An examination of the Federal Employee Retirement System (FERS) survivor annuity benefit.

Davis, Kevin; Fraser, Steve P.; Jennings, William W.

The Federal Employees Retirement System (FERS) provides survivor annuity benefits for employees whoforfeit a portion of their annuity as a premium. In this study, we construct a Monte Carlo simulation to describe the distributions and implied internal rates of return for FERS annuitants who elect a joint and survivor annuity. Our analysis suggests that the survivor benefit program is quite lucrative for most male retirees. In contrast, the program is less rewarding for female retirees, especially if younger than their spouse. For many female retirees, the program actually produces a negative return. Retirees and planners can use our results to make more informed annuity decisions.

RETIREMENT; PRIVATE annuity trusts; RETIREES; PENSIONS; MONTE Carlo method

Financial Services Review, 2018, Vol 27, Issue 2, p133

1057-0810

Academic Journal