Survivor annuity


Q. In Reg Jones’ column, he states, “Choosing to buy an insurance policy instead of a survivor annuity is seldom a good idea. Could you please expand on that thought? The financial planner I talked to, who also sells insurance, says if you are healthy, the insurance route will be cheaper to pay for and more lucrative in the end. If you plan on dying young, the survivor annuity is best.

A. This is a complex decision, and you should proceed with care since it is irreversible once it’s made. The simple answer is “guarantees.”

The federal survivor annuity is the safest option, with all elements guaranteed, including a guaranteed cost-of-living adjustment that applies before and during the payment of a benefit. If your spouse dies first, then your annuity benefit is guaranteed to “pop up” to what it would have been without the survivor benefit election. Any alternative, like life insurance, should be compared to this option by someone without a competing interest in the transaction.

I was trained to sell life insurance for this purpose, have run the analysis for clients at least dozens of times over the years, and have yet to see a solution that can compete with the survivor annuity benefit from the survivor’s point of view. The life insurance solution could work out in the survivor’s favor, but this is speculative at best. There may circumstances where the life insurance solution is the superior option, but they are the exception rather than the rule, and you shouldn’t rely on an agent’s arguments or analysis in making the commitment.

The agent you’re listening to isn’t your ally in considering this decision. They are your adversary. They will be paid compensation that at least equals the premium you’ll pay for the insurance during the first year if he/she can convince you make the purchase, so they are highly motivated, and legally allowed, to skew the arguments heavily in favor of the purchase.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to and view his blog at

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