#17- FRA, LWOP, APWU

FRA, LWAP and postal, but not postal health rates gets confusing. You’ll just have to see on today’s Fednobabble.com.

Welcome to today’s Fenobabble, where we make federal retirement benefits understandable for humans in under 20 minutes. I’m Cassie Knight and I am Kevin Jones.

And we take your questions from those who submitted online at Fednobabble.com and also from the Fed Pilot workshops. And sometimes, you know, we can’t cover as indefinitely during the workshops as we want to. And so we get to go a little bit deeper here.

We get to answer some of those questions that that we feel that are a little bit more worthy of a longer explanation. So given that Cassie first question for you, if you are for retirement and continue to work, do you have to stay under the $18,000?

So I’m assuming that they mean for the earnings test. All right, that’s that’s what I’m assuming. Yeah, that’s the only eighteen thousand that I know. So I’m assuming that as well. But there is the earnings test on special retirement supplement and Social Security.

So.

Right. But if they’re talking about the full retirement age, I’m assuming it’s for Social Security would have to be Social Security.

Yeah, because, you know, once you’re past age 62, they’re not getting that special retirement supplement anyways. Right. So the answer is no, you’re not subject to the earnings test after your full retirement age. So you can continue to work and you don’t have to worry about the income that you have coming in for the earnings test. Right, and I I think this is where and the reason I brought that up earlier was just because it gets confusing.

You have the earnings test that goes for special retirement supplement and for Social Security. If you talk about full retirement age, that’s Social Security. If you talk about mant minimum retirement age, that is that special retirement supplement. But that only goes to 62 as where this picks up at 62. And so and they and the minimum retirement age is different than the full retirement age. And I mean and this and this earnings test plays differently with each of those.

It’s not easy, outnumber all the rules.

Yeah, it can definitely get confusing here, and so I’m glad that they actually had full retirement age is what I think they meant, but that gives us a little bit inside of that.

You know, it sounds like this question is pertaining to Social Security rather than the special retirement supplement. So when you’re submitting questions, please be as detailed as possible so that we can really make sure that we’re answering them correctly for you and and giving you the advice and the answers that you’re seeking. So. Yep, great.

All right.

Next question is, if I took a laptop, which is leave without pay for an extended period of time, what things would you recommend I keep in mind regarding retirement?

This is an awesome question. I love it. Yeah, and we get this question actually pretty often, I don’t know how often you get it in your workshops, but I get it from advisers pretty pretty frequently on what does that time frame look like for people with leave without pay and versus creditable service? The answer is pretty simple, but. Not at the same time, because it is. If somebody has a lot that is less than six months in a calendar year, then that time counts for creditable service.

However, we have to be very careful here, because if somebody has had an extended period of time of love, then what does that mean for them? What is is that a year? Is that two years? You know, what is that look like for that employee? And when did that time begin? When did that time end? And we count the six months in the previous year and the six months in that other year so that we technically they only have a year that doesn’t count for credible service.

So really, I would suggest anything that has a part time service, anything that is questionable in their service history to fill out a certified summary of service and try and get that figured out prior to retirement. Yep, that’s great. So you so you said six months in a calendar year, so really someone could go almost a full year if they took six months in one year and then six months in the next and not have a count against their years of service.

That’s right, yeah. Yeah, and isn’t that interesting, so if you think you’re going to have surgery and you’re going to be out for a while, you may plan it in July just in case.

Exactly.

Exactly. July 1st and then all that time.

Yeah, that’s interesting, isn’t it interesting Cassie how there are these rules and you hear six months. Right. I mean, someone may just here live without pay. You can’t go six months in a year without realizing, OK, there are ways to take advantage of this. It’s six months in a calendar year. And so that means you can double up on that at the same time. And so there are certain things that you can do if you time.

Right. You can come out ahead. But if you time it wrong, then you’ve got serious issues with that. So it’s just I don’t know.

I find it interesting. Sorry, but that’s just benefits in general. Yeah, sure, good. You know, you have to. Be strategic in how you plan to use your benefits to your benefit, right, not to the benefit of the government or the whatever, then and there are ways to strategically plan whether you’re working or whether you’re not working. So that way the benefits can really be, you know, you can you get the most use out of them, whether you’re an employee or in retirement.

And that’s what I love about our advisors in our network. They need help, whether you’re in service or out of service. And they can really kind of dial down for you all of those different pieces that most people don’t think about. So that way they can help that employee or retiree or in the transition of employment to retirement and make sure that you’re not.

We’ll see counterintuitively working those benefits to where they’re actually hindering you and being able to actually benefit you.

