Pension – CSRS & FERS

How do the CSRS & FERS programs work for federal employees?

28

#28 – Pension Refund, FICA, Roth Switch

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Pension refund, FICA and Roth Swich all on today’s Fednobabble.com.


This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you, these two don’t hold back as they answer questions from the Fed Pilot workshops and webinars or from questions submitted by you at Fednobabble.com.


Welcome to today’s Fenobabble, where we’re going to take your questions that have come in through Kevin’s workshops and webinars and also that I get from my advisor team and talk about them and see if we can help you all out a little bit.


Yep. That’s all it’s all about, trying to clear them up. And because they are so darn confusing, let’s make them understandable for humans like you. And the first one is a long one. OK, who after OPM processes your retirement paperwork. OK, so usually that takes it could take up to a year or so easy if you’re messing things up. Do you get a lump sum check for the difference they owe you from the fifty-five to 60 percent interim check?


OK, let’s just talk about that right there. I think that’s a good idea.


Yeah. We need to stop. Right. There is more time out.


Cassie. Real quickly, talk about the interim check and this. 55 days. I don’t know where they got this because I didn’t say this in the webinar. 55 to 60 percent. So why don’t you clear that up a little bit. Yeah.


So after somebody submits their paperwork or I should say there are estimates to OPM that OPM starts processing your paperwork and they will give you an interim check of anywhere between 40 to 60% of what your calculated pension should be or is estimated to be.


So that’s the interim check that they’re talking about because they’re going to you’re going to receive that amount.


Whatever OPM decides that amount should be between the time that OPM is or I should say, well, during the time that OPM is processing your retirement paperwork. So in the meantime, you retire to the time they finalize that retirement paperwork and your pension amount, then you’re going to receive an interim check or a percentage of what you’re estimated or calculated pension should be right now.


During that time, the reason it’s 40 to 60%, we don’t know, we’ve seen much lower.


But that’s a rare circumstance. But it happens.


The reason they don’t give you the full pension check is that what they’re doing is they’re taking money and they’re holding it to pay for things like health care, things like your family, but they actually don’t pay it until later. And so if they have estimated right, it should be right around how much they actually will pay it out later. But sometimes they’ll over withhold or sometimes they’ll under withhold if they over withhold then in this question that, yes, you will get the extra amount, but it’s not going to be that full amount because again, part of that’s going to go to things like health care and other things.


But if they undersold, you’re going to have to pay that back. Thankfully, I don’t think that happens too often. I think they over withhold anything.


Yeah, I think they do that on purpose. Yeah. And so the rest of the question is, do you get a lump sum check for the difference they owe you from the fifty-five to 60 percent interim check. And so essentially once OPM finalizes that had your retirement application, then you’re going to receive a lump sum, whatever is owed to you from that 60 to 40% that they didn’t give you. Right. And so they’re going to give you all of that money in one lump sum then the question.


Yeah, yeah.


They will pay you a lump sum check. Once the retirement application is finalized, they determine your pension amount and withhold whatever they need to. Then they’re going to give you that that money back then.


The question comes at the end here. Could that potentially put you in a higher tax bracket? And. You bet. Yeah, it could. And that’s great again, another great question to be thinking about. Right. This is a question that I think very few people it’s not on the radar. They don’t even think about this. But it’s something to definitely think about for sure. Yeah.


And this is really good, you know, and it goes back to that timing of the retirement, because essentially, if you’re retiring in December and it takes OPM a year to process that paperwork so that the full year of, say, twenty, twenty one, you’re not receiving your full pension amount. So you’re in the lower tax bracket. What have you and you’re not getting see the full SRS benefit either or the SARS benefit at all because they don’t give it to you while you get the interim check.


But once they finalize that, they’re not only are they giving you the pension, they get that lump sum amount that that you’re entitled to. But they’re also giving your SRS payment that can definitely put you in a different tax bracket. They were your previously or even as an employee, depending on what that special retirement supplement is. So it’s not just a pension because now for twenty, twenty two, you’re getting your full pension amount. You received that lump sum payout for the extra 40 to 60 percent or whatever from that whole year previously that you didn’t receive it for.


Plus, you’re getting the full special retirement supplement and you’re getting the payout for the special retirement supplement lump sum check.


That could be that adds up a thousand, $20,000 dollars.


I mean, I don’t know what that looks like for you, but, you know, these are these are definitely things to consider when you’re looking at when do I retire? Is my retirement application package healthy enough to where it’s not going to take long for OPM to to finalize all the LEOs different pieces that people need to think about? So very, very good question. And the answer is yes, they’ll give you the lump sum. And yes, that could could scrub your tax bracket.


Right. Be it. So definitely something to talk to somebody about a financial professional is is going to be able to determine this, and especially one who understands federal benefits are going to be able to help you out with that timing and what that looks like and whether that’s to tell you, hey, you should wait a year because you’ve got to do X, Y, Z before you submit that paperwork to make sure that, you know, the processing goes well or, you know, your you’re good to go or whatever.


That looks like they’re going to help you be able to determine that.


So, you know, in the in the workshops I do, we have a discussion and I ask, OK, what expenses do you think will go down when you retire? And invariably I get taxes and I have to pause and I say, well, it depends.


Right, because they may actually go up if you don’t do it right. And we have seen that happen. So it’s really important to get this figured out beforehand rather than be stuck with and go, oh, whoops, I did that wrong. Well, now it’s too late, unfortunately, because we’re taxing for the last for the previous year. And there’s nothing much you can really do about the previous year now. OK, next question. If that employee has already reached a date and that mysterious apply, I don’t know what employee they’re talking about, but that employee.


Right, that employee that has already reached the maximum amount of FICA, which is Social Security on your pay stub tax for that for the year and then is rehired. So, OK, so I’m assuming that someone reaches the maximum amount of Ficca that they can contribute, then they retire, then they get rehired again. And I assume as a retired a Nuytten, is it correct to assume that they will not be subject to the FICA tax during the rest of the year or, you know, I guess not even the rehired annuitant.


And if they were maybe even if they got another job, would they not be subject to the fire contact for the rest of the year? Yeah, yeah.


And the answer is no. They wouldn’t be subject to the bike attacks because they’ve already met that cap for that year. Yep. Yep.


No matter who you work for, I yeah. Yeah. Whether you’re a federal employee or you separate it from service and you’re going into the public sector, I mean whatever that looks like for you, if you have met the cap for Social Security, for those maximum deductions from your pay, then you’re not going to pay that for the rest of the year.


Doesn’t matter the session you’re in.


I have a question for you then that just made me think of a question. So I’m going to throw in an extra question here. And this is kind of off the wall a little bit. But let’s say I retire. I’ve maxed out my ficca and then I go get hired somewhere else. I’m a part time greeter at Wal-Mart or something. Does Wal-Mart go to Social Security and say how much they paid this year or do they just start taking it out and it works out?


Or I mean, that’s I don’t know how that’s done. I hadn’t thought of that.


I’ll be recorded through their Social Security. And so if they start taking those deductions, then they should be able to see. You’ve already met that Max. Right. And but do they do that? Check that out, huh? I don’t know. That’s a great question to ask. That’s a great question.


But I think your employer think about it, though. If you are starting a new job, right, then you’re filling out that W-2 and that’s going to whomever it is, go to the IRS, Social Security, what have you do? Well, not Social Security, but to the IRS. But so somewhere along the line, somebody should say something to make sure that those deductions are not being taken from your paycheck.


Right. OK, I will tell you this.


Just because you’ve met the cap for Social Security does not mean that you’ve met the cap for Medicare. So Medicare takes up contributions because there’s no limit to the amount contributed to Medicare.


Very good point.


I just want to make sure that we’re clear that you’re not like, why am I contributing to one and not the other? Aren’t they the same? They’re not. They’re two completely separate programs. Social Security has a cap of the amount that you contribute per year. Medicare does not. So just be aware of that. Good, good, good.


I like that. All right. How can you switch to ROTH?


Well, I love that nice short question. And yeah. Well, I think we you know, in past episodes recently, we’ve talked about how you can’t switch your present money from your regular traditional TSP to a ROTH TSP. That just cannot be done. Right. So let’s take this question as if they’re saying, all right, I want to contribute from here on out or I want to start contributing to my ROTH. How can I switch to can start contributing to my ROTH?


How do they do that? Cassie.


Well that’s easy going to TSP that gov. You log into your account and you switch your contribution there.


You go to it from traditional to ROTH. That’s, that’s the easiest way to do it from here on out. But you cannot switch what you already have in the traditional TSP over to the ROTH side.


And I want to also be clear that just because you switched your contributions to ROTH contributions, your matching money still will be contributed as traditional TSP income and so are contributions.


And so the match that you receive from the federal government will always be traditional. So you will still see that traditional balance increase not only based on the growth, but based on the agency matching contributions as well. So the only thing that gets counted as ROTH will be your contributions to that side.


And I and I’ll throw one more question in there that this leads people to that we. We could probably use as another question another time, and it’s that if I put a hundred percent of my money into ROTH, do I still get the match? And the answer is yes. Except that what you just said, it goes into the traditional side, not the ROTH side.


So, you know, there’s a bonus question for the five percent.


Right. They’re not matching up to whatever you’re contributing if you’re contributing or what have you.


So and also you can switch to a ROTH. It’s just not in the TSP. Right. That’s a different strategy. Whether you should or should not is another question. Like we can go on and on about what questions this leads to it and what’s the best program and and all of these different things. And is that even a good idea, depending on what Jeff or somebody that you have, I don’t even know, switching to a ROTH in general, switching your contributions to ROTH is going to be a good thing, right?


It very well may not be. Yeah, right. So so that is where financially. Yes.


That is where you have to go in and talk to a finance professor who understands the TSP not just understands investments, understands the TSP and how it works. Because, you know, I find that a lot of a lot of people have a misunderstanding of how does this OK that an IRA works this way and then they think the TSP works the same way? Well, sometimes it does. Sometimes it doesn’t. And you have to know when it does and when it doesn’t and when how to take advantage of one or the other.


So there’s it’s always going back and forth. So, again, a financial professional who understands this is going to be very, very important for everyone here.


And again, if you go to Fednobabble.com, you can get that basically free, no cost, no obligation, no sales pitch, just to take a look at your benefits, to see what’s going on. Cassie what?


Because before you can make a plan or ask any of those further questions, you have to know where you’re starting from. Right. You’ve got to know what traditional you’ve got to know what your FEGLI looks like, what your what your annual leave payout’s going to be and how that’s going to affect taxes, which are special retirement supplement, like all of these different things that could affect your taxes that aren’t taxed like what are those different things and what do they look like?


Are they federal tax, state tax, you know, all of these different things that really can affect you in that retirement. And it’s not just when you retire.


It’s so far in advance. Yes, exactly.


What is my FEHB Cassie’s going to do ten years from now, 20 years from now if it continues to increase the way that it has been in the past five years?


Right. So these are things that we want to be able to help people understand, to get them from a place where there they know where they are, what things are projected out to be. So that way they can really strategize what those different buckets of money need to be to plan the best for the whatever retirement goals and and picture you have for yourself.


Let’s let’s put all these different pieces of the puzzle together. Take action, go to Fednobabble.com, get the report from us so that way we can help you. And it’s not let me just be clear, though. It’s not being Kevin preparing these reports.


Well, I prepare them, right. We’re not giving you the report in person. Right. We’re having one of our trusted advisers or one of our advisors and our trusted network reach out to you to get the information, to get the report to you. So that way we can really make sure that you have somebody who’s going to be able to help you with all of these other things that need to be considered, too, not just your benefits, but tax implications, you know, whatever that looks like for you.


Yep, yep. And and as always, if you would please like, subscribe and share this with your coworkers so that they, too, are prepared for retirement. And I don’t care if they’re younger or they’re about to retire, everyone needs to know what their plan is going to be before retirement. And and the earlier honestly, the better. Last words Cassie take action, take positive action for your retirement. So that way you can feel comfortable and confident during those most precious years for your life.


Thanks, everyone. Take care.


To get Cassie’s comprehensive report on your federal retirement benefits at no cost. No obligation and no sales pitch. Go to Fednobabble.com while you’re there, submit a question for them to answer on the show.

 

27

#27 – Vacation Days, Locked in, Avoid Penalty

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Vacation days, locked in, and avoiding penalties on today’s Fenobabble.


