Annunits Spouse Tax?

Rustynutt

Member
Woke up this morning, and instead of putting on my sweats like I have since mom taught me how, standing and putting one leg in at a time, decided to sit on the bed and pull them up on two legs. Is this a sign of old age?

That got me thinking of the amount of an annuity a spouse receives for the 10% reduction.

I'm FERS, going out on a VERA end of this month with 29 years and 10 months service. (That in itself shouldn't make any difference in the question).

The Human Resource person that will be handling my paperwork did an annuity estimate, which included both my FERS annuity, and FERS supplemental pay, which last until I turn 62 for the cost of the survivor benefit.

For an example, a FERS annuity calculates $30k annually, and after OPM does their social security calculation, the FERS supplemental pay is $15k annually paid until the annuitant reaches age 62.

Here's the question: When the annuitant reaches at 62, and the FERS supplement pay ends, does OPM readjust the 10% being withheld from the annuity to the actual annuity calculated by the high 3 x 1% x number of years calculation of the annuity?

This is something I thought of this morning, kind of out of the blue. I know the question will draw a blank look at the local HR office, and hoping someone here has made the transition at age 62 and knows for sure if the amount withheld is recalculated at that age and time.

That's a huge decision to make in this short of time. I'm thinking that a substantial life insurance policy to supplement the reduction could be purchased for the 5% withholding as opposed to opting for 10% of a lifespan if it is not recalculated to the received annuity at age 62%

Nut?
 
Woke up this morning, and instead of putting on my sweats like I have since mom taught me how, standing and putting one leg in at a time, decided to sit on the bed and pull them up on two legs. Is this a sign of old age?

That got me thinking of the amount of an annuity a spouse receives for the 10% reduction.

I'm FERS, going out on a VERA end of this month with 29 years and 10 months service. (That in itself shouldn't make any difference in the question).

The Human Resource person that will be handling my paperwork did an annuity estimate, which included both my FERS annuity, and FERS supplemental pay, which last until I turn 62 for the cost of the survivor benefit.

For an example, a FERS annuity calculates $30k annually, and after OPM does their social security calculation, the FERS supplemental pay is $15k annually paid until the annuitant reaches age 62.

Here's the question: When the annuitant reaches at 62, and the FERS supplement pay ends, does OPM readjust the 10% being withheld from the annuity to the actual annuity calculated by the high 3 x 1% x number of years calculation of the annuity?

This is something I thought of this morning, kind of out of the blue. I know the question will draw a blank look at the local HR office, and hoping someone here has made the transition at age 62 and knows for sure if the amount withheld is recalculated at that age and time.

That's a huge decision to make in this short of time. I'm thinking that a substantial life insurance policy to supplement the reduction could be purchased for the 5% withholding as opposed to opting for 10% of a lifespan if it is not recalculated to the received annuity at age 62%

Nut?

Good question. I'm dealing with the same questions, but have a couple more months to make my decision (although in CSRS I can make the survivor annuity decision up to 18 mos following retirement I think. At any rate, let me know what you do find out and I'll do likewise.

I'm thinking about foregoing the survivors annuity entirely and just getting a life insurance policy instead -- but looking for advice. Lots to consider: life expectancy, what death benefit amount and term can I purchase with that 10% (or part thereof), will this provide enough for my wife?, and then the questions re: the insurer -- financial stability/security/rating, etc.

I'd like to find a for-fee advisor to help me with this decision as it seems pretty complex and I have no real insight/experience.
 
Good question. I'm dealing with the same questions, but have a couple more months to make my decision (although in CSRS I can make the survivor annuity decision up to 18 mos following retirement I think. At any rate, let me know what you do find out and I'll do likewise.

I'm thinking about foregoing the survivors annuity entirely and just getting a life insurance policy instead -- but looking for advice. Lots to consider: life expectancy, what death benefit amount and term can I purchase with that 10% (or part thereof), will this provide enough for my wife?, and then the questions re: the insurer -- financial stability/security/rating, etc.

