FEGLI

31

#31 – Too Much $, FEGLI Basic, Balancing TSP

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Too much money, FEGLI, and balancing TSP on today is 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 Fenobabble, where Cassie displays are brilliant, and I tag along with her. Let’s go to a. I don’t know. Let’s go. Let’s go to question one.

All right. The first one, if you retire in the middle of the year and your salary. OK, so let me set this up. First off, they’re they’re talking about what people call Social Security supplement, which isn’t actually a thing. So we’re talking about special retirement supplement. OK, so that’s the context. So let me let me do this. What if you’re what if you retire in the middle of the year and your salary to that point goes over the earnings test total?

Will you receive the they put special retirement supplement here, which is actually are they put Social Security supplement, which is actually a special retirement supplement, or does your salary to that point eliminate you?

Because basically what it is with the earnings test, if you make more than at least this year, about nineteen thousand dollars and they start taking money away. So Cassie does that does their earnings for the first half of the year preclude them from receiving these special retirement supplement?

Here’s the thing.

You don’t you’re not yes or no. See, yes or no. That’s all I want to know. That’s it.

I know it’s not that.

OK, it’s not that easy, though. So, you know, their earnings, while they’re working and not receiving the special retirement supplement are not eligible to receive it because they don’t always receive the full amount or even a portion of it, depending on what that looks like and what their retirement. I mean, there’s a I’m back.

I know it’s confusing. This is a hard one, isn’t it? Just yes or no. Right.

OK, like I said, their income, while they’re working and not eligible for their special retirement supplement is not going to count for the earnings test. Right.

Hey, it’s well, they’re eligible and and collecting or supposed to be collecting the special retirement supplement.

That’s if they have any outside earnings. In addition to that. That and here’s the thing. They don’t even ask you until the next year what those earnings are so messed up.

And then, you know, I wouldn’t say lie to them, but you’re you’re going to receive that money and then the next year they’ll take it away if you’ve earned too much. So essentially, that’s how that works or reduce your benefit or whatever that that looks like for your income. But the income that you had while you were working, when you were not eligible to receive that benefit does not count towards the earning test.

OK, good that yeah, that is the answer. However, you’re right, there’s more involved. And I’m going to add one more wrench in there. And I think this is where you didn’t want to add the wrench, but I’m going to do it just for the fun of it. Oh, boy.

So during the show, someone retires. Let’s say they retire at the end of June. Right. So they have another agenda. Is it July is halfway during the year? I don’t know. I don’t remember. Anyways, it’s September, October, November, December. It is. Joy.

OK, anytime between May and August. Right. So let’s say you retire in the middle of the year, right. Then the earnings test could really technically start at that point if you earn more than nineteen thousand dollars after and that half, but you’re in the interim pension period and you are going there.

I am sorry. I shouldn’t. I know. So I look at the supplement and it isn’t Social Security supplement, but it’s the special retirement supplement. You don’t get it anyways because during the interim time you’re not going to be receiving it. It’s not until they finally they finalized your pension, which is about a year later. So the middle of the next year you’ll finally get back what you what they what you deserve. And by that time they may see, oh, you earn too much.

And so they. May not give it to you after all. So did I just confuse the heck out of everyone there? But yes, you’re right. Oh, my goodness, it is not a simple answer.

They may not give it to you on your pension from that point, but they might pay for the back pay. So then you still have to you still have to claim those earnings that they’ve paid you for the back pay on that year’s taxes that you got paid. Right.

So if they paid you a twenty twenty two because you separate the middle of twenty, twenty one and it’s not finalized, it’s twenty, twenty two. And then they determine, oh you earn too much so you’re not eligible for it from now on. But then you were last year because we owe you it.

Yeah. It’s and then does that different tax bracket because you were too close to the edge of the tax bracket and then of course you are you paying more in taxes than you should have been. This is why when people say, hey, Kevin, I chose to retire this day. Why? Because it sounds like a good day.

My mind goes, wow, I’m like, no, because I don’t want you to be put your put. It is possible to put yourself in situations you there’s no way to crawl out of and you don’t even know. And it could last two years after you retire and you’re still free and feeling the effects of not choosing when you should retire strategically. Oh my goodness. Right. Blown like, oh I’m going to retire at sixty one of eleven months.

Well wait one more month. Right.

If you have over twenty years service and get an extra 10 percent in your pension for the rest of your life, things can make a huge difference. Huge. Yes. Yes. So people really have to just OK, we’re getting out of the weeds, but you have to plan your retirement.

That’s the gist of it. And you’ve got to look at all of these different factors. You know, get in touch with somebody who has the answers for you. If they can’t tell you, hey, the Social Security supplement is not the special retirement supplement, you need to get a hold of us. Yep. So that way you can talk to somebody in our network of advisors who can distill that down for you and explain how to operate that and coordinate it with the rest of everything else.