This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you, these two don’t hold back as they answer questions from the Fed Pilot workshops and webinars or from questions submitted by you at Fednobabble.com.


Welcome, everyone. It’s good to have you back to learn about your federal benefits. I am Kevin Jones.


But I’m Cassie Knight we’re here to answer the questions Fed Pilot my things off, don’t laugh at me anyways.


That’s OK.


OK, so answer your questions that come in from Fed Pilot the workshops and webinars that Kevin puts on and also from the advisors that submit them from their options who build the reports for you guys. So let’s just jump in. What is the first question? They are vacation days paid out as earned income. Is there a time or is there a limit the first year you retire when you have higher earned income?


OK, well, let’s just take our vacation days. Yeah, they’re talking about Annual leave, right? That yeah, that’s. Yeah. In other words, a.k.a. vacation days, a.k.a. Annual leave. Are they paid out as earned income as well. So you get so you get that money. If you retire you get any unused annual leave paid out to you.


It’s not just if you retire, when you separate from service, your annual leave is paid to you.


Oh that’s true. That’s true. Yes. That is so far as earned income, they mean like for Social Security or you know, it’s probably against the earnings test where maybe they’re thinking that it’s, you know, does that count against the earnings test?


So let’s say that a federal employee retires at fifty six at the end of the year. They get let’s say they get a chunk of money into the next year. And if they earn too much in that next year, they don’t get the special retirement supplement. If you earn it’s about forty thousand dollars, then you don’t get any of the special retirement supplement. It starts going down at about eighteen thousand, but it goes away at about forty thousand. So does that, so does that annual leave that get cash get gets cashed out to them.


Does that count as earned income to count against the special retirement supplement. That’s what I think that they’re asking.


Yes. Yes.


Because it is income, it’s it’s income that you’ve earned from working. Whether it’s I mean that’s the bottom line.


Yes.


It counts as you earn it throughout your career, even though you’re not paid for it. But so let me back up a little bit as an employee. If you take an Annual leave day, then you’re paid for that day as income. Right? It’s not like you where your pension is just automatically given to you because you paid into the system and now they’re essentially returning those funds to you with interest, what have you. Right. Or a TSP where you’re you’re taking those that money, but you’re not earning it but annual leave you have earned and even though you’re getting paid out for it, it’s based on your salary or your hourly rate, hourly salary that you that you earn.


And so it is considered earned income. It’s it’s not because it’s fully taxable essentially.


And I think one thing you may want to or people want to think about is that the term in earned income gets thrown around a lot. And we just think of it as a title. But if you think about it as a functional phrase, earned income, yes, you earned that income. And so it actually does count against because you earned it, whether whether or not it’s paid out as normal, you still earned it.


Right. And it’s not something like you saved up for. Right. I guess that’s a that’s a very good distinction because you’ve saved your TSP, you’ve saved your your contributions to first throughout your career and and your annual salary is something that I’m not your annual salary, but your annual leave is something that you have not paid into already. You’ve earned those hours and they will pay you for it once you’ve separated. That’s why it’s considered an earned income, because you accumulate the hours and then it’s paid.


To you, it’s not where you’ve paid into this program and then they give you that money. There’s that are we just yet?


That’s another great consideration, though, because if someone’s going to retire and they want to still work but still get the SRS, then, you know, I’m just throwing this out.


I’m not saying that someone should do this, but maybe they should retire at the end of November, get the Annual leave that doesn’t account count against them for the next year of earned income.


Again, that’s a calculation that would have to be done. Whether that works or not, I don’t know. But it could it could throw off what day you’re planning on retiring or at least change it, I might say.


Yeah, especially if you’re a higher earner. Right. Is there a limit to the first year when you retire, when you have higher earned income? I’ll tell you what, it’s based on an hourly salary. And I’m doing calculations to employees or employees, to our advisors. And sometimes the payout is well over $15,000. And it’s the payout is over $15,000 for, say, you know, 300 hours. But you’re trying to maximize your payout for Annual leave.


I mean, that can really hinder somebody who’s a SRS or other benefits tax planning considerations. I mean, there’s so many other things to consider. It’s that ripple effect that we’ve talked about. That’s right. You you think that you want to do this thing, but then it affects five other benefits negatively. And so maybe that’s that’s not the best thing for you to do. You know, it’s really you have to talk to somebody about what that’s going to look like, project out those other considerations to really see how all of these different pieces are going to fit into what your goals are in retirement once you’ve actually taken that leap.


If you want more information on that, obviously you can let us know and we’ll be able to get you in touch with somebody who can figure that out for you. But, you know, planning those that Annual leave payout is way more important. I think people realize you’re right.


It’s just not, oh, I’m going to get paid out. Well, maybe. Maybe not like you think we’ll have to see. Yeah, you’re right. It is a big, bigger deal than most people think. OK, next one. I have family. Who should I call to be sure I don’t get locked into the next increase in payments.


Oh oh oh oh.


Too bad you’re going to get you’re going to get the next increase in payments. Ghostbusters. Oh that’s right.


Yeah.


No, no. And we’ll get you in touch with somebody you know. But just let you know you’re not locked into your family premiums either.


They don’t get Cassie. They do increase every five years.


So, uh, I’m 34 at 35 they would increase right at 40. They’re going to increase at 45. At 50 every five years they increase.


But you’re not locked into those rates because you can always change. Or I should say you can always decrease your coverage. You cannot increase that unless you’ve had a qualifying life event. We’ve talked about that before, but you can always decrease your coverage. And so if you don’t want as much coverage you want to pay a lower premium, then that’s one way to do it, is availability to do that?


Yeah, it’s not the right question. Right. But if they want to keep the same amount, you’re going to pay more on those five year increments you are locked in and you can’t call anyone to change that specifically. But you’re right, you can decrease or you can say, forget Fed Pilot, I’m going to go somewhere else, where else and get it where it may be cheaper and I can lock it in and it’s not going to increase and have more flexibility in what it can do rather than just pay out when someone does.


And and a ba ba ba ba ba ba ba all that stuff.


Yep. OK, that’s good.


That’s the short answer. Yeah. That’s, that’s a short one. OK, maybe we make this a really long one just for the fun. It ok it says ok so you have ok sorry. I feel like I’m a first grader when I read these sometimes. OK, so you have to be fifty nine and a half to pull out money without a penalty question mark.


And they’re talking obviously about their TSP.


What do you think Cassie. I think they’re talking about their withdrawal options, right? Yeah, well, it depends. Yep. Are you still an employee or are you retired? And that’s the determining factor right?


There is. If you are if you if you are retired, even there, OK, there are nuances in there. But basically, for the most part, if you’re retired before fifty nine and a half, you well there’s actually fifty five. If you retire in the year that you are fifty five or later you can pull out your money and you’re fine if you retire before that. Unless your special provision. I’m not going to get into all that blah blah blah blah blah however.


But you know what I just Cassie my mind I think, ok, here’s the answer and then my mind starts going, well there is this exception and there’s this oh, and you forgot about this scenario and this too. And it just keeps going and going and going. And I try to make it really simple without getting too complex. But these are really complex answers to what would seem a really simple question. Let me help you out.


If you’re an employee, you have to wait till 59 and a half to death penalty free access to your TSP. Yep. If you are retired as a regular first employee, you’re not a special provisions employee. You are eligible to withdraw or transfer or withdraw your money without penalties in the year that you turn fifty five or later. So you don’t have to wait till fifty nine and a half if you’re retired. Right. Or I should say separated from service.


Now if you are special provisions employee, you can take your money out of the TSP penalty free in the year that you turn 50 or later if you have retired from service A IT.


But you have to be, you have to be retired in the year that you turn 50. If you retire in the year, the year to turn forty nine, you cannot take out TSP until fifty nine and a half. You in fact I was, I remember being in it. What was that. Sorry. I said what.


Penalty free at least. Right.


Yes. Yes exactly. That’s a good point. So I remember being in a workshop and the number two law enforcement person for specific agency was there and he said, OK, I want to retire at 50. Can I do that? I said, OK, well, let’s you know, so the answer is yes. But actually what he was thinking of doing is retiring in the year that he turned forty nine instead of fifty and and and like one month before that.


And he said, and I want to access my TSP and we said, hold up. Oh whoa. All you have to do is wait one more month. If you can wait one more month then you can access your TSP without a penalty. If you wait, if you don’t wait that month, you can’t access your TSP without a penalty. And he was about to make that mistake for himself. And it was just one month difference is all it was.


Yeah.


You know, these these little things are what we help employees to understand when they’re talking with our financial professionals to make sure that they get these things right. So I have a fact finder that the financial professionals fill out regarding the employees information. And I remember this time where somebody came back and was like, hey, we’ll rerun this report at, you know, this one year earlier, I called the advisor and I was like, hey, look, that’s before his minimum retirement age.


Like, you can’t even retire. It was a regular for his employees. Right. So he could retire before then. I said, if he does, he’ll defer his pension. He’s going to lose his benefits like he’s not going to. And he’s like, whoa, whoa, whoa, whoa, whoa, wait a minute. That’s not what he’s trying to do.


I don’t think so. Right. Right. And so it’s those little things that you have to think about if somebody is a special operations person or or what have you and they’re submitting paperwork and we’re giving that feedback to the advisor on. OK, well, I ran the report waiting two months because we want to make sure that this person has penalty free access to their TSP because that’s a huge, huge deal. Right?


That’s 10 percent of whatever income or whatever which are you’re trying to make out of your TSP. So you’re taking out one hundred thousand dollars. That’s ten thousand dollars. That could be a big deal. Yeah.


So and that’s. Deliberatively impact somebody’s financial picture later on, and, you know, it’s all these little caveats that we got to make sure that we’re we’re looking at correctly and, you know, through the lens of of understanding their benefits and giving them the knowledge and the power to take hold of that responsibility, of their benefits so they can actually do what they’re trying to do and what they’re intending to do in retirement.


And that’s why I love our our financial professionals and our trusted network, because they are doing that. But we have conversations regularly on how things affect an employee and what they should or shouldn’t do and why this affects what have you, because we really want to make sure that whatever goals an employee has, whatever they’re trying to accomplish in retirement, they can actually do. And you have to know where you’re starting from. You have to know your benefits and what they are and see be open to exploring other situations, too, because there are so many other things that can be done with your benefits, not only with the government, but on outside products as well that really are beneficial to people.


And I love our advisors. They help you get to that goal and are able to to make that happen for you.


So, yeah, you know, it’s the Fednobabble.com and request your information. Within 48 hours, somebody is going to be in touch with you to to get that report.


And it’s amazing how how we cannot make these decisions in isolation. We can’t just say, OK, I’m going to do this with my TSP. No. Well, that affects your Social Security. That also affects your special. Well, not so much retirement, but actually it can I mean, it can affect all these different things. It in fact, it affects what your spouse does. It affects so many things. We cannot just make one decision in isolation and think, OK, that’s what I need to do for that.


Again, that’s why it’s so important your report shows that ripple effect and or can show that ripple effect. OK, well, if you choose to do that, this is what that’s kind of what happened. So again, it’s important. So again, go to Fednobabble.com and you can get that report from Cassie Knight. And as always, if you would please like share subscribe, let your colleagues know that Fenobabble exists so that they can get their questions answered and act on what they’re learned.


Any hey, Cassie any last words of wisdom here?


Take action, please, and take action for the right direction. Right. Because if you decide not to go to Fednobabble.com and not get your report, that is an action. Maybe a negative is a positive action for your benefits and for your financial plan and what your goals are in retirement.


And just make sure that you’re reaching out to somebody. Even if you’re not getting our report, make sure that you’re finding somebody who understands the benefits. Who’s going to give you a report on that, because that’s huge. That’s that’s I can’t even express how beneficial it is to know where you’re starting from. So that way you can make that path to where you’re going in the future.


So open your eyes. Absolutely. All right. Thanks for joining us, everyone.


Take care.


To get Cassie’s comprehensive report on your federal retirement benefits at no cost, no obligation and no sales pitch. Go to Fednobabble.com while you’re there. Submit a question for them to answer on the show.

 

26

#26 – LEO 62, 1991, Tax Brackets

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LEOs 62, 1991, and tax brackets, all on today’s Fednobabble.com.


This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you, these two don’t hold back as they answer questions from the Fed Pilot workshops and webinars or from questions submitted by you at Fednobabble.com.


