#5 – Survivor Benefits – Military – Part B

Survivor benefits, military, and Part B, all on today’s Fednobabble.com.

Welcome to Fenobabble where we make federal benefits understandable for humans in under 20 minutes.

That’s right. We are going to take your questions that you can submit at Fednobabble.com and questions from the workshops that I do of participants that just have random questions. And we take those and we answer them here to make it to make them very, very understandable. So Cassie, let’s go for question number one. My OK, this this one is complicated. So we have to figure out how to make this less complicated. This this one says, my husband is FERS and I am CSRS.

So if we stop just right there, there is a number of things that we could talk about just with that statement. But we’re going to be very specific and say continues, I cannot receive survivor benefits on his Social Security.

And as an addendum here, because CSRS employees do not pay Social Security, but I believe I can on his government pension, is that correct? OK, so what if he leaves you a portion of his government pension? You bet.

That depends on what the choices that you make are as far as what you’re choosing to do with your survivor benefits for your pension. OK, so let me just be clear, though. The survivor spouse benefits. A pension under FERS and CSRS, and then there’s a spousal benefit under Social Security, which are different and which are very two completely different things.

And so if her husband is FERS, she express so her husband can leave her either twenty five or fifty percent of his pension amount.

But she’s right.

There’s a government complicated for Social Security that pretty much says that anybody, whether you are state or federal employee who earned a pension.

That they did not have to pay into Social Security for such a CSRS because they don’t pay into Social Security, he was pay into the civil service retirement system. They will not.

And it’s not that they will be eligible for a spousal benefit, but the simple fact of how much they get for their pension offsets the cost of what they would form the Social Security spousal benefit.

So a lot of times it does not make sense like they would have to earn a pension of, I think, under eight or nine hundred dollars to even be eligible to receive anything from the spousal benefit. Express pensions just simply aren’t earned that low. Let’s be honest. And so because a lot of them are over a thousand dollars or more most of the time on a monthly basis than the it automatically just wipes out any spousal benefit that they would earn under that offset rule.

So this this is a great example of why it’s so important that this couple, whomever this is, and there are a lot of them out there that they visit a financial professional, this just this one topic alone for them, let alone the other topics that we could bring up that get complicated, especially with a federal couple, let alone a federal couple who won one of the first one of the Sirrs.

It gets so complicated that trying to work it out and understand all the rules that apply not only for pensions and survivor benefits and Social Security, but then we’re talking about, OK, when when do you take Social Security? It do you take does one take it earlier than the other? Do you take it at the same time? Should you not use the top of one rather than the TSP of another or one? Do the TSP and one do Social Security?

And what happens if one dies and it goes on and on and on and on?

So complicated. So yeah, this is just one or two pieces rather, of that financial picture that they really need to take a look at and and talk with somebody about to make sure that it doesn’t affect another puzzle, yet another piece of the puzzle that they’re trying to put together. Yep.

And like I said in the last episode, you’re right, because if if a federal couple if this federal couple makes a mistake because they’re trying to do it themselves, which is noble, I must say, if you’re trying to dig, if you can save some money and do it yourself, I mean, it doesn’t always work that way, though, right?

So if they can if they make a mistake in one area that does a domino effect, again, to other areas and sometimes they don’t catch it until 10 years later and they have no understanding of what it could have been. And they’re panicking at that point. Right. Because here’s the thing.

This federal employee couple may be able to take or may be able to leave a spousal benefit on the pension for that other spouse. But it almost doesn’t make sense to because there’s another way where they can protect the income that their spouse needs.

And not maybe paid as much, right?

OK, so there there are ways to cover the income of a spousal that a spouse needs if something were to happen and and maybe the spousal benefit program isn’t the way to go.

Mm hmm. And again, that spouse.

And then what happens if they die together then? So that person is paid right now for nothing.

I mean, Kevin you say something in your workshop about how this works the best. Yeah, right.