Right. Oh my goodness. Yeah, my head explodes during that time and it can be again, in context of someone’s situation, it can simply be explained. I mean, it’s not difficult to explain it when. OK, what what’s your situation? How does that work? OK, there here is how it would work for you if you went down that path. If you went down this other path, you could actually save a lot of money, like thousands, even tens of thousands of dollars.

Going down this other path you could keep for yourself.

Which do you want, huh? No brainer, but no brainer.

That reminds me of this case I had the other night. I stayed up and drank coffee and everything to make sure that I was had this case to the adviser because there was I had to break it down into different options of, oh, good. That’s the way the employee had this question. And it was regarding military service. And then he wanted to separate this day. And so I had to really explain out, like what would happen if he if or when he bought back his military service for this option.

But then he wants to go out this day. This is what this would happen. And so we had to go through those different scenarios. But that’s what we do, is we make sure that people are informed about those situations and see, OK, well, if you go on this date, this is what this happens here. But then we’ve got to take into consideration these other things. Now, if you go out on this date, is that going to be better for you?

Because now we’re looking at these other different considerations and it might be more beneficial for you to do, because now that opens up maybe different benefits that you’re eligible because of, you know, even if you’ve been in a federal program for longer or what have you.

So. Right.

So I want to point something out that I want to point something out to everyone. Please understand that as when we when we say that you can get one of these reports from an Cassie creates these reports. Right. And we we basically have one of our one of the advisors and a trusted network reach out to you, gather your information. Cassie does the reports. This is the kind of thing you can expect. She stays up late at night drinking coffee just to make it work and look at all the different situations and then hands that back to the advisor.

Then the advisor talks to you. And again, all of this is no cost or obligation, no sales pitch, all of this. And and that’s the that’s. The extent that we go to make sure that federal employees have the information that we need and it’s no joke, this is it, it makes a huge difference in understanding it and not understanding it. Woops, I just hit my microphone. Sorry, but that’s so. Thank you, Cassie.

Thank you for drinking all that coffee. OK. Next question. Let’s look at this. So this person is a post office employee. I dropped off several years ago when I picked up private life insurance. OK, good. I’m a I’m a post office employee. It looks like I should have kept the basic.

Can I can I get it in? And I guess I should have gone in and capitalize that basic because that is a that is that is one of the options of the basic option. And and Cassie, why should why should that postal employee, why should they not have dropped the basic because in retirement.

Well, for one, postal employees get basic for free. That’s it.

Bingo. That’s exactly. It’s free. Why did you drop it. Don’t do that.

Postal employees only go to no one else.

Yeah, it’s you know, even a retirement after age sixty five. If you take a reduction it could also be free. Right. You have to take a reduction but then you have free life insurance in place. Or is that option. And if you already have no well option eight also reduces that one is also free but that one automatically reduces. OK, I’m OK and that one’s not free. I take that back only the basic. Is there a quote unquote free option.

Most employees pay for it while they’re in service. Postal employees get basic for free. If they retire, then they pay for it between the years of their retirement in sixty five, if they choose to reduce and have the seventy five percent reduction because there are different options for reducing it.

But I would say if you’re a postal employee, free insurance is free insurance man.

I’m not going to recommend it because I’m not a financial adviser and I can’t tell you what to do.

But it’s free insurance.

It’s free. Right. But can they get back in? Can they get back in now?

Oh, not without a qualifying life event. So go get married again.

Maybe. I know polygamy. It’s a thing now or not. I don’t know.

I’m not going to go there.

OK, so they need qualifying life event or adopt a child, whatever. There you go. Right. That works. There you go. So, yeah.

Can you get back. It’s not an easy thing to do. Yeah. You have to have the qualifying like that. OK, that’s question to question three.

Are there straight. OK, this is this is a complicated one and we have six minutes. Are there strategies that can be used to balance TSP investments as it relates to the suitability of investing in ROTH funds versus standard or traditional TSP one of the most difficult aspects in trying to predict future tax brackets in retirement. So they’re trying to figure out basically are the strategies to understand when I should put money in my ROTH and when I should put money into my traditional, because trying to understand the tax brackets in the future is a crystal ball and and it’s difficult to understand.

Well, it’s not a crystal ball as of today, because we know we’ve been told by our new president that taxes are going to go up. So we know that’s going to happen. But at the same time, here’s the thing. Taxes are always going up.

Yeah, yeah, yeah. I hate to say it.

If they don’t if they’re not going to now they’re going to five years from now or ten years from now like. Right. They’re going to continue to increase I’m sorry. Taxes, death and taxes are one of those things that are guaranteed and increasing taxes unfortunately is also guaranteed. Right. Right. But I think this actually needs to be looked at, as are there strategies that can be used to balance the TSP investments? Yes. Yeah, there are other contribution strategies.