Welcome to today’s Fenobabble. I’m Cassie Knight and we are here to answer some of your questions that have come in from Kevin workshops and from the advisors that are on our team.


And I’m Kevin Jones and we get a ton of questions that we don’t get enough time to go in-depth with and we get to do that here. So we’re going to do that with you right now. Here’s the first question. Does not start until 62 for SP as well. What’s SP Cassie? What’s the COLA Kevin.


Oh really. Throw it back at me. I guess since that does come first in the sentence we should talk about COLA you know. OK, so here, here’s one thing I’ll say about cola. I think most people understand COLA: cost of living adjustment. I’ve heard over and over again people say, well as an employee we get a cola, a cost of living adjustment.


And that’s not true. No, no, actually, no, you don’t. But it functions similar. And I think that’s why people get confused. Right. A cost of living adjustment increases their salary as they are an employee, but that’s actually not what does it cola is something different. And so that doesn’t happen while you’re employee. COLA is when you are… Happens when you are retired.


Yeah. It increases your pension, a pay raise increases your salary. There you go. Right. So that’s the the biggest difference that people need to understand is that a pay raise increases your salary while you’re an employee. The COLA is something that automatically happens when you are retired and it is to your pension. Well, not the special retirement supplement or any of the other benefits just for the pension.


Well, you said automatically happens. It automatically happens when it happens.


Not that it always happens if there is an increase or if there is a government that automatically happens. Right. If you retired in the middle of the year, though, just know that you’re not going to get the full cola for the next year. Right. Like it. It’s based on how many months that’s you know, it’s so if you’ve only been retired for six months, you’re going to get half of the cola.


So this this this question points to the fact that Fer’s employees do not get a cola until they’re sixty two, but that is regular for his employees. So if a regular employee doesn’t retire or retires at least a minimum retirement age of fifty six, for example, they’re not going to get a cola for basically six years, five, six years there.


But if they are special provision, which is law enforcement, air traffic controller, firefighter, if you retire at 50 years old, you’re going to start getting a COLA the very next year.


So they automatically get called or I should say they get COLAs immediately as opposed to having to wait till age 62 to begin receiving those colas. Right. So that’s the great thing about being a special provision of the special provisions employee. Not only do you get the higher pension factor in the computation of your pension, but you also get the cost of living adjustments automatically as opposed to regular first employees or most employees where you have to wait until age 62 to begin receiving those cost of living adjustments.


Yep, that’s just the way it works, whether we like it or not.


OK, how do you buy back time for temporary employee status years between nineteen ninety one and nineteen ninety three Cassie. The answer is I have props for this. Yes you do. And you see it in the.


Yeah look at that. This is now Cassie. You have to explain this prop here.


You have to keep this stuff together. Guys, this is complicated. This is not easy to remember all the little darn rules that are floating out there.


Not at all.


And temporary service. So let me let me back a little bit. Temporary service is non-deduction service or a service or when an employee does not make contributions to FERS or CSRSnon-eduction. That’s the federal employee retirement system or the Civil Service Retirement System, so the part that I just showed was for four years and essentially if you had any non eduction service after January 1st of 1989, you’re not eligible to buy back that time period. They don’t give you the option to and that’s just how they change the law back then.


But if you had any service prior to that, you can, but essentially if you’ve had ChampVA your service are not adduction service after January 1st of 1989 then your you get, you get leave accrual for it. Right. So your leave. So this computation on your pay stub will probably show 1991 of whatever month and whatever day that you started. But that doesn’t mean that your retirement service computation date will be the same. Right.


Retirement is a service. Computation is the one that helps for eligibility and your pension calculations. And that can be vastly different if you’ve had on deductions service. Right.


Yeah. Big difference here now. And I will say this as well, Cassie. I remember one gentleman, he came up and he said, my temporary time counts. And I said, well, what do you mean? And he talked to me about how his agency, his agency, their version of temporary time was different than another agency’s version of temporary time. And most agencies, when you talk about temporary time, you’re talking about non deduction service in his agency.


It wasn’t non deduction service, but they called it temporary time. Now, I don’t know whether they officially called it that or is more of a casual thing that everybody does call this temporary time. So we have to be really, really careful and making making sure we’re speaking OPM ease and not just what we’ve heard or what our agency says it is, because it could be different from agency to agency. So I will say this.


My husband’s a Delta employee. When he was first hired, he was temporary because he was on a trial basis. Right. They had to make sure his background cleared for the federal purposes of doing all of this stuff and his badge color was different and whatever. Then permanent employees. He was considered temporary, but he was still contributing to hers.


And so I think this happens often with the employees because their temporary service is it technically non deduction service. So we have to make that very clear as well. Yes, you have just temporary service where your agent when you’re on a temporary trial basis with your agency, that is not non non deduction service. And that time will count. However, if you are not contributing to FERS or CSRS, which is that both employees, that’ll be FERS. Now, that’s finally showed the FERS sign that I had because, you know, CSRS are still eligible for that deposit.


Right? They can still make that deposit. But FERSnon-deduction employees are cut off if it is true, non deduction service or temporary service where and this is common for postal employees, where you they get hired as temporary.


They’re not contributing to the first retirement program and then they become permanent and then they start contributing to their first program. And that’s when their time actually starts counting for the retirement purposes. So very different between agencies. And that’s why we always recommend getting a certified summary of service for people who I get back that the advisors like. Well, they’ve had temporary time. OK, well, was it true non-deduction service or was it time where they were just on a temporary basis until things cleared through the government or what have you where they were still contributing?


Yeah, right. So very, very different. But essentially, if you weren’t contributing to the first program and that’s that’s the bottom line, was it no deduction service or not.


Right. And I’ve heard so you mentioned post office. I’ve also heard that same thing. You know, they come they come for a season and they work and then they’re done. I hear that also for IRS. I hear that also for Forest Service. And there are a bunch of other ones that have, you know, seasonal. And there’s another great word. Right, seasonal. Well, what is seasonal mean to your agency? Again, it could be very, very different and very different, depending on your.


Position in that agency as well. We won’t get into all that, but just to show again how complicated it is, which is again another reason why it’s important to talk to someone who understands federal benefits, who can look at it and pick out, oh, no, I know it says that, but that’s not how it works. It works this way and and move on. And then again, you’re awesome. Report just shows step by step.


This is what this means. This is how it gets handled. This is how you want it, how you can take advantage of it. Love that.


And if essentially the easy way that we can figure out some of these, how that temporary service is getting a copy of that pay stub from then, and you guys can submit that with our advisors and they’ll be able to tell you or they’ll submit it to me and ask. And I’ll be able to tell you whether or not that that temporary service was actually non-deduction service or not. If it was a service where you contributed to, then all that type counts.


You don’t have to worry about it.


We like to be nice that we figure out when people or it when people go to the advisors and they’re submitting that information. You know, the more information that you have regarding certain things like temporary service and and those things that can get convoluted, send us whatever documentation you can and we’ll be able to distill down whether we need to send in certain forms to get more clarification, such as the certified summary, or if we’re able to tell you what kind of service and how that how that gets treated with your retirement or your pension calculation, then we’re doing all of that for them.


So feel free to reach out if you don’t have somebody who understands the benefits, because that’s can make a difference for sure. Yep.


Huge difference. OK, question number three, if I do a ROTH conversion while in the thirty two to thirty five percent tax bracket, wouldn’t it be best to let let it ride to the next generation to that to be taxed at the lower tax brackets.


OK, so basically what this person is saying is if I do a Roth IRA, a Roth conversion, which is taking traditional money, paying taxes on it and putting it in a Roth account. Right. Which you cannot do in a TSP, which we covered in the last episode. But you can’t do that in the TSP. But you do that in a in an IRA, for example. So you take your traditional money, put it into a ROTH, but you pay the taxes in the middle.


Why would they do that if they’re in a thirty two to thirty five percent tax break, and why wouldn’t they just leave the ROTH money alone or the traditional money and then give it to, you know, let that pass on to their, to their kids when it gets well passed on, if it can be passed to their kids? Oh, that’s a good question right there. Can it be even passed to their kids? Cassie.


Well, first, I want to just have a little disclaimer here, OK? We are not tax professionals and we are not here to tell you what you should or should not do tax wise to your financial portfolio, period. A We are not licensed or legally able to give any sort of tax advice. All right.


So I just gonna throw that out before we get into this question. We can kind of go over a little bit of what considerations to think about, different strategies that may pertain to maybe go to you or may not. But really, you need to talk to a tax professional before you to really look at the numbers before we can. Well, we can’t even answer this question, but before you can have this question answered for yourself. Right. I just want to make that clear.


Thank you for me. So essentially. Sorry, what was your question?


Kevin you don’t forget. We’re done. No, let’s not. No, this really I mean, really basically what they’re saying is, wouldn’t it be better for me to take the money that’s going to be taxed at a higher rate? If it’s going to be taxed at a higher rate? For me, I just take the money that will be taxed at a lower rate and pass on the stuff that would be taxed at a higher rate. So I can give it to my kids and then it’s going to be taxed at a lower rate for them.


Now I see it right. And that’s the thing. And I want to say this question is so incredibly complicated. And honestly, I don’t know that we can do it justice on this episode because it is really, really, really complicated. There are so many things. And I think to really answer this, we’d have to go into each bit of this and explain, OK, this is what this is and this is how this does and this is the effect that.


It it’s massive, it’s a massive question, I think that’s really something like this needs to be projected out because I don’t know how much you’re going to pay, even though you’re in a thirty two to thirty five percent tax bracket. I don’t know anything about the income, about how much you’re trying to take, what that looks like. Right. So I don’t know any of the details here, so I can’t tell you how much tax you’re going to pay.


Right. That kind of what is it how far is your next generation. Right. 20 years, 30 years, 40 years. Maybe there’s a big difference between all of that. Essentially. I think, though, that people need to understand taxes always increase. So if you could pay tax on that money now and leave it to your kids, would that be a better scenario?


Hmm. Hmm. Right. What is that projected tax bracket going to be? Do you think that? Why do you think that they’re going to be in a lot lower tax bracket?


Right. It is not this all this almost assumes that this person knows when they’re going to die and what station that their family was. OK, but maybe it will be passed on to their children. Maybe this person is buried in the TSP is passed on to the spouse, and then do we know when your spouse is going to pass away? Right. But I think I think the big thing, big thing about this question is that they’re thinking about the right things.


They’re asking the questions that need to be asked. And I love this in-depth question just for that fact.


Yes. Whoever submitted this, kudos to them, because they are thinking about the ripple effect of how that’s going to affect their benefits, what they’re looking at, the different options that they may have for this particular situation. And that’s fantastic, right? Because this is what you should be doing.


Unfortunately, we simply can’t answer in the detail that this person is looking for, which is not awesome. But I really do want to encourage them just to take a look at it. Right. Go to a tax, go to a tax professional or financial planner who is able to take a look at the numbers and do those projections for you. We can give you where you’re at right now or if you’re retiring in five years with that estimated TSP balance will be and all of that.


So that way they can do the projections from there on out, because this is something that really does need to be looked at. And kudos to them for thinking about that. So that’s really good.


I love it. And that’s, again, if anyone were to go to Fednobabble.com and sign up, that that’s the report they get. That’s the kind of questions they can ask. And again, it’s no cost, no obligation, no sales pitch. And it’s just it’s beautiful because they get your report Cassie, but they get to ask these kind of questions that are just solid. Love that.


So, yes, you’re right about the network. They give you that advice. They’re able to tell you all these different pieces of the puzzle to fit it together to where you’re making those goals or exceeding them. But you’re able to to make those plans, whether it’s a tax stratizization plan, whether it’s a financial plan. If you’re just looking at the income side of it or what have you, they do a full service. They’re not just looking at your TSP.


They’re not just looking at your at your benefits, your life insurance or what have you. They’re looking at all of these different pieces of the puzzle and they’ll be able to best answer those questions. So please, like share comment, go to Fednobabble.com, get the report so that we can get you in touch with somebody who is able to really dial in those numbers for you.


Yeah, and I think most importantly, as Cassie as you say, go act on what you learned. Go do something about it. Go do it.


Thanks for joining us and have a fabulous time until next time.


To get Cassie’s comprehensive report on your federal retirement benefits. At no cost, no obligation and no sales pitch. Go to Fednobabble.com while you’re there. Submit a question for them to answer on the show.