So, yeah, you know, I find it also interesting that a lot of people think, OK, if I go see someone, it’s for my retirement. Well, if if you’re working with them well before retirement and you have anything come up like leave without pay, you can go to them and say, hey, how can I do this right? How can I take advantage so it doesn’t hurt my retirement? So instead of it just being an end of career thing, it’s got to be throughout your whole career?

Well, at least, you know, I would recommend that it’s throughout your whole career that you’re working with someone so that when something does come up, you can say, oh, does that hurt or does that help or how do I do this so that I can have a better retirement in the future? So this whole planning for retirement, it’s got to be the whole thing, not just at the end of working.

Yeah, that’s really great advice, you know, because I can’t tell you enough. How many times employees that I’ve talked to or advisers that I’ve talked to where they they’ve talked to employees and they they have this misconception that, you know, I just need to create my benefits when I’m when I’m about to go out the door, you know, a couple of months before I go out the door. Right. Well, what if there’s one if there’s issues that we could deal with that might take some time with the government to get in order prior to retirement?

And you want you it could save thousands of dollars if you plan that years ahead of time as opposed to at retirement and waiting until that time to make sure that you’re you’re doing all of this in a way that’s beneficial for you. So I don’t care how young or old do I go see somebody and let them help you coordinate those benefits and making sure that they’re they’re really working for you to the to your advantage?

Yeah, absolutely critical. OK, good, good summation there. Next question. I’m not a postal worker, but my insurance is with a p w you will my rates go up because. Really, what this is referring to is the I’ll say again, shortcut phrase that. Postal workers when they retire? Well, right now they get a discount as to how much their their health premiums are, but when they retire, their rates go up. So this person is saying, I’m on the postal workers.

Health insurance plan, are my rates going to go up to? Yeah, and so the answer is they’re not going to go up because you retire. Right, OK, as we’re postal employees, their rates, I should say, most postal employees, their rates are different than regular employees, and so they do pay a lower percentage and at retirement they do increase because then they just jump into the normal percentage for everybody else, which is that. Seventy two percent range of of the cost.

Right. I guess they pay at least twenty eight percent because the government pays the seventy two percent. Right. So regular employees though, just because they’re on the American Postal Workers Union then there are going to stay the same for them even at retirement, unless obviously there’s an increase due to the annual increase, which typically there always is some sort of annual increase, but it doesn’t increase just because you retire. Right. And I hear this not just for folks who are under the A.P. w u program.

I get this question often from advisers where employees think just because they retire, that their health insurance rates increase. And that’s simply not the case. Right? It doesn’t change. I mean. Well, let me backtrack a little bit. Your premiums that you pay don’t change how you pay them changes, right?

OK. Yeah, you know, in the workshop, I say your rates don’t increase, but you’re going to pay more. And that sounds like a complete contradiction because how could my rates not increase? But you’re paying more. So explain that just a little bit while we’re here. Why?

Why the heck not sure. Sure, so people are employees, rather, pay on a twenty six per pay period basis throughout their employment rate because you’re not getting paid monthly, you’re getting paid every two weeks. And typically that’s on a twenty six pay period scale for that year. But then in retirement, you’re only paying the premium 12 times a year because you get that your switch to that monthly benefit with a pension. And so you do add up or at times your premium by 20 and then try to get your monthly premium.

But you also have to think about the tax issue. Most people don’t realize that when they’re employed, they get to pay their health benefit before tax. But after retirement, you actually pay that health premium after tax. And so you’re paying more because you have to include the taxes that you’re paying on that premium as well.

Right. So it’s I find it really, really interesting that, yes, rates don’t go up, but you will pay more. And that concept, I mean, is foreign, right? You wouldn’t think, OK, I’m going to be the same, but no, you’re actually going to pay more because of everything that goes along with it.

And this isn’t the only thing that is confusing like that. I mean, there are other benefits where you say this is how it works, but when you dive into it, that’s how it works on the surface level.

Just to as a quick explanation of how it really works is very different. So that’s that’s again why we highly suggest that everyone here go to Fednobabble.com and to sign up and get a report from one of our trusted advisers in our and our trust network. You can sign up. We’ll have one of our advisors from a trusted network reach out to you. They’ll do a report. It’s free. It’s no cost, no obligation, no sales pitch. They’re going to show you what your retirement will be, not just the day you retire like the H.R. report does, but over your home, your mint, and some things that you need to be thinking of.

And you can ask them all the questions you want. So we highly recommend that you go do that so that you can prepare. That’s right, and when they do that, and obviously they’ll have the opportunity to submit a question as well, and if you do submit a question and we use the question on the show, then you’ll get some you’ll get a T-shirt or a facemask from us here at Fenobabble. And also, don’t forget to inscribe shares with us and let’s get the word out.

So that way people can have the information that they need to really dive deep and coordinate those benefits as soon as possible.

That’s perfect. All right. Until next time. Thanks for watching.