I'd like to find a for-fee advisor to help me with this decision as it seems pretty complex and I have no real insight/experience.
Depending on how much and how long, I'd start getting quotes on that Life Insurance policy. I locked in my wife's insurance policy at $200K (No more medical reviews) until she reaches 85. The premium was steep in the begining, but we have budgeted accordingly and I get pay out if she survives past that. I would hate to see your quotes if you are just doing this now. But very interested in finding out.
 
Depending on how much and how long, I'd start getting quotes on that Life Insurance policy. I locked in my wife's insurance policy at $200K (No more medical reviews) until she reaches 85. The premium was steep in the beginning, but we have budgeted accordingly and I get pay out if she survives past that. I would hate to see your quotes if you are just doing this now. But very interested in finding out.


Khotso, FERS annuity must select at least the 5% or 10% spousal declaration in order for them to be eligible for your FEHB plan.

Frixxxx, I was just married a couple years ago at age 54 for the first time in 20 years, so never considered spousal life insurance at that time. My wife immigrated from The Netherlands, and other than burial coverage, was not able to carry over her policy offered through the Department of Justice there.

Haven't checked, other than watching late night television advertisements. I'm figuring the difference between a 10% and 5% annuity selection for the wife would be just over $200.00 month, and would hope that would get me around the coverage you have. The benefit to her, if I croke soon, a lump sum payment would be much more beneficial to her than waiting for half of my annuity payout over her life span.

I'll hit up HR today, I want to see what their timeline is for processing and checking out. I want to be signed out by Jan 31st, with no hold up in paperwork on my part or theirs.

Rusty
 
Depending on how much and how long, I'd start getting quotes on that Life Insurance policy. I locked in my wife's insurance policy at $200K (No more medical reviews) until she reaches 85. The premium was steep in the begining, but we have budgeted accordingly and I get pay out if she survives past that. I would hate to see your quotes if you are just doing this now. But very interested in finding out.

I know 2 people who went with life insurance for themselves ( spouse being the beneficiary) rather than the 10% annuity reduction for spousal survivor annuity. Their rationale: the premium was less than the 10% of annuity ndthe term substantially exceeded their own life expectancy, and provided a substantially death benefit to survivor and heirs. A key consideration for them was that unlike the survivors annuity, life insurance pay out can be inherited by heirs. Annuity goes away leaving nothing to heirs. ... Sounds like a smart move but also carries a lot of risk ... I need to calculate those risks (and costs) to make a good decision.
Anybody else out there looked at this?
 
I know 2 people who went with life insurance for themselves ( spouse being the beneficiary) rather than the 10% annuity reduction for spousal survivor annuity. Their rationale: the premium was less than the 10% of annuity ndthe term substantially exceeded their own life expectancy, and provided a substantially death benefit to survivor and heirs. A key consideration for them was that unlike the survivors annuity, life insurance pay out can be inherited by heirs. Annuity goes away leaving nothing to heirs. ... Sounds like a smart move but also carries a lot of risk ... I need to calculate those risks (and costs) to make a good decision.
Anybody else out there looked at this?

This is along the lines I am thinking. I would surely select the 5% option to keep FEHB. I guess if a spouse worked and had health coverage from a reliable pension plan, that would not be an issue.

Need to get quotes this week!
 
Hello Rusty, I am considering this same question. Here are a few fairly thoughtful articles from MyFederalRetirement.Com. To me this is not so cut and dried. Please let us know what you decide.

Importance of Survivorship Decision The Importance of the Survivorship Decision

CSRS Beneficiary Elections CSRS: Survivor Benefits Elections at Retirement

Should You Take a Survivorship Election for Your Spouse Should You Take a Survivor Annuity for Your Spouse?

Survivor Benefits vs. Life Insurance Survivor Benefits vs. Life Insurance
 
This is along the lines I am thinking. I would surely select the 5% option to keep FEHB. I guess if a spouse worked and had health coverage from a reliable pension plan, that would not be an issue.

Need to get quotes this week!