 

25

#25 – SF-50, 240, Conversion

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SF-50, 240 and conversion on today’s Fenobabble.


This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you. These two don’t hold back as they answer questions from the Fed Pilot workshops and webinars or from questions submitted by you at Fednobabble.com.


Welcome, everyone. It’s good to have you back to learn more about federal retirement benefits.


I’m Kevin Jones and I’m Cassie Knight. And we’re just going to jump into the questions and answer them for you. And helpful, hopefully.


Hopefully, that would be nice. What is an SF-50 Cassie?


Oh my goodness. Do you have this question often in your workshops? Let me ask you that on what an.


No, I actually I don’t. And and I think it’s because people are afraid to ask what an SF-50 is.


There are. All right. And I think that actually happens a lot. You know, we talk about it, that’s a fifty and people just go, oh, of course, and it’s a fifty. I know what that is. And they really don’t have a clue. They just go along with it. I think there’s a lot of that that happens. But what does an SF-50.


Yeah. So an SF-50 is actually a really important document that everybody should keep copies of. You’re going to have more than one.


OK, this is not one of those forms like, I don’t know, retirement application where you just submit one of them or two of them depending on what that looks like. But essentially you have many SF-50 throughout your career as a federal employee, and they are documents that show any change in your salary. So any step increases or any other sorts of increases in your pay. If you switched from one position to another, then you have documentation on that.


If you change your FEGLI benefits, you have an SF-50 for it. There is an SF-50 for every move and everything that you do throughout your career. And that’s why it’s especially important to keep a hold of them. I think you can go on your E opf and download your set fifty years and save them electronically if you can, you know, because this is a very important to have, if there’s any discrepancies in, you know, your position, your pay, benefits, what have you.


This is especially important to have for anybody, especially air traffic controllers who are subject to vision. One hundred or just in general, I think they’re actually required to have their last SF-50 when they submit the retirement application. But if you are a federal employee, you need to have this documentation because after you separate, if there’s any problems with the retirement application and you have to go back and get that information, it is ten times harder to get that document from OPM or wherever they have that.


They you know, I don’t even think that most of these are electronic. I’d have to look up the exact date. But I’m going to say it was like late nineties that everything went electronic, maybe early 2000s. And so everything previously is in a warehouse in the middle of nowhere.


Yep. And I even heard once, oh, I don’t even remember where I heard it, but there is a fifties and other documentation was in a warehouse and it burned down. And so they didn’t even have access to that.


So they tried to get it and they say, Yeah, it was in that fire. Yeah. Sorry, that’s too bad. So yeah. So SF-50s that you’re right. That’s another one that you want to keep track of, that everyone wants to make sure that they have a copy of every one of them. And I think one of the things that people don’t know what to how do I say this. They don’t know what should be on it. And so if something is missing, they don’t recognize that it is missing.


I heard once of a of a gentleman, for example, who got to the end of his thirty years of service and said, OK, I’m going to retire. And they came back, said, oh, I’m sorry, you don’t get anything. He said, well, why is that? And he said, yeah. And he said, well, you didn’t pay into your pension at all.


He said, What do you mean, I didn’t pay into my pension. I’ve been working for 30 years as a federal employee and I don’t get a penny. They said, well, you should have seen it on your SF-50, should have seen it on your pay stub. You should have said and you said, I didn’t know what to look for. I didn’t realize that it should have been on there in the first place. And and and I’m sure they had to admit that it turned out that they had to admit that it was their fault, not his fault, for not taking it out all these years.


But he didn’t know to look for it. And I don’t know what happened in the end, whether he got his pension or not. But still, you need to know what to look for. In fact, that might be a great video to do, just Cassie some day just on the 50s. And what’s there, what you should look for, what kind of things are, you know, so you don’t.


I think that would be valuable information for folks. What is an asset 50? What should be on there and what to look for if there’s any issues? You know, we can definitely have a little teaching about that. Yeah, good.


OK, that’s SF-50 next one annual leave carry over of 240. I understand that’s an incomplete sentence, but we’ll forgive that right there. We’re not we’re not going to be sentenced Nazis right now. So typically federal employees can carry over two hundred or forty hours from year to year. Sometimes it’s more depending on your position and situation.


Whatever is within the agency. There’s different reasons why these limits fluctuate. But I’ve seen it.


Three hundred and twenty or what have you like. There’s there’s different limits for different types of employees or different types of agencies. But essentially the the baseline is two hundred and forty hours. Right.


So normal or typical, federal employees only have two hundred forty hours that they can carry over of annual leave from year to year. Now you can still accrue annual leave with your two hundred and forty hour max, but then you have to use whatever is extra by the end of the year. Otherwise you just lose it, use it or lose it type of thing. And so essentially you can only carry over two hundred, forty hours into the next year.


So, yeah, and I think what this person is yeah. The second half of this says, what about the extra hours for twenty twenty. So I think what this person is talking about is let’s say there is an extra week in the pay period into twenty into the next year. Twenty, twenty one. But let’s throw that in. And you know what happens to that extra time because they don’t get paid the eight hours of annual leave until is it eight hours of annual leave, eight hours of annual leave per pay period.


Is that right? Am I saying that right now? Annual leave varies depending on how many years of service that you have.


And so newer employees earn less employees more and more they don’t get to for six and eight hour accumulation. But essentially, um. I’m sorry. Yeah, I’d have to double check that, but I’m pretty sure that is annual leave. That varies. Either way, there can be, you know, a hundred to two hundred hours that somebody earns in a given year. If you are close to retirement, I think it’s two hundred and twenty or something like that that you earn in a year because obviously you’re earning that eight hours.


Right. But you can retire with four hundred and forty eight hours or four hundred forty hours of annual leave and get paid out for them for those hours. So if you plan on retiring at the end of the year, you can accumulate all of that and not use it because you’re not going to lose it. But it said anything about you and I’m forty they want you to use throughout the year because you’re not going to carry it over into the next year.


But if you plan on retiring, then they’ll pay you out for those extra hours.


Then I think what this question here is asking is, if they retire at the end of the year, December 31st, they’ve rolled over 240, the build up their 2… Whatever to eight after that. Right. So they go out with 448 hours, but what about the extra hours in 2021 that they didn’t get from the pay period beforehand? So let’s say they get eight hours every pay period. They don’t get awarded that eight hours every hour until the end of twenty or end of the paper, which happens to be in 2021.


And so they’re missing out on eight hours of annual leave in that, in that instance. Right. And so and that’s just that’s the way it is. It’s better than I hear people all the time. And this is just a misunderstanding of how it should be applied. But some people say, well, I want that eight hours of annual leave and so I’m going to retire in the first week of twenty, twenty one. Not realizing that they have that they not only that they got the eight hours of annual leave, but they just dumped two hundred and forty or two hundred plus hours that it’s a trade off.


Two hundred plus hours or eight. Which one do you want.


I also want to point out that how it affects the pension as well. Right. So if they retire the first week of January. Right. Then they’re missing out on almost three weeks of their pension accrual and they’re not getting paid. Right. Right. So it doesn’t just affect the annual leave for the carryover standpoint, but also the pension accrual on the on the other end. And so, first, employers really have to make sure that they are retiring on the last day of the month.


So that way their pension begins accruing the first of the following month. Otherwise they lose out on unpaid whether they paid from being an employee or pension accrual. There’s there’s a week or two weeks or three weeks or four weeks, depending on the the month and the days and how all that works. But essentially, they can really you know, I don’t think that they take into consideration the other factors here when it’s, oh, I want to make sure that I’m leaving on the end of a pay period to get this time.


Well, what happens to the rest of it? What happens to the pension? What happens to, you know, whatever other things you need to think about for your case? Right. And so essentially, if you’re looking at maximizing your annual leave, you need to retire the end of the year in December, thirty first December 30th, what have you to make sure that you were not going to roll over and essentially lose those hours that you’ve accumulated the year prior.


OK, I’m going to throw a big caveat in there, Cassie. So what you said was spot on, right? If you want to maximize your annual leave, then you should retire December 31st and and do it that way. However, in some cases, that may push people. They get that check a couple of weeks later. That may push people into the next tax bracket for the next year, which means and I did a simple calculation and I took a fifty thousand dollar employee who worked 30 years, did some calculations and found out that if they retired on December 31st, having rolled over to 14 to eight that year, build up to four hundred forty eight hours, get paid two weeks later, yeah, they will actually be ten thousand dollars less than if they had done it differently.


So that is a huge amount. So it yes. Maximizing your annual leave, that is how you do it. However, that is not the only consideration we need to look at when retiring and people get stuck on that. Oh, I want to maximize my annual leave and don’t realize the domino effect it has on everything else. And federal employees have to be so careful of that.


Yeah, these benefits really do have a ripple effect if you do something to this one, that it affects all the rest of it. Right. So you really have to be cautious about that, because if they have a simple retirement to like for them to be able to finalize, then they’re getting the interim payments and then they’re getting all that back pay. And what if the SRS is in place? Right. What if they’re collecting Social Security, like all of these different factors have to be considered when you’re looking at retirement and how it’s going to affect the tax bracket.


That’s a whole nother conversation.


Yeah, yeah. And what affects this?


You’ve got to talk to somebody who knows what they’re talking about, who can help you out, who can help you figure out those considerations, though this is located. Yeah, I love our advisors and our network because we we know what they do. They’re looking at every single aspect of your employee benefits plus the financial side of it to really set you up so that way you’re not doing something that you actually think is right that might be wrong due to your situation or what have you.


And so I love that our advisers really look at all of these different things and the ripple effect that they have on every single benefit and really a financial plan or tax planning considerations. So taking a look at that and letting you know, hey, this is what’s going to happen here if you do this. So we do this, maybe you retire in September or August. You know, you get the annual leave payout and everything else, and that helps for this year.


And then next year you can be better by next year and you can set yourself up, get a better tax situation or what have you. That’s one of your concerns. It’s definitely important to talk with somebody who knows the federal benefits and how they work and what all of those considerations are so they can really help you out there.


Who knew that choosing what day you should retire would be so complicated? They say it can make the difference in sometimes tens of thousands of dollars of when. And so anyways, it’s complicated. We’ll just say that we only have a few minutes left for this last one. Can you change regular TSP to ROTH? TSP?


Well, thank goodness this one’s easy. The answer is no. There you go.


OK, put your traditional TSP into your it and convert it into a ROTH TSP. That’s not I mean, there are strategies to take out of TSP and into a private ROTH, but that’s a whole nother conversation. Essentially, though, you cannot switch your traditional ROTH and just move it over to the traditional TSP sorry, into a ROTH TSP now it’s right.


Just no right. Yeah. So in the in the accumulation phase, the answers, what you’re trying to do, the answer is no. In the distribution phase, you, you still can’t do it in the TSP. But there are ways to do basically essentially that just not in the TSP so it can be done outside but it can’t be done inside no matter what in the accumulation or distribution phase either. So it doesn’t matter.


TSP has limitations. Yep. Yes, it does. All right.


Well, if you would, we would love for you to like, subscribe, follow and all that good stuff, getting notifications and share this with your friends and your co-workers and make sure they understand this because they’re going to retire someday and they need to know this information.


Yes, they do. And we didn’t talk about the report very much in this episode, but we do offer a report about your benefits. So you know exactly where you’re starting from. And if you go to Fednobabble.com, then fill out the information that one of our advisors and our trusted network will get a hold of you within 48 hours to get the information needed for that report and tell you exactly how much your annual payouts going to be and all of those different things that we talked about to really help you with your planning in your retirement process.


So reach out to us and let us help you feel encouraged and and and do that retirement at a place from knowledge rather than just having to figure it out during the crisis planning process. So thank you, guys. Thanks.


Take care, everyone


To get Cassie’s comprehensive report on your federal retirement benefits at no cost, no obligation and no sales pitch. Go to Fednobabble.com while you’re there. Submit a question for them to answer on the show.

 

24

#24 – Burning SL, Still There?, Army Reserve

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Burning sick leave, still there? And Army reserve on today’s Fenobabble, . This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you. These two don’t hold back as they answer questions from the Fed Pilot workshops and webinars or from questions submitted by you at Fednobabble.com.