I don’t I don’t know what you’re referring to. OK, well, for the spousal benefit. Yeah. Yeah. It only works best if they’re going to retire. Oh yeah. Yeah pretty much. If it’s great if they retire and die on the same day. Right, really good. Yeah, I see what you mean. Yes, I mean, it’s perfect if that happens because you don’t pay anything and the spouse gets and I also say that you shouldn’t marry someone much younger than yourself so they can live a long time, too.

But that’s right. That’s horrible life advice.

Oh, I wouldn’t listen to that again, because we’re not financial professionals that take our Laidig advice.

We’re simply trying to point out some of these considerations that maybe stress points in your financial plan that you really need to take a look at.

Yeah, right. Because these things are so important to get right the first time, especially the spousal benefit, because that is one that once OPM finalizes that paperwork, you only have 18 months if you want to change that benefit, otherwise you’re stuck with it. It doesn’t matter if you choose that this plan or if you think that this plan is too expensive for you or if you’ve found another way to cover that spousal income or what have you and you’ve selected the max amount to give to your spouse, you’re stuck paying 10 percent for four years and almost 10 percent versus IRS employee of that pension amount for that spousal benefit.

So this is very, very critical for people to take a look at and make sure that they’re looking at this through the right lens and really making a split decision on if this is a good thing for them or not, you’ve got to have that knowledge base behind it.

You don’t Cassie. I did find one way around the whole thing that so there’s there’s 18 months, right? You have to make a decision or to change it. Right. There’s there’s another way to do it, and that’s to off your spouse.

But that advice, I don’t know, I, I wouldn’t I wouldn’t say. Yeah. Bad advice. OK, next one next question. Military buyback. How does that really work?

Oh boy. It you know what, I’m throwing this up. It depends. It depends because. It depends when you do it, because the longer you wait, the more expensive it’s going to be. And I know people, people who come into the workshop all the time and they say, you know, I’m looking at buying time, my my military time back, and and I say, OK, how long ago did you work? You know, did you work or were you in the military?

And they say, oh, 20 years ago. And I think, oh, my goodness, this could be quite a chunk of money that you’ve got to pay back. It’s not an easy thing then.

Yeah, it for any deposit or redeposit service, there’s interest added the longer you wait to make that happen. OK, and for military service in particular, you really have to make sure that it’s worth it. Right.

OK, if you are at back up, if you’ve retired from the military and you’re above and six or seven, it may not make financial sense for you to do that unless you are a reserve, because as we know, military reserve people get both pensions. However, if you are active duty military. You really have to take a look at this. OK, but the process to go and find out how much that deposit is, because that’s really going to be the key, is finding out that number to make sure you have to find out how much it adds to your pension and what that deposit is and how long it’s going to take you in retirement to recoup money that you paid into that deposit.

OK, but there’s really two forms. To to make that happen. So one is R1 20- 97 that they submit to DFAS.

OK, that’s going to give them their earnings because the military deposit is based on the earnings that an employee had inservice OK in February.

And then they’ll fill out another form for and it’s thirty one 08 that they will fill out to find out how much they have to pay back into firms to get credit for that military service.

OK. And so that’s for first employees. Let’s see see us address it. That is really dependent on one when that service was because some employees and this has to be like a long time ago, military service, but some employees, it doesn’t make sense to make a deposit because they could get credit for it anyways. Right.

And so they as ours, it’s a whole nother can of worms, but we really have to ask somebody to find out if it’s worth it.

Yeah, that’s. And I think the thing that. The thing that messes people up here, I think at the very, very beginning again, are the shortcut phrases and this is what I hear. It’s worth it to buy your military time back if you didn’t retire. Well, that it depends, it all depends, it depends. It does. I mean, sometimes if you did not retire from the military, it’s still not worth it to buy it back.

Sometimes if you did retire from the military, it is worth it to buy it back and really, really worth it to buy it back, but to go buy those shortcut phrases, to make financial decisions that we can, you know, I mean. Oh, you know what? I retired from the military. I remember one gentleman what he had to pay. He was told exactly that you shouldn’t buy it back if you retired. And so he didn’t.