Re: your quote timeframe, you may be able to change you survivor election for a period of time after actually retiring. So you may have more time - but better check with HR soon it sounds. I am CSRS and have 30 days after receiving first retirement check to make a change - as I recall at least. You may have a similar timeframe under FERS?
 
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Re: your quote timeframe, you may be able to change you survivor election for a period of time after actually retiring. So you may have more time - but better check with HR soon it sounds. I am CSRS and have 30 days after receiving first retirement check to make a change - as I recall at least. You may have a similar timeframe under FERS?

The election for survivor benefits in FERS is made at time of separation, and can only be changed if a "life changing event" occurs. Something along the lines of a death of a spouse, divorce, or cause to move to a disability retirement within one year of separation. FERS and CSRS differ, and where they do, it is mostly extremely different. CSRS are lucky dogs! :)

As far as the election for either 10% or 5% of survivor benefit under FERS, from what I have recently read, the election is deducted somewhat separately for each benefit. If a FERS retire is eligible for the FERS supplement pay, then the survivor benefit is deducted for that portion of the annuity, and the FERS earned annuity. When a FERS employee reaches the age of 62, and the FERS Supplemental pay is discontinued, that annuity is no longer a part of FERS survivor benefit election. It did not state the 10% or 5% reduction in annuity for survivor benefit election is no longer deducted, but it would seem logical. Still have not confirmed this question. What my concern there is, the governments appatite for double taxation could apply, and would like to see in writing the election is no longer deducted.

Two other bits of information included in that portion of OPM data.

An employee is considered to have turned 62 in the previous month, if their birthday falls on the 1st of the following month, for FERS and Social Security calculations.

For the dreaded earnings test under the FERS supplemental annuity pay, during the year a FERS annuitant turns 62, earned income is not included in calculations for the purpose of the earnings test for the supplemental portion of the annuity for that tax year.

This would be a key month to, if desired, pull large sums from say a TSP or other taxable earnings account, work ones butt off for the year making a fortune, and not lose any portion of the supplemental pay.

Lastly, somewhere in all this discussion was the mention of how OPM knows what your earnings are for any given year an employee is receiving FERS supplemental pay. Not to worry, they have that all figured out without having to interface with another government agency such as the IRS or Social Security, which would seem to be the actions of a efficient organization, but they send the annuitant each year a form to disclose their earned income for that taxable year they are receiving FERS supplemental pay.

I realize some of this may sound petty to LEO, Fire, and other Federal Employes such as Air Traffic controllers whom serve 20 years with benefits for those positions being a bit more defined by OPM, and not quite so vague as other FERS annuity programs are. Not to disrespect those positions, but in many cases there, if an employee entered service early enough, there is possibility to have reentered the work force with the opportunity to complete a second career within the time it takes many FERS employees to reach MRA. And to the GS-15's and SES who's pension will be 4 to 20 times more what in this case mine would be. However, every dollar counts here to survive, and enjoy the retirement I have earned after 30 years of service under those positions.

So I've done my homework to the best of my ability. Even to the point of drawing blank looks from most HR offices to OPM itself in understanding all the intricacies. What I have found, it all boils down to money. The most informative organizations found during research were, DEFAS, IRS hand books, and Social Security Handbook.

Now, back to the other thread where I enter into a magical wonderland :)
 
Well, as a recent retiree (FERS), I can tell you the survivor annuity "cost" is based on the percentage of your basic annuity. The "benefit" is also based on that basic number...the supplement is not affected either way.

Also, you do have 30 days after your first retirement payment to change your election.

HTH !


Stoplight...
 
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I am looking at a FERS Benefit Estimate Report as I type this.
At the top of the page, under Unreduced Monthly Annuity, in the block of Survivor Benefit Reduction, the amount is 10% of the amount of the Unreduced Annuity.
That amount being a calculation of my earned FERS and FERS offset pay.

If you are getting the checks, and are receiving the FERS offset pay, I don't doubt what you are saying, seeing what I have encountered with HR reps lack of understanding of the FERS retirement system.

I may have missed the 30 day expiration part on selecting a survivor benefit percentage. I don't recall seeing it, but then I have read a hell of a lot, especially working through what went on earlier in my other thread.