Hi everyone. I am Kevin Jones and I’m Cassie Knight and we’re going to answer some questions on today’s Fenobabble. So the first question is, if I burn my sick leave on an hourly basis, how many hours am I looking at? Forty eight or fifty four? I don’t want to go over and risk losing a full month by missing the mark.


OK, well, if that wasn’t confusing enough, let’s let’s break this down just a little bit. I think what this person is trying to get at is the 30 days that you so you can use your look, leave whatever that is sick, leave sick leave in your calculation for your pension. So let’s say let’s say you have again forty five days of sick leave and you have you can use 30 of that in and use it into the calculations of the 14 days or you lose.


So when this person says, what am I looking at. Forty eight or fifty four.


I don’t know because that’s you personally and we don’t know what your situation is, but whatever it is, you know, take 30 of that and move it over into the months column really. And and use the extra left over. Now what people don’t want to do is accidentally take too many hours and have it take off a whole month because that’s what it will do.


Right. So now there is the sick leave chart and it’s based on two thousand eighty seven hours per year. Right. Excuse me.


And that equals one whole year that will be added to somebody is a pension, essentially, if they have that many sick leave hours built up. So if you burn your sick leave on an hourly basis, how many hours are you looking at for what are you looking at? That’s how many hours you burn or that’s how many hours you need to have to to qualify for a full month. Like, I don’t know how many hours this person is starting with, so I don’t know how many hours they need to burn.


Right. Um, you know, a risk losing a full month by missing the mark. If you’re concerned about that, then make sure you have an extra day or two of sick leave to where you know that you’re going to be solid even if you don’t or. Yeah, even if you don’t. Even if you retire. Excuse me. And you know, you’d rather lose out on a day or two that a full month. You want to make sure it sounds like this person is really concerned not having that full month.


They don’t want to lose twenty eight days or twenty nine days. We want to make sure that that full 30 days goes over into the pension amount. And so if that’s the case, be over by a day or two. But I can’t really do the math on what you’re looking to burn forty or fifty for it because I don’t know what your how much you’re starting out with. So I don’t know how much you need to burn. Yep.


And that’s something that when you when any federal employee meets with one of our advisors in a trusted network, they could just figure that out. And that’s another one. Let me just figure this out for you. OK, done. Here you go. Kind of.


Yeah, because they’re submitting all of that information to me to where I know what they’re sick leave is how many, you know, what their retirement service computationally is. So that way we can know exactly how many hours or how many days sorry that they’re going to have with that retirement and then how many sick leave hours they need to have on top of that to make that thirty day mark happen.


So if you you know, if you’re coming or getting in touch really with one of our trusted advisers, then we’re going to be able to help you figure that out. But unfortunately, I can’t do that right now.


Yeah, and what you don’t want to do is, is if you do it by yourself, there’s always the chance of saying, oh, I accidentally went in the next month, which takes off money from your pension for the rest of your life. And it has a compounding effect. So obviously you don’t want to do that. OK, next one is the gap. You meant if I retire before 62, still in place, so in Cassie in the last the last episode of the episode before that, we talked about all the different names for Survivor benefit.


I’m not Survivor Benefits Special Retirement Supplement.


You’re putting up with a new word. I know. Yes, I am. I just like making up names right now. So there’s a gap payment. There’s gap insurance, there’s Social Security supplemental, Social Security offset. This is really special.


Retirement supplement.


Yes, that is the correct name. Special retirement supplement. It is from the federal government. It is not a Social Security benefit in a strictly a first employee’s benefit from the federal government. If you retire prior to 62, they will give you a certain amount based on your estimated benefit at 62 with Social Security and how many years, full years of service that you’ve had. And they’ll divide that up and find out what that amount will be for your special retirement supplement, OK?


And I can understand why people get this confused, because in the formula, it pulls over Social Security, the Social Security amount that you get at sixty two. So it makes sense to people.


And it’s also subject to the earnings test. Right.


That’s very similar to Social Security. Right. Right. The government has kind of adopted that earnings test from Social Security and they use it for this benefit. So it’s a very confusing benefit, especially when people don’t realize that Social Security supplement, which is what I hear most commonly, is something that is actually a Social Security benefit for disabled people and things like that. There is a supplement income for folks. And so they don’t realize that, though, when they’re talking about the special retirement supplement.


And it’s a very, very confusing in this name, it’s thrown around with so many different variations and people gap payment, right? I mean, it could be viewed as a gap payment because it’s for employees who are under 62 and it only lasts until you’re age 62 when you are eligible for Social Security. Even if you don’t begin drawing Social Security, it only lasts until you’re 60 to it. So it fills that gap of time before Social Security is is eligible to be drawn.


And so I can understand how people come up with the name. But the real name is Special Retirement Supplement.


What do you even know?


It’s still in place if you’re on it before age sixty two and you retire, however, only on an immediate full pension. Right.


And I’ll go out on a MRA+10 basis. You’re not going to receive the special retirement supplement. I want to make sure we’re really clear on that. It does depend on the type of retirement you have on whether or not you’re going to be eligible for this benefit.


So is it still in place overall? The answer is yes. But again, remember, it depends on how you retire. But it also can depend maybe possibly in some future point if Congress decides to take it away and they’re always looking at trying to figure out should we take it away or should we leave it? So that’s one thing that I hear a lot in the workshops is that people are worried, OK, is it still going to be there?


And the answer is it’s there. Now, until it’s not so mean, we don’t we don’t know.


It’s kind of like the high three to high five. Right. People are concerned about that being an issue as well. Exactly. That is seems to be constantly on the House floor for them to discuss it. Really, when it gets passed, we will let you know.


OK, we’ll make note of that for now. We’re dealing with what is current and in place as of today, because that’s the best information we have. So many of these benefits are constantly on the House floor and being discussed about being changed or withdrawn or what have you. And until that actually happens, so we have nothing to go on. We can’t tell you when that will be or what that’s going to look like. And so until then, we’re going to go with what we know and what’s in place today.


And the funny thing about this, and we get to discussions like this all the time about in the workshops, is that, well, if it’s not going to be there, I would plan differently. Well, that’s true. But you can’t let us stop you from planning. You still have to plan, assuming that it’s going to be there and then maybe make, you know, an alternative. If it’s not, then what do we do? And those are the concessions we have to make as we’re planning all those.


OK, what if situations OK, what if it’s not there? Well, then we’ll do this. What if FEHB changes or what if Medicare changes, or what of the TSP changes, or are all these the high three, like you mentioned? Because the high five? We have to be careful with that.


Yeah. What if Social Security is not there by the time all of these all of these are very valid concerns. And that’s why our advisors that we have in our trusted network are experienced in answering those questions. They make sure that, you know, whatever scenario plays out or whatever what if scenario plays out is accounted for when they do that financial plan with you, whether it’s to make sure that you have more tax free income or whatever your goal or situation is, they’re going to help you make sure that you’re covered with all of these different buckets and all of these different benefits and make sure that they’re working together as a well oiled machine and to get you to where you need where you need to be.


And if something happens, if something breaks somewhere, how are we going to fix that situation? And they really distill that down. So all of these are very great questions and very valid concerns and just know that an adviser should be able to answer them for you if they’re not helping you plan. Right. Let us know. We’ll get you in touch with somebody who is versed in the federal benefits and understands exactly how to coordinate them with outside planning.


Yep.


And also mention that along with that Cassie that things will go wrong. Things things will go not as planned. It’s going to happen. And so we may if we’re trying to do this ourselves, I may be focusing on, well, what if Social Security goes away and trying to plan for that when it’s possible that it work, when it’s probably most likely Social Security won’t go away? Now, I’m not saying that that will or won’t or possibilities on that, but there are certain things that we may think are big.


Well, for example, one I remember one lady was really worried about high three to high five, and she said, I’ve got to retire before they make it high five. And I said, wait a minute. Do you for most federal employees, if they change from high through to high five, there’s going to be such a small difference that you’re not going to notice the difference, number one. And number two, the chance of it happening are very small.


So I wouldn’t I wouldn’t be your whole when you’re going to retire off of that, it’s easy for us to place undue burden or emphasis on one situation or one benefit when we should really kind of back off and have a more balanced approach. And that’s what an adviser does help us, helps us balance that much more than we would our own, because we have those emotions that that get in the way. Absolutely.


So say they don’t take Social Security away. What happens if they increase taxes instead? Because. Right, right. There’s all of these different. What do you think about.


Oh, yeah, yeah, yeah, yeah.


I mean, we help people or not we but our advisors help people with those situations and know exactly how to counteract those what if scenarios and make sure that you’re set up. So no matter what happens, you’re still set to meet your goals. Yep.


Perfect. OK, last question. How does the Army Reserve pension play into all this?


I’m going to let you take this away Cassie you go for it with the question that you don’t get very often in your workshops about active duty service.


We don’t I don’t think because a lot of people understand how that works and the bonus that they get. I very few people that I have talked to, when I bring it, if I bring it up, most people like what I’m in reserve or I wasn’t reserves. And I don’t know about this and I’m kind of surprised by that. Yeah.


OK, so let me take a deep breath here.


I love it because there is a lot going on with reserve folks, OK? And they have a huge benefit that they don’t even know about. I would say most of them don’t realize what a benefit they have just being a reservist as opposed to active duty. OK, when it comes into relation to their federal pension, I should say, I don’t know what their other benefits are. Not benefits could be of reserve active duty. But when it plays into your pension on the federal side, it can really be beneficial to be a reservist.


And here’s why. You can if you have retired from the Army Reserves or Navy Reserve, if you have retired from the Reserves Service, then you can quote unquote, double dip your pension. On the federal side, because you can collect your reserve pension and you can make a deposit for your reserve service and collect on that reserve time for both pensions.


What? That’s craziness. Let me just clarify this a little bit. Excuse me, but somebody with active duty military service, if they have bought back their service on the federal side, they waive their military pension so they will no longer receive them in a military pension. When they begin their federal pension, they reserve they receive that federal pension and military pension combined in one federal pension. But as a reservist, you still collect your fat, your reserve pension, and you can also collect that federal pension with that reserve time included and make that federal pension more robust on that side as well.


And so you have you still that’s why they call it double dipping, because you can collect your reserve pension and your federal pension and get credit for that reserve time in both pensions. That’s the bottom line.


And and how does the government allow that?


I mean, so it’s not all reserve service. And let me just make sure that we’re we’re clear on this service time that can be included for the federal side. And that’s the two weeks of the summer. And any training our deployed service. OK, so the time that cannot count is the one week in a month drill time for reservists. They cannot buy back that service, but they’ll get time for all the rest of it. OK, so pretty decent there if you know about and if you play it right.


And here’s another great example. If you know about this, if you play it right, you can score with this. And those are again, something in the in the report that you would you would catch if no one else caught it, you would catch it. Oh, look at this. You can double dip here. You bet.


We are making this note constantly back to our advisers and say, hey, look, this person’s a reservist. They haven’t made a deposit. Let you know they need to follow this process to make sure that they get credit for that service because they can double dip here. Now, I want to be clear. There is an exception. Like all rules, there are always exceptions, of course, and that’s for military reserve technicians.


If you are a military reserve technician and you are having to have that military status because of your civilian job, then that is where you will only collect the reserve pension and the federal pension because you’re already getting credit on both sides of pay. So you don’t receive the quote unquote double dipping factor, like if you were a reserve and had your federal service separate.


So you do realize that you just took a number of people on an emotional roller coaster saying, oh, I’m so excited that I dropped them flat. Well done, Cassie.


I just want to make sure that everybody understands exactly how things work. I get it. No, I, I think that’s good because it always depends. There are always exceptions to things. I don’t care what it is, there’s always an exception to different things. So to make sure that you understand what they are and what the future things are, make sure you like, subscribe, follow, get notifications, all that good stuff on on Fenobabble. Share this with your friends.


Please help them understand the benefits that you get.


Everybody let them know. Yep.


Everyone. And then Cassie, what do you do in the end.


Go to Fednobabble.com and request the report, take action, take action on your benefits and make sure that you are in control of what that financial picture looks like for you. You got it.


Great. Thanks for joining us.


And we will see you next time.


To get Cassie’s comprehensive report on your federal retirement benefits. At no cost, no obligation and no sales pitch. Go to Fednobabble.com while you’re there. Submit a question for them to answer on the show.