There are tax strategies. There is a distribution strategy. Right. Where do I take these different buckets? The money do I pull from my ROTH, I pull from my traditional what does that look like? Is it just a tarp that you’re dealing with?

Right, and that’s why we’ve really got to talk to somebody who knows our specific situation and what our goals and priorities are for retirement, because until they know that, they can’t answer this question for you. I mean, other than saying, yes, there are strategies.

Right. That’s all that’s all we can really say today is yes, there are. But what’s right for you? There are. Right, exactly.

Yeah. No clue. No clue. Everyone’s a little bit different.

I like I are there, but I have no doubt.

Yeah, well it’s that well we just kind of let that episode off on a downer then are there. Yes. OK, next. Yeah that’s it. Go figure it out. Get it. Really. Yes, yes.

Yes. Go figure it out. Go do that. Go to that Fednobabble.com website and and sign up and have have Cassie create one of these reports for you. And then when you talk with an advisor, again, even the strategy piece of this, an advisor will talk to you about and kind of walk you through no cost, no obligation, no sales pitch still and they’ll walk you through. Where should you put your money. CFC’s and I ROTH traditional here.

You put it here, here, here, go. There’s no reason not to. Oh, my goodness. Then there’s all the reason to do it. If you can grow. One of the things I say in my workshop as I talk about there are two main reasons are two main goals for the accumulation phase or the phase that employees are in putting money in. Right. One of those goals is to grow your money as much as possible.

If you if you’re not doing that, why are you even using the TSP? I mean, there’s there’s no reason you might as well take it out and put it in a savings account if you’re not trying to grow your TSP. And that’s what they can help you with is if you don’t know if let me say this, if any federal employee doesn’t feel good about where they’re headed with their TSP, not just I feel OK. No, if you don’t feel good and confident about where you’re headed about in the TSP, get Cassie’s report.

You need it. I want every federal employee to feel good, not just yeah, I feel OK. I think I’m doing the right thing. That’s not an acceptable answer. It should be. Yes, I know where I’m going. I’m headed there and I’m excited to do that. That’s the feeling every federal employee should have about their TSP.

I think that. People just, oh, the the government’s going to take care of me, and these are the benefits that I have not happening, and they don’t do the proper planning, right. Retirement should not be something that just happens in life that you’re just going to figure out when you get there. Retirement should be a planned process. It should be something that OK, this is what I’m going and you should know what you’re going to have and what what you’re going to do when you get there.

Right. This this should be something that over time you take a look at and OK, at retirement, I will have a million dollars. And this is the amount of income that I’m going to have from that million dollars. And this is what I’m going to do with that. Right. And and this is what I’m going to have for Social Security. Like, it should be something that I mean, there are exceptions. Yes. Sometimes things happen and we have to do, you know, and figure it out just like anything.

But it should be something that OK, this is a planned point in my life. This is what I’m going to do and this is what I’m going to do to get there. Yeah, right. To make that happen for myself. And you can’t do that, though, until you know where you’re starting from. You know you can’t. Oh, well, I’m going to contribute this amount. Well, why why are you going to increase your chance?

Why are you going to decrease the amount that you put in your TSP and why are you going to choose those different funds?

You should know exactly why every single one of those moves you make, not just arbitrarily make them. Yeah, OK. So, OK, we’re out of time.

What are your numbers? There you go. There you go. All right. Thanks for watching, everyone. Take care.

And we’ll talk to 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.

 

30

#30 – Penalties, Whole Life, Special Provision

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Penalties, whole life, and special provision 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. Hello, hello, Kevin, how are you? Hello, fabulous, how are you, Cassie? I’m good. OK, so what’s the first question today? Here we go.

Oh, did you see that? If you wait to take Medicare Part B when you retire, there is a penalty.

So I just want to point out. What was that?

Oh, I said, do you remember that show we did when we talked about Medicare Part B? Yep, yep, yep.

Um, first off, I would just want to say, when they say did you say it’s because I just just for people who are new watching, we take these from workshops that I do from Fed Pilot. And so when you say and when it says, did you say, I’m literally taking the questions that they ask during the webinar and just plopping them in and I’m really not editing them at all. So that’s that’s why it’s kind of worded that way.

But yeah, part B, I’m looking at the question here. Is there a penalty for Part B when you retire? So there is a there’s an enrollment period and the enrollment period is at seven or eight months. So I think it’s seven months around the the time that you turn. Sixty five, is that right?

So it it is all the phone. It is three months, three months out legacy.

Look in the camera here, three months before the month, right out of your birthday. It is the month of your birthday and then three months after your birthday. So there’s a seven month period at age sixty five.

