At retirement a federal employee is required by law to elect a full survivor annuity unless the spouse agrees in writing to a reduced survivor annuity or none at all.

The minus of electing a survivor annuity is that it will reduce the amount of your own annuity. How much that will be depends on whether you elect a full annuity or a reduced one. It will also depend on what retirement system you are in.

Under CSRS, a survivor annuity may be any amount from $1 per year up to 55 percent of your base annuity. Under FERS, there are only two choices: 50 percent or 25 percent. The reduction for a survivor annuity under CSRS is 2.5 percent of the base you elect up to $3,600 and 10 percent of any amount over that. Under FERS it’s exactly 10 percent for the full annuity, 5 percent for the reduced annuity. Regardless of the level of survivor benefit you elect, the reduction is made in your base annuity, i.e., the amount to which you are entitled before any deductions are taken.

The big plus of electing a survivor annuity is that it will provide a lifetime income for your spouse after your death, unless he or she remarries before age 55. The amount of the survivor annuity will be derived from your base annuity. If you elected a full survivor annuity under CSRS, your widow(er) wouldn’t receive 55 percent of your reduced annuity; instead, he or she would receive 55 percent of your unreduced annuity, the one you would have received if you hadn’t elected a survivor annuity, increased by all cost-of-living increases you got since you retired. In addition, your survivor spouse’s annuity would be increased by all future COLAs.

There’s another advantage, too. If you and your spouse are covered under the Federal Employees Health Benefits program, your survivor will be able to continue that coverage if he or she is receiving a survivor annuity. No survivor annuity means no coverage, unless he or she is also a federal employee or retiree who is separately entitled to FEHB coverage in his or her own right.

You and your spouse might be tempted to reject the opportunity to elect a survivor annuity and instead invest the extra money in the market or purchase an insurance policy to make up the difference. However, few retiring employees do that. The reason is simple. The government’s deal is hard to beat. Not only does it provide a generous return on your investment but it’s backed by the full faith and credit of the government.