 

22

#22 – Compression, W2s, TRICARE

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Cassie
Compression, W2s and TRICARE on today’s Fenobabble. This is Fednobabble.com, where Kevin and Cassie make federal retirement benefits understandable for humans like you, these two don’t hold back as they answer questions from the Fed pilot workshops and webinars or from questions submitted by you at Fednobabble.com.


Welcome, everyone. Welcome back to Fednobabble.com. I am Kevin Jones and I’m Cassie Knight.


Let’s go ahead and jump in to today’s questions.


What we’ve got here is, number one, there is unused sick leave remaining after running the sick leave conversion into how many hours does that convert? I work a compressed schedule five, four, nine. So I need to know how to make best use of that overage.


What say you, Kevin. So here is one of the things that I find interesting is that federal federal employees a lot of times don’t understand how complicated their benefits are. It’s just it is really, really complicated. And sometimes when it’s really, really simple, they make it really, really complicated. It’s almost the opposite. Right. That’s the no fault of their own. And I totally get why I fully get it. So for, for example, another one that I another thing that I hear all the time is Leo’s law enforcement officers that a lot of times they say, well, we get that, you know, that, you know, it’s the wrong name, but they’ll call it special retirement supplement or the Gap insurance.


Right. And it’s and it’s us. LEOs. Well, actually, it isn’t just you. It’s any could be could be any FERS employee. And so wait, wait. I’m not special that way then. And I hear that, but it’s just not me. And so this one is so this one. OK, here’s a compression schedule, but it really isn’t different than any I mean, from the regular schedule of what it is when it comes.


Yeah. When it comes to sick leave, whether you’re a compressed schedule or a regular scheduled employee, whether you’re part time or what have you, it doesn’t matter when you are looking at the sick leave conversion. You simply use the sick leave conversion chart. Twenty, eighty seven sick leave conversion chart and that’s it. It’s going to come right at the same no matter what kind of schedule you’re on or anything like that. So.


Right. So OK, there we go.


It does matter. OK, ok. I do want to say that when you’re looking at retirement and you have sick leave being added to your retirement, if they don’t make a full month, then you will have extra days. A but it also depends on how many extra days you have in your regular service as well. So you have to figure out what those days are and how they can how we can make sure that you’re not having like two weeks where you’re not having the added to to your well, you’re losing them essentially because maybe you have one month and and two weeks.


So it’d be forty five days of sick leave. And then you are leaving at the time that you have exactly 30 years, you don’t have any extra days. And so then you’re losing out on two weeks. Right. So then obviously they want you to use those two weeks of sick leave to where you’re not before retirement. So that way you’re not just losing out on those days and not get paid for them. So that’s one thing that we help employees with, though, when they come to the adviser and they’re asking those questions on how many days of my going to have and with how much time do I need to use before retirement and all of that to where I have no extra days, then we can run those scenarios for employees.


Yeah, and I always say give yourself just a little bit extra just in case, because you don’t want to miscalculate. You want to get you know, you want to get you want to get close. Absolutely. And use all the days. I mean, if you have, let’s say, 14 days left over, let’s use the 14 days, but maybe give yourself a day or two or like in sick, leave you parlance a couple extra hours or two just in case.


Don’t go down right to the wire because you never know. And we’ve seen people say, OK, I’m going to get it right, I’m going to nail it. And then they get sick right before they have to retire. And then that eats into a whole month of calculations that they could have put into there for sure. So, you know, give yourself a little grace there, which would be kind of nice. Absolutely. OK, here’s a second one.


Social Security, OK, the SS.


So here are the special retirement. Like, what does it mean? They’re so OK. So I was talking about this with just a second ago when we said the LEOs call this. I mean, everyone calls it this really Social Security supplement or gap insurance or Social Security offset or whatever. And I’ve said this before on Fenobabble and I’m going to say it again. It’s the wrong. We’re calling it the. Wrong thing, and normally, if we call something the wrong thing is like not a big deal, but in this case, I feel like it is a big deal because it’s a big deal.


Calling it a security supplement makes you think that it comes from Social Security and it doesn’t have this conversation with the adviser just yesterday.


Oh, really? No. Do we even. And he said, look, this person’s coming in here tomorrow. And I just want to make sure that you included the Social Security supplement on her report. So I scroll down the page. I said, and it’s a special retirement supplement, if you call it the Social Security supplement. It’s not a Social Security benefit, number one. And number two, if they go to the Social Security office and ask about the Social Security supplement because they think it’s a Social Security benefit, they’re going to be talking about something way different.


Yes. Yes. The Social Security supplement, it is a federal benefit. It comes from first it it doesn’t come from the Social Security themselves. Right. OK, and that’s huge because, again, if you’re if you’re looking at disability income or something like that, it’s a very, very important that we have these things. Correct.


Right. So so what am I a little. No, no, you go ahead. I don’t want to be sexist.


Remember, this is what I think about the earnings test for the special retirement supplement.


Yeah, I think so. Is that right? I believe so.


OK, so if the income is strictly earned income, OK, so TSP is not going or income that you withdraw from TSP is not going to count because that’s retirement, just like your pension doesn’t count. That’s just earned income, whether you’re self-employed or an employee working for a company. Either way, whatever income is actually earned on all those profits or that you have coming in from your employment, that is what counts towards the earnings test for the special retirement supplement.


Got it. Now that. Yeah, that’s that’s a nice and easy one. I do want to add one more thing to that Social Security supplement that that name you gave a great explanation of why. I’ll say one more thing is that there are a number of overall I think it’s really important to name things what they are unless they conflict. So, for example, the pension and I don’t want to confuse anyone, but this just will give an example.


We know well, let’s say the TSP has annuities that you can choose. However, the pension is an annuity itself is a form of an annuity. So but we don’t call it that. We don’t call the pension anonymity because that’ll just confuse people as to what it is. And does it come from. I’ve heard people say, does my pension come from the TSP or and they get those confused. So the language that we use is really, really on purpose.


And it’s really important to understand what we use when we use it, because, number one, we don’t want to confuse things. Number two, the more we can the more we can label things correctly, the more of a better understanding we will have of it overall. So absolutely, there’s that. All right. Was that was that question number two? I think that was a question, yes. OK, then question number three, I will be eligible for Tricare.


OK, this is a complicated one. Ready? I will be eligible for Tricare Tricare at 60. Again, Tricare is the military’s version of FBG at 60 because I retired from the US Army Reserves. Good for him or her, whichever. I plan to carry my FBG into retirement at the end of this year and switch to Tricare when I turn 60. When eligible for Medicare, I would have Tricare as secondary is is this advisable? So this person right here has a lot going on, but I think we can kind of take this question and sum it up in when this very last part, when eligible for Medicare, would I have Tricare as secondary?


OK, so this is one of those things where it’s really simple. Yes. That is made very complicated. Exactly.


That seems to be the same. If you have Tricor, you must enroll in Medicare, period. Done. However, here is here’s where it can get complicated. If this person is a military reserve technician, then they will not have the availability for Tricare. And this is something that is misunderstood by a lot of these people because they think the military reserve and I’m a civilian employee, so I have the option to your own special breed. Yet if you are a military reserve technician, I will tell you right now you will not be eligible for Tricare period.


So you’re going to be stuck with me in retirement. OK, but if you are actually reserve and not civilian at the same time, so maybe they did have their separate service, OK, then they will be eligible for Tricare and that’s when you’re automatically have to enroll in Medicare anyways because you’re going to have Tricare.


Now there is a way for federal employees or retired reserves or retired active duty to have the option to be able to get back on their feet if they lose their TRICARE coverage. Right. So if they have to be at retirement, then they can suspend their fee in retirement and hop on Tricare. Obviously, you still have to enroll in Medicare. So you’ll have that in Tricare and Medicare will work together for that coverage. But if you’re in a location where your TRICARE pulls out or something happens, whether coverage is not great, then you can hop back on to the FB and reenroll during open season.


Or when you lose that, lose that coverage involuntarily and have a Medicare. And so that’s really, really strong. And I think something that really should be coordinated with people who have those different health care systems. And if they coordinate them right, then they can really set themselves up for success later.


Yeah, that’s a huge one that a lot of people can take advantage of. That is really, really good. Now, when I when I look at the end of this question here, is this is that advisable? So you said which is which is spot on. If you have Tricare, you have to do Medicare A and B, you have to do those to you just have to. So is it advisable? Well, when it comes to this being secondary, a lot of people say, well, how do I make it secondary?


It just happens. It’s not you don’t have to set it up as secondary. Once you get Medicare, it becomes primary, TRICARE becomes secondary. And that’s just the way it is. So is it advisable? Well, if you get Tricare, if you get Medicare, it’s just going to happen. So you’re not going to have a choice on that one. Exactly.


It’s pretty easy for Tricare that I would say. Yes, that is you have to have it in order for Tricare to pick you up on other coverage. But as far as who secondary in this primary, I think that boils down to who is covering what, who is your doctor, specialist, what have you. Some people take Medicare. Some people don’t want Tricare there. It depends on where you’re where you’re at. And and so I can’t tell you who’s going to be first or second in line.


But what I can tell you is they’re going to be one. Then the other person is going to get billed and they’re going to cover, you know, based on whatever those limitations are, because I’m assuming Tricare for Life. But there are other Tricare programs. True. So I don’t know what those specific limitations are. However, if you’ve got Medicare, you’re going to be 100 percent covered. And I want to say that even if you are not in Army reserves or active duty, you’re FEHB in Medicare.


We’re very good together as well because we. So that’s one thing that I’ll say it and I’ll throw this on the kind of the back end of this question. This gets this whole thing just I want to say the health care, but not only the health care, everything else gets really complicated when it comes to are you active duty or are you reserves? Did you retire one or the other or did you quit? Or is it disability or.


And and on and on and on and on and on, right, there are different things that you should do in different circumstances, even if your friend seems to have done the same thing that you did. It doesn’t mean that that is what you should do as well, because you you may be very, very different. So as soon as we add in military into the mix, it complicates things. And what I love about your reports is that all of this can be figured out.


It’s very it’s I don’t want to say it’s easy to figure out, but we Cassie I’ll just say this. You kind of make it you kind of make the magic happen in the background so that so that when a federal employee gets the report, it’s like, oh, that’s what it is. And this is how it works. And that’s great. But there’s a lot of magic that kind of like Disneyland, right? There’s a lot of magic that happens in the back end.


But you don’t you just get on a ride and you go and you have fun. Right. But there’s a lot going on in the background. And the person who comes to Disneyland doesn’t need to worry about all the extra stuff they just to get to enjoy it. And that’s the way I feel like federal employees are. They just get to come to this Disneyland. They get to sit down with one of our advisers. And I trust the network and just get your report and say, OK, there we go.


All the magic is done for me and here are the issues and the things that I need to figure out.


So that’s that’s what I love about it myself.


Our whole goal is to keep it simple. Yes. Keep it as simple as possible. These things are complex. These things are there’s exceptions everywhere. And it’s knowing what pertains to you and what doesn’t. And that’s our goal because we really want people to have that information and be able to use the information that works for them so they can financially succeed, whether that’s in employment or in retirement, which is apparently the ultimate goal, is to have the information and the tools and resources that you need for your situation to get to wherever you need to be.


What’s your what are your goals and aspirations? We want to make those happen for you and get you on your way to do that.


So, yeah, and it’s not only just for you, but it’s also for those around you because they’re retiring, too. So if you would please like and subscribe and share this with your with your co-workers, follow all that good stuff. Right. Because not only do you need to know this, but they need to know that we don’t want to see any federal employee have to get out of the of the system of working for federal government, for all of us for so long and then go, oh, I, I think I mentioned this before.


I had someone come back to my workshop twenty years after they were retired trying to figure out how to fix what they’ve broken, you know, so that’s what we’re trying to help people avoid is yes, please, please, please. So yes.


And last words of wisdom, Cassie, take action, get the report, find out what those benefits are for you. Let’s get you on whatever needs to happen for your situation. Let our advisors help you make those dreams come true for you.


So very good. All right. Thanks. Thanks for joining us. We’ll see you next time to get Cassie’s comprehensive report on your federal retirement benefits. At no cost, no obligation and no sales pitch. Go to Fednobabble.com while you’re there. Submit a question for them to answer on the show.

 

21

#21 – Formulas, 8%, 5%

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Kevin
Formulas, eight percent and five percent, all on today’s Fed in a battle, this is Fednobabble, where Kevin and Cassie make federal retirement benefits understandable for humans like you. These two don’t hold back because they answer questions from the Fed pilot workshops and webinars or from questions submitted by you and fednobabble.com.