Right.

However, for employees who have FEHB and continue working right, they have a special enrollment period at retirement if they separate after age sixty five as well, or part B because you don’t need it while you’re still working. If you have employer sponsored coverage, you don’t need it. If you’re not working, if you have employer sponsored coverage.

But essentially if you’re an employee, you don’t have to sign up and you don’t get that special enrollment period until after you retire. And then it’s an eight month enrollment period once you separate it from serviceeight-month.

But so I want to add one more in there as well, because there’s really when this is all around the enrollment period, is there a penalty? Well, it depends. If you get in the enrollment period and there are three way, three different enrollment periods and enrollment period, no one is around your sixty fifth birthday, like you said. No to that. Right. If you if you’ve already retired. Right, then there’s then there’s also if you work past sixty five, it’s eight months after you retire then.

Yeah there is also if you are working they’ll say, let’s say that you retire but you’re married to another federal employee and they’re, and your spouse is working and you’re covered under that. You don’t have to take part B if you’re under FEHB that way. And then and then until your spouse is off, until your spouse retires, because you’re covered by his plan as well.

Even as a federal employee, a retired federal employee, you still have FEHB or. That’s true.

Some do, but it’s not considered an employer sponsored plan at that point when you retire. But if you’re on your spouse’s, it is then it is.

It is because the government still covers a portion of the premium even in retirement.

Right. So it’s still an employer sponsored program. So even if they decide, you know what, I have FEHB whether they’re retired or employed and they decide not to sign up for Medicare at their sixty fifth birthday or upon retirement, if they retire after age sixty five, then the. There’s not enough they can avoid the penalty by filling out special documents, like it’s really hard to explain this without going into a specific person’s scenario.

Sure. Because there are a lot of different rules of Medicare, just like there are a lot of different rules in the federal program.

But the Part B enrollment penalty, if you don’t fill out the correct paperwork, when you do try and get into Part B and you’re after and you’re not signing up in an election period, then there’s A it can be up to 10 percent of each 12 month period. You could have been enrolled in part B but didn’t sign up.

Right.

But. That goes back to which enrollment period. And what age and there’s a lot of different factors, so I would highly recommend going in and talking to a Medicare specialist in your area if you don’t have one. Please reach out to us, because I do have connections to Medicare specialists for people and folks all over the country. So definitely want to make sure that we understand this so that we were not subject to the penalty, because if you don’t fill out the form for the employer sponsored program, when you do decide to enroll and it’s not in a in a enrollment period like a special enrollment period or initial enrollment period, if you’re just trying to say, like during the annual enrollment period or open enrollment season, then we need to there’s some extra steps to take to help with that process.

And it’s really confusing.

It is. I’ll just add that just to clarify that 10 percent per 12 month period, basically per year that you’re out is for the rest of your life. It’s not just, oh, there’s a penalty. It’s it’s every month for the rest of your life. That’s huge.

Yeah, huge. Very much so. And, you know, I, I actually did Medicare for a little while and as a Medicare insurance representative, and it was crazy to me that people didn’t think they needed Medicare. Right.

Even with right. Until you get older and you need it and then late with that.

It would be if we didn’t fill out the right forms, they didn’t understand. They just thought, oh, well, I’ll have a penalty. And so I would never sign up. Right. And it wasn’t until they got in contact with me and the other gal where they realized, oh, I could have signed up five years ago and saved myself so much more money because there is a way to avoid the penalty if I’m in the FEHB program.

Right.

But they didn’t know that. So as a federal employee, if you have FEHB, then you can avoid that penalty. You just got to take the right steps to do it.

Yeah. And I’ll add one more thing to that, because you brought up a really good point. A lot of people come to the workshops that I hold and they say, you know what, I don’t need Medicare. I’ve got FEHB or flipped. They say I’m only going to do Medicare. I don’t need FEHB anymore. And then what happens is, is if they go through that, then they get to a certain point and they realize, actually, you know what, I may want to do that.

And if you drop FEHB, you never get it back. So you don’t even have a choice. So it’s you federal employees have to know this now. They have to learn this now, way before they retire and put the plans in place so that they can avoid all the penalties, so they can avoid not not being able to get back into FEHB anymore. And and we’re only talking a small subset right now of their benefits that they get this that contract goes with everything.

They’ve got to know all of this beforehand before they get themselves into so many jams that they didn’t even know were coming.

Yeah, people think, oh, well, I’ll just suspend FEHB. Well, you can only do that for certain Medicare programs as well. So that’s a very, very remote.

Do you do due diligence to make sure that you are taking the correct steps for your plan? Right. And that’s putting those different pieces together. So we’re getting low on time.

I just let’s move on the longer we can talk about that topic.

Now, this this question. I don’t know the answer, do I?

