Spousal annuity vs. life insurance


Q. I will be retiring at the end of this year with 37 years and 10 months of service. I am a CSRS employee who will be 57 years old in September. My annual annuity would be $81,958 a year. 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 choose the spousal annuity. Which would be the wisest?

A. No one can answer that question because no one knows what your life expectancies will be. The only thing you can know for certain is this: The money that would be paid out on a life insurance policy is a fixed amount.

While using and investing it wisely can stretch it out, if your wife lives for a long time, it will likely run out before she dies. On the other hand, a survivor annuity will continue for as long as she lives and be increased by cost-of-living adjustments along the way. Further, unless you live to a very old age, a portion of your unreturned tax-free retirement contributions will transfer to her, lessening her tax burden.


About Author

Reg Jones was head of retirement and insurance policy at the Office of Personnel Management. Email your retirement-related questions to fedexperts@federaltimes.com.

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