Cassie
Hi, I’m Cassiepart and welcome to today’s Fednobabble, where we’re talking about formulas eight percent and five percent.

Kevin
Hi, and I’m Kevin Jones. Let’s jump into the questions. The first one is what is the formula for part time, Casy? What is the formula for part time?

Cassie
I don’t laugh at me. And those are crazy things. Right? But listen, this is something that is so complex, OK? Part time service is its own little bird. It’s like postal employees. It’s it’s something that is really dependent on. How long you been a part time employee, how many hours you’ve worked as a part time person. So let’s just use simple numbers here. OK, ok. OK. This is the man that’s good for me, right?

Kevin
That’s good.

Cassie
If somebody has a high three of well, we’ll see if their pension is going to be fifty thousand dollars a year before their part type of factor. OK, and it worked thirty hours their entire career. OK, that seventy five percent of a full time employee. Right. So they’re thousand would be reduced to seventy five percent of that amount.

Kevin
Good. So yeah. So really overall in the in the workshop, the way I explain it is you go through the formula as, as if you’re a full time employee, so you go through the, you know, your, your high three times your years of service, even if it’s part time years of service, you’re still your years of service times, let’s say one percent. Right. And that’s the first formula. And then you get this number and everyone says, OK, that’s my number.

Kevin
But part timers go one step extra and prorate that last number. And so really and correct me if I’m wrong here, but this is what I understand, Cassiepart-timepart-timepart-timepart-timetwenty-five, is that OPM sounds kind of crazy, but OPM goes back through your part time and adds up all the part time hours you had during each pay period to make that preparation. They have to go through all of that to figure that out. Is that is that correct?

Cassie
OK, so if you are you talk about somebody who has like different pieces, a part time service.

Kevin
So if we just took it, made it really, really simple, let’s say, like you said, thirty hours for their whole career was it was always part time. Right. But sometimes it would be thirty to sometimes 35, sometimes 40, sometimes to twenty five. But you know, it’s right around thirty. They’re not going to say, well it’s right around, they’re going to go back and they’re going to count it all up and add it all up together to get to that last number.

Cassie
So it depends on how many hours they’re slotted for, right? Yes. So if somebody is has an agreement with their agency that they’re only supposed to work thirty hours, but then one week they were thirty two hours. Well, sometimes those two hours work out and sometimes they won’t. Depends on the agreement that they may have with their agency. And so that’s where it kind of gets nitty gritty. But what I can tell you is when somebody fills out their retirement paperwork or even before.

Cassie
Right. If they’re looking at their certified summary of service, that really lays out their hours of part time work. And you can do some math there or we can we do this often for our our advisors where we’re really trying to look at that preparation factor and what that looks like for a piece of service, because there are many employees who have broken up part time service. Right. So say that they’re part time, a little bit. You know, then they go full time and then they go back to part time, you know, or they’re just part time for a brief period.

Cassie
This is really common with women employees and I. I don’t mean to be sexist here, but are sexist. Look, you I am I am a woman. Give me a break.

Cassie
No, but for instance, when somebody takes maternity leave and they just go back to a part time service for a couple of years while the little ones are younger. Right. And then a couple of years later, they have another child. And so this is more common to all the time, just is what it is. At any point in your career, you can get what’s called a certified summary of service. And we help employees or we help advisors get that paperwork for employees to make sure that they can get it in and submitted, because that will help really distill down all service that an employee has, whether it’s credible or not credible.

Cassie
It lays it all down and shows them exactly what is full time service, part time service and obviously other types of service as well. But it really you can do the math with that form and determine what that curation factor is overall and see how it’s going to affect your pension.

Kevin
Yeah, and in the end, what you’re what we’re trying to find out is how will it affect your pension? So when we say what is the formula for part time, we can give the basic formula, but that’s not always the correct way that it’s done. And in certain circumstances, especially when it’s part time now, full time, part time, no time, part time. When it goes like that, then the formula is broken up and it’s all over the place and it gets really complicated.

Cassie
And we can lay out the formula. Right. It’s your pension times, whatever factor there is. Yep. And that’s the bottom line. But without that knowing what that preparation factor is for an employee, we cannot determine what that looks like for them, right?

Kevin
Yeah. Right. Yeah.

Kevin
And that’s and again, that’s why federal employees have such a hard time. Well, I had part time here and here and. OK, what what will it really be? That’s I think that’s one of the beautiful things about your report, Cassie, is that federal employees don’t have to figure it out. They just get the report and know what it is. And, you know, I’ll say this not only not only what it is because of your report, but if you’re to go to H.R., they may or may not have had your part time.

Kevin
If you were at a different agency, they may or may not know what that is. And they may or may not give you the right numbers. But you know what they are or the federal employee knows what they are and so they can give them. So your report will have that all in there?

Cassie
Well, if the federal employee does, right, I haven’t forgotten, I guess.

Cassie
Well, and here’s most of the time when there is a part time service, then if an employee does not know their probation factor or does not have their certified summary of service or a benefit statement that lists it, then we are automatically referring back to that certified summary of service for an employee to fill out because we can’t get an accurate pension number if they’ve had part time service without knowing what the probation after is. And that’s what we’re trying to accomplish, is making sure that people have solid information so they can work on whatever financial plan they’re looking at with the with the advisor.

Cassie
So our ultimate goal is to make sure that the employee has the best, solid, most up to date information for their benefits. And part of that is knowing that proration factor, if they’ve had part time service. And so if you’re an employee that’s had part time service and you haven’t done a certified summary of service, do it or finding out if your agency knows what that is.

Kevin
Yeah, most officers yeah, I would say even most H.R. people don’t even know what that is or that they can even do it. I’ve heard that there’s so much pushback from employees saying I want to go do this. In the end, he says, no, you can’t until you retire. But that’s not true, that you can go get that now and everyone should go get that. No, not tomorrow. Today.

Cassie
Right, and that it says it right in the instructions that put boggles my mind. Yeah. Yes, these forms are included in the retirement paperwork package. However, in the instructions, it says that if you need to clarify your service, that you’re able to submit an ID. And we simply said that back to the adviser and let them know, hey, this is where it says it. Please let the employee know and point this out to their H.R. department that they can submit this form to certify their service.

Cassie
That’s what it’s for. So if you can do that way before retirement, that is.

Kevin
Yep, absolutely. Well, that that question just took 10 minutes of our time. That’s OK. But we got into other subjects at the same time. Right. And it’s interesting that the small question like this, there isn’t an easy answer. It it depends, of course. Right. All right. Question number two, if I retire at sixty seven, will my Social Security still increase eight percent a year or do I have to be working? I guess there should be a question mark at the end that I did not put that there.

Kevin
But there but there is a question mark, right? We just type of whatever, but at six or seven. So I assume that this person hit their full retirement age at sixty seven and they’re wondering if I hit my full retirement age, does it still increase at eight percent a year or do you have to be working. And that’s a little bit more complicated.

Cassie
It is. The short answer is yes. It increases by eight percent.

Cassie
OK.


However, you also still have to be working to a certain degree or earn a certain amount if it’s going to be the full eight percent because it’s based on your earnings. Right. I think you said that right.


That’s a lot. And really, I would say go to your Social Security office and ask them specifically about your situation.

Kevin
Yeah. And also, I’ll throw in there that you have to not be drawing Social Security, so. Right.

Kevin
You can’t draw your social. As soon as you draw your Social Security, it’s locked in that amount for the most part. Right. And it’s not increasing by eight percent a year anymore. So as long as, you know, if you retire and I’ll add in there and are not drawing Social Security at sixty seven, does it continue at eight percent? Pretty much, yes. But again, you know, you have to you have to go check it out.

Cassie
And I want to make sure that we’re clear on what this eight percent is increasing by, OK, this is the eight percent of that or retirement age amount. OK, so. Right. And don’t expect it to be eight percent of your salary or some other weird number. It is eight percent of that full retirement amount at the time. So if you’re sixty seven and you have three thousand dollars coming in or estimated in your Social Security statement that it’s eight percent of that.

Cassie
Three thousand dollars. Right.

Kevin
And that amount, that amount is called the PIA, the primary insurance amount. And really everything is based off of that number right there, more or less whatever that is like this. That is the benchmark number for every I’ll say I don’t want to say federal employee, because, again, this is a federal work. I’m just a American worker benefit.

Cassie
Exactly. And so this is an eight percent on that amount. So if your income increases, obviously, that amounts going to increase. And so the eight percent is going to be based on that larger amount. But so I wanted to make sure that we’re clear on what that eight percent meant. Good. Yes, absolutely.


Thank you. I think we could make it.

Kevin
Yeah. It’s hard it’s hard to give somewhat simple explanations without diving into detail, actually. And because I think on each of these, we can spend another 20 minutes on every each one of these going a little bit deeper. And then if you’re in this situation, it could also be this. But these are the basic answers to these questions. OK, next question. How do I determine what the five percent is in my TSP? So I’m assuming this person is a FERS employee wanting to contribute five percent to get the five percent match.

Cassie
Right. And so that five percent is. Based on their annual salary amount. OK. So if the if they’re making one hundred thousand dollars a year, that it’s going to be five thousand dollars because that’s five percent of a hundred thousand dollars. Great. So it is based on that annual salary before taxes. Gross. Whatever that amount shows on your pay stub or LES, it’s five percent of that amount.

Cassie
That’s not always easy to determine now.

Kevin
OK, I’ve got a question for you, because I’m I get to be in front of federal employees and talk to them about their benefits. Personally, I have never been inside to look at someone’s TSP. Right, because I’m I’m up in front of them teaching, having helped federal employees in the past and working with advisers right now. You’ve been in TSP before and and I’ve seen that. Is there some type of I don’t know, does it show or does it indicate in there where they, you know, what the full amount is and then you can do this much TSP or what five percent is?

Kevin
Or do they have to do federal employees have to figure that out themselves?

Kevin
What the five percent is now, they can choose a specific dollar amount or a percentage amount. And so if they want to just five percent of their income, then they can elect to do that inside TSP dot gov. They simply have to log in to their TSP account and, you know, look at their contribution amount and select to contribute a certain percentage. So my husband is a federal employees duty and he likes to contribute 15 percent to his TSP.

Cassie
So it’s strictly based on that percentage, though he doesn’t have a he didn’t have to do the math to figure out what it is because. Right. It’s not a math whiz like that.

Cassie
I don’t get me wrong.

Cassie
I love my husband. He works great with his hands. He’s a mechanic type, you know, get in there and fix it kind of guy. So I don’t mean him any disrespect. Right. Of course himself, of course.

Kevin
But but many people are not math whizzes. And honestly, what is what is it based off of their confusion that they can just go in and it’s set at five percent and be done or 15 percent and be done?

Cassie
And I think that’s huge for special provision employees as well, because they’re on their paystub, doesn’t show their actual pay amount because they have that a low hourly pay that is also included that extra twenty five percent bump, and that’s not shown in their pay on their pay stub. And so if they want to contribute a certain amount or a certain percentage, I should say, then they they really need to go into TSP and just select a certain percentage because you have to do that backwards math to really find out what their pay is and find out what that five percent is based on.

Kevin
Right.

Kevin
A little bit more confusing, which is which is one another reason why working with an advisor is so preferable and getting your report again found a bubble dot com. You can get Cassie’s report, but go I mean. Oh my goodness. To have to have to go through all those calculations. Not you don’t have to I mean, it can all be done for you at you know, there is easy one, I promise. Yeah, yes, yes, yes, yes.


So good.

Kevin
That’s the last question there. So everyone, if you would please like subscribe, follow and share Fednobabble with your friends because your co-workers need to understand this, too. They need to learn this stuff before they retire. Cassie, any last words of wisdom? Take action on your retirement.

Cassie
Don’t let these benefits bog you down. Don’t don’t think that they’re going to work best for you when you plan them at retirement, start looking at them, start looking into them now and really understand them now. So that way you have the best financial success moving forward. Great. Thanks, Cassie.


To get Cassie’s comprehensive report on your federal retirement benefits at no cost, no obligation and no sales pitch, go to fednobabble.Com while you’re there. Submit a question for them to answer on the show.