I’m I’m good with federal benefits, but with outside private benefits, personally, I’m not as good at. So this is this is for you, Cassie. What’s the difference between whole life and universal life policies? First off, I want to say none of that is in the family. None of that is anything that the government will give you. So this is completely private a question about private life insurance and not Feigley, but federal employees wonder about this all the time.

So what do you think?

Yeah, especially when kids are parents like me. So, yeah, I will dabble a little bit into this.

But again, we could spend twenty minutes talking about this because there are several different types of each one of these plans. Right. So whole life is what. It’s called traditional life insurance. It’s a plan, it’s a set it and forget it kind of policy where you have fifty thousand dollars worth of coverage or one hundred thousand or more, whatever that coverage looks like, and you pay a premium and that’s what it is. Now, there are different features and writers that you can add to a whole life policy that may be beneficial and that can vary from company to company.

A universal life is another type of whole life insurance, but it’s not traditional because there are different options that you can choose on universal life insurance and there are different ways that it works. So there’s regular universal life insurance, which has two different options, and that will depend on the kind of premium options that you have.

And then there’s indexed universal life policies, which are they are kind of like, how do I there are hybrid between regular universal life and variable universal life policies because there’s variable universal life policies, too. And so there are a lot of different types of life insurance even between these two, because there’s a going back to whole life now that I think about it. There’s there’s other life insurance, all life type policies that may work for somebody.

And so say this is a question. We have to talk to somebody who is working with them to determine what is the best plan for them.

So what I hear from that, because I’m no expert in this in this section right here, it’s stupid, complicated, because as I listen to you, I thought, wow, OK, well, there’s that and there’s that. So really, there there are two types of life insurance. There’s temporary and permanent, if you want to look at it that way. And whole life is a subset of permanent and universal. Life is a subset of whole life.

And there are different and and it just goes on and on and on. And it’s and I think that’s where people get confused is like, OK, I hear all these things. I don’t know what they are and trying to explain them without any context.

It is is maddening almost.

And so really, someone has to be able to sit down and say, OK, well, I mean and really it’s for for example, for me, I would have to go in and talk to someone and say, all right, let’s talk life insurance, they say. And they would have to say, OK, what is your situation? That way I can narrow it down and let’s talk about how this affects you specifically. Then around that context, I would understand it, but kind of kind of as an amorphous thing out there, it’s really difficult to understand, really difficult.

And I’ll tell you what, as a licensed insurance agent, when somebody would come to me and say, tell me about life insurance, it would be like, OK, what is your situation? You tell me about your situation so I can tell you about the plans that are going to work for you, because I can tell you about all of this different type of life insurance plans. I can go into the different strategies and all of these different things that I can make myself look really smart.

But none of that matters if the yen or the life insurance that we’re talking about, you’re not going to qualify for you just wasted my time and your time.

Right? Right. So employees, if you’re looking into different types of life insurance and go talk to somebody who is going to ask you questions about yourself. Yes.

Your debt, your income, your personal, you know, situation. What does that look like for you? You know, do you have kids? Are you married? Are you, you know, a single with a dog? What does that look like for you? Because all of those different factors are going to put into place what that recommendation should be or could be for you. So somebody is not asking you those questions. Find another life insurance representative, because you’ve got to go into those numbers in those situations before they can make any sort of recommendation.

And I think that’s that’s good advice for every benefit the federal employees get. You can’t look at it and just say what is right for me. No, you you even your pension, you have to dive in and understand what your situation is before any recommendations could be made. You just have to. That’s one thing I love about our. Our trusted advisers and our network is they they’re able to add the ask the questions that need to be asked first.

They’re going to find out where you’re at. Right. They’re going to go through that process and meet with you and get the benefits report to you. And then they’re probably going to talk into more of those situational questions that are going to be, you know, if you wanted to learn more than they’re going to be able to answer those questions for you because they’re finding out those personal or personal answers.

So that’s right. OK, we’re almost out of time.

OK, this one is an easy one. This is this pretty quick, right?

So is the special offers for. Right.

Special provision. So I think I think what they’re asking is in in in the workshop, we cover special provision firms pension calculation. Right. Who gets the special provision, first calculation and its special provision employees, which include on on a general level, law enforcement, air traffic controllers and firefighters, federal firefighters and Customs and Border Protection. Right. Right. So, yes, right.

So there is CBP, some of them as well, because. But they weren’t. But now they are considered special provision. There’s a whole bunch of there’s a whole bunch of stuff in that piece right there. But overall, law enforcement, air traffic controllers and firefighters is basically what we’re talking about. And and in our workshops, people will say, oh, wait, I want to be a special provision. Then how do you know what may already be a special provision and not even know it?

No. You know, special provision.

Yes.