And then he then he came to us. We did the report for him and he learned that he could if he paid, I think. And that could be a little wrong here, but I think it was if he paid ten thousand dollars, he would get I think it was another ten thousand dollars every year for the rest of his life or something ridiculous that something really cool like that.

Yeah, it’s very close to. Sorry, go ahead. I do these calculations all the time, yeah, and. More often than not, if somebody is not retired, typically it’s worth it, I say typically because again, not always is it worth it. However, typically it is. And it’s amazing to me how people don’t realize that if they pay, you know, ten thousand or twenty thousand dollars, then getting that back within just a couple of years of retirement.

Yeah, that is not uncommon. Right. OK. However, if they’ve retired from the military, a lot of times they’re losing money because the military pension, again, is based on what they earned in the military. And that calculation is different than what artisan’s.

And so, you know, if people are in the process of buying back military service and I recognize that it’s not worth it for them because they’re going to lose five thousand dollars a time in a year, then they could start that process and get it back.

And I want to say, even if they’ve made a deposit, there’s a way to get it back to pay.

But you really have to make sure that you do that prior to retirement, because once you’ve retired, that’s it.

Think back, you know, figure out if you know, if I if I buy my military back that I can increase to my pension. No, that’s not how it works after retirement. Like, you really have to dig down deep into the earth and find out these numbers prior to. Right. And I don’t mean like a month prior to I don’t mean, you know, five months prior to that. You need to figure this out as soon as possible, because if it is worth it to make a deposit, you want to make as low as a deposit as possible.

You don’t want to have to wait until you’re looking at six months or so before retirement because then you’ve accrued that much more interest the longer you wait. So definitely something that really looked at from somebody who understands the federal benefits and you know a little bit about the military service and this is something that we help our advisers with all the time. They really appreciate because H.R. even gave us bad advice for military service. They don’t always know how it works.

I’ve had to screenshot and give the advisor the regulation that says, yes, somebody is eligible to make a deposit for their reserve service because somebody has been told by a VA that wasn’t true.

Yep, yep. I think would it make it easier for the reserve service? And so those little to definitely have to be dealt with as soon as possible.

Yeah. Can you imagine. Oh, boy. Having military pension, federal employee pension. Military TSP. Federal employee TSP, Social Security and and survivor benefits and really at that point, the combinations are endless. How do you maximize the amount of money you get? That is a mystery that has to be done with precision. And the well and the other thing that I get a lot of time with very is the misconceptions or misunderstanding between FEHB and TRICARE.

Yes. Who is eligible?

What can I do with those benefits? Am I going to be able to have TRICARE and as an option in retirement, or do I just have FEHB and then Medicare on top of that because TRICARE has to enroll in Medicare. So you’ve got to make sure that if they are taking that TRICARE that they’re also doing the other things. And so that is another big piece of the puzzle. That is something that needs to be planned out in the chairman planning process for folks who have military service.

And they really need to understand what that benefit is as well. Yeah, right.

OK, we have less than two minutes and we have a question left, so we got to do that and wrap it up. Here’s a question. I did not sign up for Medicare Part B because I was working and had BCBS can I sign up for Part B when I retire? The answer is if you’re 65. Yes. Done. OK, yes. And if you’re older than 65 and you want to avoid that Part B penalty check with a Medicare specialist in your area or go to the service website because the Centers for Medicare and Medicaid Services are going to require a waiver that you’ve had employer coverage.

It’s pretty simple. I say, quote unquote, simple.

They try and make it easy for people, but definitely get with a Medicare specialist in your area and to make sure that you’re getting the correct paperwork in there. So you’re avoiding the penalties that go along for not enrolling in part B, it’s available at sixty five.

Yep. Good. Thank you. All right. If you want if you want a report created by Cassie all about your benefits and it’s crazy detailed, crazy comprehensive. Just go to Fednobabble.com and it’s there’s no cost, no obligation, no sales pitch, nothing, no strings attached. And you can get that report. And if you want to ask a question, go to Fednobabble.com. And if we use your question, we will send you a Fenobabble T-shirt or maybe even a Fenobabble face mask just for the fun of it.

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