As I was only given 4 hours notice to return my acceptance of a VERA VISP, with no indication of it actually being approved until that day, I am in a bit of a rush here.

The previous disability package is fairly inclusive of the necessary forms, and was told by the local HR rep that the HR handling my VERA package intended to utilize those forms. However, there are statements such as actual retirement date and other things that must be corrected, so have spend the entire day reproducing a package to turn over to HR first thing in the morning.

Probably the most relative bit for this thread is, I have at this time decided to select the 5% survivor benefit, and elected to carry more FLGI insurance options. Doing a quick Internet search for the amount of coverage I was looking for, it was a much less expensive option. The offset between the survivor benefit being at 5% and the amount of the FLGI is canceling as far as my annuity is concerned. And, I might add, a much better circumstance for the wife If I should meet my demise before turning 65 :)

If the HR rep providing the annuity estimate royally messed up, it caused me a lot of wasted time and effort. If it is calculated on the earned annuity, then all the better! :) That would amount to my FEHB that has been figured into our retirement expense. Win win all the way around here.
 
Frixxxx, I was just married a couple years ago at age 54 for the first time in 20 years, so never considered spousal life insurance at that time. My wife immigrated from The Netherlands, and other than burial coverage, was not able to carry over her policy offered through the Department of Justice there.

Don't forget to try WAEPA for quotes- they generally do very competitively. Life Insurance for Government Employees and Their Families

I've got term coverage for myself and my wife, and until recently (As now I'm over age 50) it was always a fraction of the cost of FEGLI. Now, over age 50, it's a lot closer in cost, but still a pretty good deal to look over.

Good luck.
 
...That amount being a calculation of my earned FERS and FERS offset pay.

Rusty...you're confusing me now ! Perhaps this is an issue between a straight FERS 30+MRA retirement (like I did !), vs. your early out/disability...What do you mean by "offset pay" ? The top line of the estimate (I looked at mine, too !) is your basic annuity, based on your high-3...that number DOESN'T include the supplement ! The supplement is added down in the section labeled "Net Monthly Annuity". Yeah...it's weird...but MY final OPM amounts very closely match my last "Estimate" from my Agency !

I may have missed the 30 day expiration part on selecting a survivor benefit percentage. I don't recall seeing it, but then I have read a hell of a lot, especially working through what went on earlier in my other thread.

I hear ya ! My final OPM "Retirement Benefits" Statement mentions that the 30 day option to change was on the app :blink:

I looked at my retirement "options" for months before I decided to go...Can't imagine trying to do it in 4 hours !

FWIW...we took the 50% survivor benefit...We don't have Kids, so we're not concerned with leaving a "legacy" to our heirs...let them earn their OWN retirement ! :D The Wife (a retired Teacher) has a defined pension, and health insurance (so far !), and our TSP/403(b) balance should be enough to carry her through, if I croke first !

If SHE crokes first, we took a survivor benefit for me on her pension, too...she has enough life insurance through her pension to bury her, and I have enough term and whole life in place to bury me, too. We MAY cancel the term, since it's getting expensive as I age !

Everyone's "situation" is different ! Do what makes sense to YOU !

Stoplight...
 
Don't forget to try WAEPA for quotes- they generally do very competitively. Life Insurance for Government Employees and Their Families

I've got term coverage for myself and my wife, and until recently (As now I'm over age 50) it was always a fraction of the cost of FEGLI. Now, over age 50, it's a lot closer in cost, but still a pretty good deal to look over.

Good luck.

Thanks a lot for the referral. I mistakenly read while using the FLGI calculator, that at this time I could elect to change FLGI to the B and C options. The HR rep this morning told me that is not possible, the only change I was allowed to make was to the Basic coverage I did carry.

An outside policy, pretty much everyone says, is a much better deal.

They still gave a confused look when I brought up how survivor benefit was calculated. I don't think they know. Hopefully, we don't end up on two seperate anunity plans, both under the same FERS program :)

Thanks
 
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