 

20-1

#20 – Divorce, Retire When, Regrets

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Divorce, retirement and regrets on today’s Fenobabble.


Welcome to Fenobabble, where we make federal retirement benefits understandable for humans like you on Kevin Jones and I’m Cassie Knight we take your questions that online Fednobabble.com or from Kevin’s workshops at the Fed Pilot workshops, and we simply try and answer them and make them understandable for you, or at least bring up the concerns that you have or should be thinking about when you’re looking into those benefits.


So the first question we have for today is I had a divorce approximately five years ago and was awarded my retirement. How do I make sure it’s all coming to me?


How did divorce five years and and was and was awarded my retirement? Does that mean that this person has already retired then? Well, not necessarily if they had a if they had a divorce and they were awarded their retirement, essentially that means in their divorce decree.


Oh, yeah. Then they were awarded their pension. Yes. How much pension? I know it sounds like I’m going to assume it’s the full pension. That doesn’t mean that their former spouse is not entitled to or survivor benefit.


Right. Yep. Yeah. Because they could get a survivor benefit. And and so. So that person gets the whole thing. But but they don’t. Because if the spouse is awarded the survivor benefit, then that’s what some, you know, up to about 10 percent off of their paycheck. So they don’t get the whole thing. They get 90 percent of it. Right. So it depends on your divorce decree. Yeah, let’s see how do I make sure it’s all coming to me?


So here’s one thing that I get often from financial advisers. They submit their retirement paperwork or the application review when somebody is divorced, then they want to take a look at the divorce decree and they ask, you know, OK, how much of the pension is there? How much of the surviving spouse benefit is being awarded to the to the former spouse? And where do they send this? Yeah, OK. Because here’s the thing. If any part of the pension or survivor’s spouse benefit is awarded to your former spouse, then it needs to be submitted as soon as possible.


If you were divorced five years ago, you need to submit that paperwork today. OK, if you just went through a divorce, you need to submit that paperwork today, as soon as the divorce is finalized, is when you should be submitting that paperwork to OPM, because if you don’t and you’re at retirement age, it can delay that retirement process for a number of months before you that months before it’s finalized and possibly even a year. This is something that people don’t think about enough.


It’s like, OK, well, I’m divorced and I’ve got my degree and this is what it looks like. But there needs to be specific language in there.


They’re depending on how it’s written, there may need to be other forms for OPM, and you definitely want to make sure that you have time to get that taken care of. OK. I have the address to submit that and maybe we can, you know, put that up or or we’ll put that in the show somewhere on our website. We’ll do that. OK, that’s great. Yeah.


And again, yeah, this is a great example again of why you should be why every federal employee should be working with a financial adviser from the beginning, because again, when they’re going to say, oh, by the way, did you know you have to do this and you need to catch this and make it really easy instead of, you know, we find people, federal employees. Oh, I have to submit my divorce paperwork. What? OK, well, where do I send it to?


Well, I don’t know. Well, how do you find out? And they waste so much time and effort trying to figure out just where to send it to and all the stuff where, you know, again, one of the advisors and ah, just a network would just say, there you go. Oh, by the way, you need to do it. Here you go. Do that. And and it’s one of the things I talk about in the in the workshop is that there are a few things you have to know about your retirement.


First is where you are right now, the next. And financially health wise, family wise, the next is where you want to go. And then the critical piece of this is to draw a straight line from where you are to where you want to go. And that straight line is your plan. You do not want that plan to go up and down and back and forth and all over the place, because that gets really, really frustrating. If you have someone who can just help point you straight along, then you can just move on without getting frustrated.


Wait, wait. I thought it worked like this. No, it doesn’t work like that. Well, it does. It well, it does in that situation, but it doesn’t. No. Make a nice easy line at.


I want I want to add to that a little bit, too, because OPM and the agencies are whoever you work with for different things, whether it’s buying back service or just trying to get information on your service time, like they can make it go up or down.


Right. Right. But the adviser and our trusted network can keep you on that straight line path. So even though you might get thrown off, they’ll help you get right back on the path to make sure that you are getting where you need to go smoothly. And you’re not like being off track. And then what do I do now? Because the agency is telling me I can’t buy back my military reserve time. Yeah. So I must not be able to.


Yep. And then you find out years later. Wait, I can because you’re that is exactly that I can. And now I’ve accrued interest. Over all of these all of these years, because originally I was told one thing which was not true. Yep, not trying to negate a charm or the age of eight, but there’s just false information out there. And you want to army with the correct information if you have any problems with that, or we’re helping us get the information black and white from OPM and say, hey, take this back here.


This is what you need to do to get the employee back on that straight path and helping them on that journey. So as quick as possible.


Yeah, you know this. And I know we’re spending a lot of time on this one. So we’re going to have to make the next two. But I do want to throw in one more example of this. I was just talking with an adviser this week.


What they have a federal employee who came to them, they’ve been working with them for a while. Well, that federal employee got a notice from H.R. that they have thousands of dollars that they have to pay into Feigley back pay because they didn’t take it out of the paycheck for a number of years. And they’re like, what, are you kidding me? And so they had to work through that whole thing and it it turned out good for them. But that’s another example of how hard OPM may come back and say, no, we’re going to switch things.


And the adviser can say, no, we’re going to put you back on the right path even if they throw you off. And it was that way, unfortunately. Fortunately, in this way, H.R. or OPM or whomever they were working with was wrong and they’re able to fix it. But if you don’t know how to fix it, you would just take it at face value, saying, oh, no, I owed thousands of dollars. How do I get out of this?


I can’t. Oh, well. And people do that all the time and they pay those thousands of dollars not knowing that they never needed to. So I’m sorry. I thought that was an excellent example of what you can get into here.


You know, with option C for family is great. That’s a great example. Another example of what people don’t realize they can get that refund. Yeah. And that can be huge. I mean, that’s an even if that’s a few thousand dollars, something is better than nothing. Yes. Is. All right. Let’s go on to the second question.


OK, we’re going to make these quick. Yeah, so can’t hold on, I can’t really see that. Are you seeing a little thing on that screen to. I am I don’t know why they in OK, we’re we’re just going to have to pretend it’s not there. OK, there we go. Yeah, OK. When I retired, retired the day after my sixtieth birthday with 20 years or do I have to finish out the month or pay period.


Hmm. OK. So you can retire. OK, you can retire the day after your sixtieth birthday with 20 years. Absolutely. Whether or not you should is another question. Bingo. OK, and it depends on if your seats are surfers, OK, if you are a Fer’s employee, you want to retire the last day of the month if possible, because that means your pension is going to begin accruing the first of the following month. So say I’m retiring January 30 first, then my pension begins accruing on February 1st.


However, if I retire January 15th, my pension doesn’t start accruing until February 1st. So I lose two weeks of either pay or pension accrual. OK, so people would say if your first day of the month is the best time to retire.


Yeah, if you’re looking at it as an example, you know, the end of the month, for example, my my birthday is February 4th.


So if I retired on February 5th, my pension doesn’t begin accruing until March 1st.


So I basically missed out on a full month’s pay, either as a federal employee or as a retiree. So, yeah, it depends if if I’m itching to get out at 60 and 20, which is the eligibility. Right. If I’m itching to get out and I’m financially OK, then fine, I’m going to get out because I can’t mentally stand it anymore. But if I want to be paid as much as possible, then I’m going to wait till the last day of the month.


I’m going to wait till the twenty eighth. Twenty nine. Yeah, and this is also something that people can coordinate with their annual leave because that gets paid out. So if you know that you’re not going to necessarily need the Annual leave or other expenses and you want to leave the day after your sixtieth birthday and you know, your birthday is on the or the second of the month, and you go on to go out on the on the third and do that and just use the Annual leave payout for that month, depending on how much you can get or save up for your Annual leave, because different agencies have different maxed amounts for for that accrual.


But you know that there’s different ways to get this figured out if you want to leave the day after your 16th birthday. I have to, absolutely, because I can’t stand it anymore.


And we get we get those people in the workshops that I can’t do this anymore. I want out. OK, I get it. I remember a scenario where I was working with an employee and he did not care that he was going to get a 30 perc ent decrease almost for an MRA+10 scenario because he wanted to go out as soon as he is Emori. He said, I just mentally cannot handle it anymore. I want out. I think he was like fifty six and some change.


And he said, That’s it, I’m done. I said, well, this is going to be your penalty. And he said, OK, well that’s all right.


You know, there are a whole bunch of different reasons why that may just have been the right decision for him. And it’s hard for us to judge that. Right.


So, yeah, OK, I was born in 62 and my city is nine of eighty eight. Does this mean I should have retired or could have retired in twenty eighteen. I was born I was born in sixty two and I said is eight. Well then if we do the math that’s 30 years. At that’s 30 years then, so I guess, you know, if they have 30 years, I guess it really depends on how many years they worked as a federal employee.


If they have the 30 years, then. Yeah, and and isn’t that interesting that let’s say let’s assume that they’ve had 30 years. Right. They have the 30 years and 30 years. They now in twenty 20 realize they could have retired two years ago.


And again, that’s another thing we see all the time, what I could have retired, what I’ve been working for. What.


Yeah. Yeah, so they were born in 62, they would be 58 this year, assuming that their birthday was prior to November, right. And so they would be 50, they would have the age requirement. They’ve obviously met the minimum retirement age because that is anywhere between fifty five and fifty seven. And for nineteen sixty two, definitely you’re over your MRI. And so you’re you’re age 50. You’ve met the age requirement. If you started in September of eighty eight, then obviously you have thirty years by twenty eighteen and so you’re the MRA with the years.


Absolutely. You can retire or could have retired in twenty eighteen. And this is just one of those scenarios where people don’t realize what they could do. With that, with their with their or her and what it’s like for a very good example of. You know, if someone is somebody who if they would have had the knowledge, yep, five years ago, would they still be in service? Right.


And when we say this is why we just urge people as as possible.


Yep. Does this does this mean I could have retired? Well, again, let’s look at this in a couple of different lights, could have eligibility wise. Yes. Could you have money wise? Hmm. Depends. Could you have family wise or health wise? I mean, there are a number of ways to look at this, that eligibility isn’t the only wise that we need to look at when and you or could you have retired?


There are a number of other factors as well. And again, you’re right. This is why you need to figure this out sooner rather than later. You need to be looking forward to and know that this is when I can retire rather than, you know, because what if let’s say two thousand at the same at the end of 2018, you think, oh, I can’t retire, but I really want to, I need to medically or whatever it is.


And you’re stressing about this and you don’t even know that you could have you can’t retire. Go ahead, do it. But you’re freaking out that you can’t.


So again that’s why we say go to Fednobabble.com, go to Fednobabble.com and sign up for the retirement report that Cassie will put together. But we will put you in touch with one of our trust, one of our advisors that we have on our trusted network. They’re going to reach out to you, get the information from you. Cassie is going to do the report, and then our advisor will walk you through the whole thing and show you, OK, this is when you can retire.


This is when you can’t on each of those wises.


I don’t know what other way to put that, but in each of those type of scenarios and I mean and it’s no cost, no obligation, no sales pitch. It’s just to give you information. You got to know about it. So please go do that.


Yep. And then outline exactly what you should or shouldn’t do like it. Could you have retired. Sure. But is that a good decision or not? You know, and they’re going to they’re going to tell you exactly why or why not and what other information you need to consider when looking at whatever situation or whatever questions you have for them. So, again, no cost or obligation. Don’t forget to like, share, subscribe. You know, send this to your friends and let them know that we’re here for you guys and we we just want to encourage you guys to do due diligence with your benefits and really make them the most advantageous for you.


Yeah, make them work for you. Do not do not just take the default the government gives you make them work for you. All right. Thank you for watching, everyone.


We appreciate it. And we will see you next time.

 

#17- FRA, LWOP, APWU

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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.

 

15

#15 – OPM’s Report, Wages, Designated Survivors

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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.

No. Right.

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.

Also, don’t forget to submit a question. Please be acetyl as possible so we can make sure that we understand it and interpret it correctly and get you the answer that you’re looking for.

So, yeah, and if you would please also share and subscribe and like and all that good stuff. Your friends and your co-workers need to know the same information as well.

Don’t don’t you be enlightened and have all this great information and then not share it at all. And then there in the dark. I’d hate to see that happen at all, but please go share and subscribe like hit the notifications button as well. And until next time, take care and go make it a good retirement.

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