OPM’s report, wages and designated survivors, all on today’s Fenobabble. Welcome to Fenobabble, where we take federal retirement benefits and make them understandable for humans, I’m Kevin Jones. Then Cassie Knight, we take questions from Fednobabble.com and Kevin, Fed Pilot workshops and webinars where and we answer them right here on the show.
So let’s jump in. What’s the first question?
Question number one is sure, even though I’m 20 plus years from retirement right now, that report that they’re talking about, we talked in the last episode of maybe this episode before that, the certified summary of federal service from OPM. That’s what they’re talking about is should I get that even though I’m way far away from federal or from retirement? And here’s my thought, I’ll give you my thought, Cassie you give your thought, maybe it’s to say maybe it’s different, but OK, I know what people ask this all the time.
And I say, I don’t care where you are in your service, go get it, because you want to make sure that they are on the right path and capturing everything. And then I, I personally say do it every five years just to make sure. Is that overkill? Probably, but it’s going to make sure that nothing is messed up. So that’s that’s my opinion. Now, anything that’s super, super good, you know, not only get the report from the certified summary, but take a look at your your retirement report as well, whether that’s from H.R. OPM or simply your financial adviser, because, as you know, we provide those reports from our four employees, from our trusted advisers.
Will you submit that information? That’s part of what that options does, is provide that back office support.
And, you know, I think it’s super helpful to get all the information you can, because that way, when you’re doing that retirement planning and you’re looking at your your financial picture, you know, you really set yourself up for some great success later on in life.
So the earlier the better, in my opinion. Yeah.
I’m with you know, I find so many people, unfortunately, the majority of the people who come to workshops are going to retire, let’s say, in five years. They’re closer to retirement, which makes sense. But the unfortunate thing is that what they’ve been told all along is you don’t need to figure this out until you’re five years or so.
And in fact, that’s what the law is, right. The law says that the government will pay for eight hours of training for you if you’re five years from retirement. And so everyone gets that in their mind of, OK, I’m going to wait till five years from retirement to try to figure this out. No, no, no, no, no. Go find this out. Now, I don’t care how if you’re 20 years from retirement or 20 days, go figure it out now and don’t put this off.
Yeah, they’re actually supposed to have information about their benefits at the beginning, middle and end of their career, and they call it the end when they’re five years to retirement.
But so many agencies only just do, you know, give the information at the beginning and then, you know, obviously try and get in touch with the employee at the end. And obviously, they have to have some sort of retirement change training or something in their agencies, you know, within that five year period that that is required. But I don’t think there’s enough awareness or or anything encouragement to to take action while you’re in service.
You know, it doesn’t matter if you just started. It doesn’t matter if you’re only five years in. It doesn’t matter if you have 10 years and you still have 20 years. It’s super duper important to take a look at your your financial planner, your retirement plan, whatever that is, is for you. And and really make sure that you’re doing what is necessary for for you to have the responsibility of your retirement plan in your lap. Yeah, right.
You know, when I worked at NASA as a consultant, I worked there for six years and I would hear people all the time say I’m just working for retirement. But do you think they were planning for it? No, mentally, they’re just holding out mentally is that’s all they’re saying. They were they were saying, I’m actually preparing for it. And really, it’s interesting that we could spend one half of our adult life in retirement. That’s a lot to prepare for.
We don’t want to just jump into and say, oh, I’m here. OK, what do you give me? I’ve heard way, and I’ve seen way too many people do that. Too often, and I think federal employees not to pick on them or anything, but they just have this mentality, like I’ve got these great benefits and they’re going to be there in retirement.
Right? Well, OK. And the government is going to give you a pension, but it’s not going to be what your paycheck is.
Mm hmm. Right. The cost of living obviously increases every year because we all complain about the gas prices and the grocery prices and all of these different things. Right. Health insurance is going up and an exceptional rate then, you know, all of these different factors really need to to get taken care of or thought of, I should say, in that in that retirement phase, because you don’t know what that’s going to look like 20 years from now.
However, you really set yourself up if you know what those numbers are going to look like. So that way, you know what you need to have in the bank. You know what you need to have in your in your TSP. You know what your family is going to do. You know what your FEHB is going to do? You know what all of those things, or at least to the best of our LEOs for what they’re the policies are currently on the rules and regulations.
But you can at least set the set it up to, OK, if this happens, this is what my plan is going to be.
And if something else happens, here’s what my plan is going to be, because then you have that damage control. Yeah. In in that plan. Because so often you can say, oh, yeah, this is what I’m going to do. And, you know, your spouse gets sick, they get cancer.
Then what if it’s those contingency plans?
I mean, how many federal employees are in their work working on projects? Right. A lot of federal employees are working on projects and there are always the contingency plans. OK, well, let’s do this. But if through that we discover that this we have to take a right turn and go somewhere else and try something, the same should be with our retirement plan. It shouldn’t be OK. Point A to point B, done. I mean, most people don’t even do point A to point B, they just say, OK, the government is going to give it to me.
And you said, you know, not picking on federal employees, but I get it. At the same time, federal employees are typically told that, you know, basically the the premise comes across as you’re going to be taken care of in your retirement.
