 25 years in working for the Postal Service and have at least eight years left to retire (FERS). We elected not to take the survivor benefits because I’m still working at the Postal Service and I will have him on my medical plan. We have two insurance policies on both of us in case of death. But I’m not sure if I understand the point of survivor benefits. Do you have any numbers on the pros and cons of survivor benefits, and are we wise for not taking it? We are both healthy and we have no dependents.

A. The survivor benefit will provide a survivor with a guaranteed income that is guaranteed to increase with inflation each year and guaranteed to last for life. These are guarantees that life insurance and retail annuities can’t match. Electing the CSRS or FERS survivor benefit is the safest bet for a survivor and should be considered the default choice until and unless you determine something else to be a better alternative. It is definitely not wise to make such an important decision without the proper analysis and understanding. It is also definitely not wise to trust an insurance agent to conduct this analysis.

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Use TSP funds to delay Social Security?

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Q. I took the Voluntary Early Retirement Authority on Jan. 31 at my minimum retirement age. I had 26 years at the Postal Service under FERS. After 16 years of marriage, I became a widow. The only income I have is my annuity and the special retirement supplement from the Office of Personnel Management. Will I be eligible to receive Social Security benefits from husband at 60, and will they end at 62? When I turn 62, my supplement will end. I have $190,000 in the L2020 fund. Would it be beneficial to me to start receiving money from my Thrift Savings Plan at 62 and delay Social Security until full retirement at 66 years and four months. A financial adviser told me to roll over my money into an IRA when I turn 59½. Is that a good idea, or should I keep it in the TSP? Would you recommend the G Fund, since I don’t have money to lose?

A. Mike: It’s impossible to give you specific personal financial advice with this tiny amount of information. In general, however, you should invest your money in a way that gives you a high probability of achieving your financial goals with a minimum of risk. There is no one-size-fits-all investment strategy, even for someone your sex and your age. Investment management is an ongoing and complex process. The advice you’re being given about rolling over you TSP to an IRA sounds like a sales pitch to me. You should preserve your TSP assets as long as possible unless a trustworthy analysis indicates that it would be in your best interest to do otherwise. Your question about using TSP funds to delay claiming Social Security is worth considering, but, again, finding the right answer will require some analytic work.

Reg: To find out how your own Social Security benefit would interact with your Social Security survivor benefit, go to

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Survivor annuity

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Q. In Reg Jones’ column, he states, “Choosing to buy an insurance policy instead of a survivor annuity is seldom a good idea. Could you please expand on that thought? The financial planner I talked to, who also sells insurance, says if you are healthy, the insurance route will be cheaper to pay for and more lucrative in the end. If you plan on dying young, the survivor annuity is best.

A. This is a complex decision, and you should proceed with care since it is irreversible once it’s made. The simple answer is “guarantees.”

The federal survivor annuity is the safest option, with all elements guaranteed, including a guaranteed cost-of-living adjustment that applies before and during the payment of a benefit. If your spouse dies first, then your annuity benefit is guaranteed to “pop up” to what it would have been without the survivor benefit election. Any alternative, like life insurance, should be compared to this option by someone without a competing interest in the transaction.

I was trained to sell life insurance for this purpose, have run the analysis for clients at least dozens of times over the years, and have yet to see a solution that can compete with the survivor annuity benefit from the survivor’s point of view. The life insurance solution could work out in the survivor’s favor, but this is speculative at best. There may circumstances where the life insurance solution is the superior option, but they are the exception rather than the rule, and you shouldn’t rely on an agent’s arguments or analysis in making the commitment.

The agent you’re listening to isn’t your ally in considering this decision. They are your adversary. They will be paid compensation that at least equals the premium you’ll pay for the insurance during the first year if he/she can convince you make the purchase, so they are highly motivated, and legally allowed, to skew the arguments heavily in favor of the purchase.

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TSP and beneficiaries

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Q. Can you leave a percentage of your Thrift Savings Plan account to grandchildren’s 526 college fund?

A. This is really a question for an estate planning attorney, but it seems to me that this is like asking if you can designate a person’s Roth IRA as a beneficiary — and the answer to that questions is no.

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Survivor benefit vs. life insurance

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Q. I will be retiring at the end of this year with 37 years and 10 months of service. I am a CSRS employee and will be 57 years old in September. My annual annuity would be $81,958. I will have a little over $200,000 in my Thrift Savings Plan account.

Is it smartest to take the spousal annuity or take out a life insurance policy on myself to sustain my wife once I pass away? My annual annuity will be reduced by around $7,900 a year if I chose the spousal annuity. Which would be the wisest?

A. This isn’t your choice to make. It’s your spouse’s choice. If I were your spouse, I’d favor the full survivor benefit.

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Take Social Security or TSP?

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Q. I’m retiring June 1. I’m 62 and will be 63 in September. I’m in CSRS Offset with 36 years and five months. Accrued sick leave will give me 37 years and six months. I’d like to hold off on taking Social Security. I might work when the dust settles in retirement. I have 35 years of covered Social Security earnings, so no windfall elimination provision reduction, just the CSRS Offset.

Would it be wiser to take an annual 4 percent draw from the Thrift Savings Plan, wait until I’m 66 and then take Social Security? I have $205,000 in TSP. Interest rates might increase as well, and then decide on an annuity.

I receive a survivor annuity from my wife’s CSRS record. I’m getting married two weeks before I retire. My spouse will have a nonfederal pension and Social Security when she retires. She will also be the recipient of my survivor benefit in CSRS.

A. You’re asking for individual financial planning, which can’t be provided responsibly through a forum like this. The answer to your question depends upon your goals, resources and constraints, and will require some analysis to determine.

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Annuity vs. life insurance

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Q. My husband and I are both retiring soon, he under FERS and me under CSRS. His income will be made up mostly of Social Security, while mine will be mostly CSRS. A full annuity for him would cost $425 a month. Does it make sense to elect this annuity given the cost? Would a term life insurance policy be a better alternative? I need to put the paperwork in this week.

A. There is no universal answer to this question, but if in doubt, the safe bet is to elect the full survivor benefit for your spouse. To answer this question properly would take a full-blown financial analysis, but you’ve waited too long for that to happen before your deadline, so you’ll have to “spin the wheel.”

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Insurable interest survivor benefit

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Q. As I read the information in the retirement pamphlets, it states that “a blood or adopted relative closer than first cousins (this includes children, siblings and a parent) are presumed to have an insurable interest.” If I retire in good health, could I elect an insurable interest survivor benefit for my adult son or daughter (blood relatives) even though they are not my dependent or disabled?

A. Yes.

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Life insurance vs. survivor benefit

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Q: A co-worker is trying to convince me that taking an annuity without survivor benefit is more cost-effective than with the survivor benefit. He says it is better to take the full benefit and buy an insurance policy to protect my wife when I die. Besides the health insurance aspect of that decision, I argue that the survivor benefit is the better choice. I believe you wrote an article on why it is better to take the survivor annuity. Would you please repeat that advice and would you also point to where I may find more information on this question?

A: Better for who? Better for your life insurance agent, definitely. And you can probably enjoy a little more spending cash while you’re alive, but I doubt that, with the proper understanding, your spouse would choose this option. You can visit, click on the link to “Who We Are,” then click on the “Archive” link at the top. Type “pension max” into the search window and you’ll find several pieces I have written on the topic.

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