You don’t really know because there is more there are different rules. You are special proration employees, whereas they like they can’t be hired after a certain age. They can only work until a certain age or for a certain number of years, depending on what hired. Of course, there’s a whole lot of that that we can get into as far as exceptions, because those people are not those people, but those employees.

Some special provisions as well.

They have so many different. The government pull strings more for that group.

Yep, there are there are some exceptions, some things that special provision employees get that no one else gets. But at the same time, there are certain restrictions on special provision employees that aren’t for regular furze employees as well. So it’s you’re right, it’s all over the place. So if there are any special provision employees listening, watching. Oh, my goodness. There if you don’t know the rules and a lot of people don’t know him, a lot of people especially, are they just like, oh yeah, you’re an exception.

This is how it works for you. And they don’t understand the the impact on the back end. So you’ve got to be able to talk to someone who understands that for sure.

Yeah, I have to get a report. You guys, we’re going to help you with all of those exceptions, because typically, if there’s an exception, then there’s an exception to the exception. We’re fighting it. Well, speaking give that.

Yeah, we’re giving all that information back to the advisers in our trusted network, and we’re going to give them all of that information. So that way they can come to you and explain it to you, the employee, and be able to help help you and guide you through what that looks like. So, again, we’re out of time.

Kevin hit. We want the max again. All right. Yes. All right. Thanks, Cassie. Take care, everyone. Take your 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.

 

29

#29 – Early Bird, Price Hikes, and Allocations

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EarlyBird, price hikes, and allocations 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 once again. Let’s hit this right off the bat. Cassie this I was thinking about this question earlier and and I’ve got some answers to this, but do you recommend taking Social Security early?

I don’t recommend anything because I’m not the financial adviser. That’s about it. We’re not going to give me.

That works, right?

Yeah, that’s right. And so it depends. There’s several factors that I think people need to take into consideration, because this answer can vary for everybody.

Right. The the guy who has cancer at retirement at 62 or finds out that he has cancer shortly after retirement is going to want to take that Social Security earlier than somebody who, you know, hey, I’m going to live a long time.

I’m still working at 70 and I’m not going to take it until my actual later.

Retired later age at 70, which is the highest age that you can collect Social Security.

So I think it really it depends on, you know, not just health, but what is your financial situation look like? Where are the different buckets of money that you have coming in? Do you have to draw Social Security early just because you’ve got to make that income need? Yeah, I don’t know.

So I got yeah. You know, I was going to answer. I was going to answer. How do you recommend taking Social Security early? I was going to say no. Do I recommend it taking late. No jury recommended taking it at FERS. No, I don’t. I mean. Oh my goodness. One of the one of the advisers that I trusted network I was talking to recently, and he said there are five hundred over five hundred and fifty different strategies for Social Security.

Wow. And I’ve been saying and it’s and it’s everyone’s job to figure out which is right for them out of the five hundred and fifty eight. So you’re right. It is. I mean, it’s kind of like I was just thinking about someone saying, OK, is our solar system on the right side or the left side of the of of our galaxy?

That’s a really good question.

Well, you know, it depends on which perception you’re at or, you know, angle and what you see, what you what you’re looking at, which side you’re on. Right. It’s just like, what side is your driveway on? Well, what side of the road are you going to be coming down? Right.

Right. Yeah, exactly right.

It’s not quite that simple for Social Security, but it is for our guys who are working or now we’re helping employees figure this out. Right. And putting all of those different pieces of the puzzle together. So that way they can determine not if it’s recommended to take it early, but what age is it recommended to take it when? And I think that’s the bigger question that we need to take that employees or retirees need to take a look at is what what is that break even point in my retirement that it makes sense for me.

And if we knew if we knew when we were going to die, it would make this whole thing a lot easier.

Well, maybe our spouse already has a timeline for us.

But besides that, I know a little worried there. But besides that, you don’t know.

And so I was talking with one of the again, one of the advisors and a trusted network this week. And we’re doing a workshop together. And and I said, all right, you’re going to do you’re going to do the chat. I’m going to do the presenting on the front end. You do the chat in the background, will bring it in and be talking as well. But while I’m talking, you do the chat and he goes, so I’m answering questions.

I said, yeah, and most of them will be it depends because people are asking really specific questions like this that you don’t know until you look at someone’s situation, someone’s family life, someone’s goals, someone’s financial health, inside and outside the government.

Someone’s what you’re predisposed to all these different things. And then. You can make a good choice at that point, but not until then, so right. OK, that’s number one.

Number two, we receive a lot of emails regarding Broza, we being so this is the federal employee talking. Right?

We receive a lot of e-mails regarding somebody from HR then. Right?

And receive a lot of emails.