We’re going to give you what you need. No, right, no, it isn’t that way, unfortunately, I mean, and if it is and I say this all the time, if you just take the default of what the government gives you, then who is it going to benefit more, the government or you? Yep, and we know the answer right there, right, so again, it’s so important. OK, we talked about that. We got to get on to the next question, but yeah, good.
We could go on with that discussion for a long time, but it’s that important. OK, does the earnings test include interest income from investments or just wages? That’s an easy one. So, yes, it is go for it is strictly wages, whether that’s earned income from employment or earned income from a business.
You know, as a business owner, it doesn’t matter. It is strictly on your earned income that you have coming in. It’s not any investment, just wages.
Basically what you get from W2 or ten ninety nine. There you go, if it comes from anything else like TSP or pension or even even interest or what we’ll call owner draws from a business, it doesn’t count those as well. It’s just what you’re working for in wages. Pretty simple. Yep.
OK, I like it. I like it to be that easy sometimes. Yes. OK, if you have a designated and if you have designated a benefit survivor in TSP and have not chosen the annuitization, will the balance be available to that person?
So I think what they’re saying there is that there is that annuity on the front page of the annual TSP statement and they’re saying if if we don’t take that, then will the balance be given to someone?
If I die to the, you know, beneficiary if I die. Now, I’m curious if they mean if you have designated a beneficiary, not a benefit survivor.
Because if you take any sort of survivor like, you know, you, the TSP says, oh, yeah, you can pick, you know, the self only option, you can pick the survivor benefit, you know, 50 percent or whatever, then you’re a new enticing life like that is annuitization of your TSP.
Right. But if you just name a beneficiary. And it won’t be available to the beneficiary until after you pass, because that’s how that works.
But, you know, so you can’t I guess the simple answer is no. You’re that person is not going to have access to your TSP unless you’ve passed away. And it doesn’t even matter if you’ve named a beneficiary, because TSP will put it in the order of precedence right after they do their piece of it.
Well, not if you have a beneficiary. It skips the order of precedence, the standard order of precedence. It just greatly skips that. Right, I’m saying if they don’t have a beneficiary named, then it will automatically go to the order of precedence.
Yes, yeah, yeah, that’s true. So I guess I guess, you know, because the TSP has, I think, 18 different annuities overall that you can do that. Most people don’t, even if they see that one on the statement, think, OK, they have that one.
No, they’re actually 18. If you dive in and there are different and there are different, if you were to die different amounts that the survivor, the beneficiary would receive. So.
It again, it depends which one you do, and then at the same time, let’s say you do none of those and then you do the what am I what am I thinking of where you get it?
Just all options. Yeah, I withdraw options or the installments. Then the remaining amount does go to the beneficiary. Now, here’s the question that most people don’t understand is and I almost want to just leave this. You know what? Let’s just leave this as a question, maybe for another time, because we could go on about this one. If is there any difference between leaving your money in your TSP to your spouse and leaving it to your children, is it treated the same way?
Oh, I’m sure we’ll get that one. We’ll get into it, but that’s a question again, most people don’t even think about and they think, OK, I’m going to leave it to my spouse and if not my spouse, then I’ll leave it to my children and assume that all my children are going to get it just like my spouse did. No, it’s different. We won’t go into that right now. But it’s just another question that people don’t even know to ask.
I’ve actually gotten out a few times from financial advisors where they’re like, well, how does it work if somebody else is named, if it’s not a spouse because maybe they’re not married. Right. And can they need somebody else? And can they need a charity or an organization or what have you? And how
does that work? After that happens, because obviously the rules for the beneficiary accounts are a lot different than they are for the regular TSP and so, so many different factors to think about here.
But essentially, the bottom line is name a beneficiary under TSP. Right. That’s huge. Got to get that to you. I can’t tell you how often I see TSP statements from from employees and there’s no beneficiary named.
Right. That’s so sad. It is because the standard order of precedence, of course, that’s going to go to the government first and then your spouse or whoever’s next of kin or whatever. And it really bothers me that Tia Spiga has that, you know, don’t worry about it. We’ll take care of, you know.
Oh, no. Yeah.
Take responsibility of your money, OK? Because I had those small balances.
OK, where you wanted to.
Because if you don’t take responsibility, we will is what the government is saying. Don’t you don’t need to worry about it. Let us take responsibility for that. And you’re good to go.
No. Got to love the government. Yeah, yeah, definitely, they do have just the overall just to get anything, the pension and these benefits. It’s great because a lot of people in the United States don’t do that. They have to do it all on their own. So they’re in the mentality already. I’ve got to do it on my own. The danger of having the government give some to you is thinking that the government is going to take care of me when I get into retirement, when that’s not quite the case, that they may help, but it’s it’s not going to be taken care of.
It’s totally different than that. Right.
So if you guys want to know what those numbers look like for you and you want to help us get you in touch with somebody who can really, you know, dialoging down and and talk with you about those federal benefits and see what those numbers are going to look like in the future, whether it’s what’s my TSP balance going to be or my pension, how LES my FEHB going to be affected. Please go to Fednobabble.com, submit the information. We’ll get you in touch with a trusted advisor who can understand his benefits and can really help you out.
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