Q. I will retire in six months and have joint physical custody of my 8-year-old child. I am not married, nor was I previously married.
My retirement counselor said that if I wanted my child to receive my annuity should I die post-retirement (and she is under a certain age and a full-time student), it would be very costly, and not only would my annuity be reduced greatly but she would only get small amount. I recently read somewhere that I could elect a survivor annuity benefit for my child at no cost. So:
1. When retiring, can I elect my child to receive my annuity?
2. Is it free? If not, what is the cost?
3. Is the cost a one-time fee and a permanently reduced annuity to me while I’m alive?
4. Approximately what percentage of my annuity would she get?
A. You can’t elect a survivor annuity for your child. You can only make such an election for a spouse. On the other hand, you may be able to elect an insurable interest annuity for the child. To do so, you would need to:
1. Establish by a current medical exam that you are in good health when you retire; and
2. Provide affidavits that explain the relationship between you and the child, and the extent to which that child is dependent on you and expects to receive a financial benefit from your continued life.
If you meet the criteria, your annuity would be reduced by a percentage based on the difference between your age and the age of the child. Because the difference in your case is so great, the reduction would be a steep one. Since you are about to retire, I have to assume that the difference is 30 years or more. If that’s so, the immediate and permanent reduction in your annuity would be 40 percent. For that amount, when you die, the child would be entitled to 55 percent of your annuity (if you are covered by CSRS) or 50 percent (if covered by FERS).
On the other hand, no reduction in your annuity would be required for the child to receive a children’s benefit if you die while he or she is under age 18 (age 22 if in school), and it can be established that although the child was born out of wedlock, he or she has been supported either based on a court order or with voluntary regular and substantial contributions from you. That benefit in 2013 would be around $500 a month.