Let me let me see. I haven’t read this in a book. So we receive a lot of emails regarding Fedeli insurance costing a lot more than private insurance. But as we age, I don’t know of anyone who has done this. Is it really worth it on this?

So I saw this actually as a federal employee receiving, you know, just random emails that, hey, you should buy our insurance because it’s too expensive. That’s kind of how I read it.

Yes. Yes. Now that I read it all in context, then I it takes me back to the time when I was helping federal employees with their planning. I had this one gentleman in particular, which we were looking at, you know, getting that outside private coverage outside of vaguely. And he had received an email around the same time that we were talking about a similar marketing email regarding targeting Feigley and the fact that it progressively gets older as you age.

And they were trying to ultimately to sell him into a private plan.

You mean and more expensive as you age. Right. Is that what you meant, older as you age? I’m like, well, yeah, I mean, that’s more expensive. I just want to make sure. Yeah, that’s what happens. Cassie. Yeah. Sorry. Go ahead. Go ahead.

Yeah. That’s what I get for getting not enough sleep but OK. So yes it’s cost for my point to that was I was like well yeah. Didn’t you look at the report. I mean I showed you in the report that costs and so we were able to kind of branch out from there and, you know, have that deeper dive into that conversation because he was like, oh, well, you know, this is what I received. And I’m like he’s like, isn’t that kind of the same thing that you’re doing?

And I was like, well, somewhat. But they are specifically just looking at one benefit that you are getting. We’re looking at the whole piece of the pie and kind of what that looks like, making sure that we’re we’re connecting all those dots and that we’re coordinating that care together. And I think that’s why, you know, I’m so passionate about this, is because it really irks me when advisers are just after that one quick sale.

And that’s one thing I love about our trusted advisers and our network is they are doing the full service planning. We’re making sure that they’re not after that quick sale. And because you can’t just look at your life insurance, right? Yes. FEGLI is your is going to cost more as you get older. It’s what we call on the private part, private side as a five year term policy, because as you get older every five years, that premium increases and in fact, it almost doubles at 55 and age 60.

And depending on the options that you have chosen or what coverage you’ve elected for family, it can get really expensive.

Right. And a lot of times, if they have more coverage of FEGLI Insurance, by the time their premiums stop increasing at age 80, they’re paid more into the policy, into the family program. Then they have the actual coverage that they have. That’s right. Sometimes that happens sooner.

Sometimes it happens later. Again, it depends on some of these income and and all of those different factors to that specific person. But I really do feel like the earlier somebody can look into this and look into private insurance because you’re not going to know your own numbers until you actually branch out.

Right. And one of the things that I say in the book workshop was that is that I know that was a lot.

Sorry. I know you’re spot on, though, really? Because one of the things that I say in the workshop is, is it’s sort of some some people think, OK, there’s the government insurance, which is FEGLI, and then there’s private life insurance. But they don’t realize is that FEGLI is private life insurance in a government wrapper. Right. And in fact, so it’s MetLife, just one plan of MetLife where MetLife has hundreds of solutions. There’s the government is only giving them one solution of MetLife where they could have hundreds.

And it’s not only I don’t want to say it’s not any cheaper because it it it might be, but it’s a lot of times it’s really not so. But it may be the only thing that they can get. So I’m not saying that it’s good or bad. We just have to be educated on what actually is FEGLI. When do the prices go up? Look at it, like you said, in a holistic approach rather than just life insurance.

No. Well, let’s talk about life insurance and also long term care and also TSP and also your pension and your security in light of all of that and then make a decision. You can’t just say, oh, I want to go get it. I mean, you can, but it’s not typically the best when it’s not.

In fact, I had another client who we were looking at replacing their FEGLI coverage, but going through the underwriting process, we found out he was not insurable.

So thankfully, don’t cancel anything. We didn’t change anything with FEGLI and he had some really strong coverage with the options that he had chosen. So I said, hey, look, you need to keep this because you’re already there. They don’t do a medical examination unless you try and convert it over to permanent coverage. I said, but right now, this is your best option, you know, because the just the way that we were looking at the coverage he needed at the time and everything else, it just wasn’t going to be worth it for him.

Sure. Yep.

So. Sometimes those are just what what has to be right. Right. And that’s why we always say if you are looking at private insurance, too, don’t cancel your coverage.

Yes, please.

You don’t know what those different plans are going to entail, what those underwriters are going to say. And, you know, maybe one company isn’t going to be the right one. Maybe you have to look at a couple of different companies. But in the meantime, you don’t want to cancel your coverage or decrease your coverage. Right.

And not when you don’t have the option to increase it or get more coverage later. Because if you do that, you could ultimately, you know, not have that coverage in place when you need it most or when your spouse needs it most or whoever your beneficiary is, because it you know, you couldn’t find coverage elsewhere. So you’ve got to be careful with with the insurance on. If you are looking elsewhere, you know, keep what you have until you have that policy in place and you’ve paid for it and you’ve signed on the dotted line.

