Retirement & Financial Planning Report

Structuring Payouts for Your Heirs

In addition to their civil service annuities, many federal employees purchase private annuities for investment, retirement planning and survivor benefit reasons—including the option to provide a benefit so someone who would not be eligible for a civil service survivor benefit, such as an adult offspring. As with a civil service annuity, a private annuity requires important decisions regarding designations of beneficiaries.

Some tax-deferred annuities offer an irrevocable beneficiary designation option. Here’s how this might work:


You can change the beneficiary designation during your lifetime. After your death, though, the beneficiary designation is locked in, along with the payout method.

Such a feature may be appealing if you’re concerned about your heirs. You can name your daughter as beneficiary, for example, specifying a single-life payout. No matter what happens to your daughter–divorce, lawsuits, business failures–she’ll have that lifetime income. What’s more, some income from an annuity will be a tax-free return of principal.

If you wish, you can specify a “20-year term certain” payout for your daughter. Then, if she dies, say, 12 years after you, her heirs (your grandchildren, perhaps) will receive payments for another eight years. You can’t provide such post-mortem protection with other types of bequests. An inherited IRA, for example, can be cashed in all at once and lost to a con artist. To truly protect your heirs, you’d need to go to the time and expense of setting up a trust.

An annuity, on the other hand, can be a simple, inexpensive way to provide a legacy that always will be there for your heirs.

Thinking of Returning to the Government as a Retiree?

OPF: Tweak Your Personnel Folder for Maximum Benefits

Taking FEHB into Retirement Without a Hitch

FERS Retirement Guide 2022