Yep.

One quick story. I had someone who who was doing who said, OK, I’m going to go get coverage. I mean, private insurance, private life insurance.

And she so she came to our class, learned about and said, well, I’m going to I’m going to go check it out. She checked it out. I said, OK, this is best for me. I’m going to go do this.

The day before she was going to go sign, she had a little bit of a heart attack, not a massive heart attack, but a little heart attack. It precluded her from getting any more life insurance. And now the only thing she could have had was family and she did not cancel it. Thankfully, she kept it. And so she she was still OK. She was going to she’s going to be paying more, but she waited just one day too long.

Had she gone the day before, she would have been fine, and that’s why we say, go figure this out now, do not wait every I mean, I don’t care for 20 years from retirement. Figure this stuff out now. So, OK, if SRS to this podcast’s.

Yeah. Go and and look into this and get a hold of somebody. If you don’t have a financial advisor or insurance professional that understands the federal benefit, please let us know. Sign up on our contact. We’ll be able to get you in touch with somebody in our trusted network who can help you get that information.

It’s free to know right now. Sales pitch. Exactly. It’s simply just you your numbers, because you can’t do any sort of planning or any sort of further action until you know where you stand right now with your benefits. Yes. And they have you and they’ve agreed to do two free consultations, getting your your numbers and making sure that you understand what you have generally before you can do any of the other retirement planning.

So, you know, definitely worth it to look into.

That’s what I’m going to say. Absolutely. Yes. Yes, yes, we do. We do hundreds of them every month. And so anyway. Well, I’ll just stop there. OK, next question.

Next question. Are there any settings on TSP allocation now?

Yes, but depending on what he obviously this is a very vague question, but I thought this would be a good opportunity to just quickly talk about what are the settings and what kind of what kind of things can they set in their TSP.

You want to cover some of that? So there’s a lot of things that they can do within their TSP that ultimately the employees in control of that, right. So initially when somebody signs up, then the TSP does have a certain allocation and contribution that they’ve set up. But it depends on when you were hired. Right.

That will depend on what they automatically put in place for you if you haven’t done any further, anything further with your TSP. Right. So I can’t tell you the answer is yes. They have settings to automatically do allocations to the TSP. But what those settings are change every few years. And so I don’t know what his set up for you.

That’s what I can say. But take ownership of your TSP, please take a hold of that. Look into it. And and you know, there are certain contributions that you I feel that you should be doing. But again, I’m not a professional. I can’t tell you what you I can’t recommend what to do to you or in your TSP plan and for one key, but the government matches five percent and free money is free money.

So I would take that if you can take it. Yeah.

You know, Cassie, I think correct me if I’m wrong on this, but I think that there are three different allocations that can be made and we can call in allocations is kind of a general word. No, the first one is how much money do you put in? How much are you allocating to the TSP? The second one is how much do you allocate to the five funds, the GFC, S.A. and then the next one is how much do you allocate to ROTH versus traditional?

I know and it’s odd because when I do the workshops, I get questions like so I can add to the ROTH for my right is is it in there? Can I go ahead and do that. I’m like, yeah, it’s been there all along. Maybe you just haven’t seen it. But it’s, it’s there, it’s right in front of you and you haven’t seen it. So I think those are probably the three, you know, if we call it allocations that most people would be talking about.

Yeah.

I was going to ask you if you could actually elaborate a little bit more on that, because I remember when the first workshop that I attended that you were hosting live. Yeah, I had brought my husband to. Yep. And I love him.

And he had taken some advice, though, from his uncle, who was XRX employee, and he was first and his uncle told him, be in the G fund.

That’s the safest thing. Right. And you were trying to guide anybody to anything. You were just simply giving them the information about the TSP. And he we do this thing in the class, in any class that we take together, we make notes to each other. And he was like, what? Questionmark.

What do you mean that the the, you know, C and S fund were like the highest over the G fund for earning just like I don’t know how many years. Like, yeah, they had some really bad years, but for the most part, like he was just like mind blown, like I need to do something different because I’m younger. I have more years in service like all of this difference.

And so finally he let me take it over for a month or so.

But it was just like he didn’t understand what it was about the TSP, and therefore he just went for the safe bet. He took that water cooler talk and he just ran with it. Right. He didn’t it wasn’t until he was actually informed that he can make better decisions for himself. Right. Which I think that’s what people need to do.

Yeah. Which is why we do this so everyone can be informed and do it. OK, I hate to say, but we’re out of time. I’d say that’s alright. Five, four, three, two, one. Thanks Cassie. Talk to everyone next time. Hope you gained a lot in this Cassie next time. All right.

Well we’re getting there right.

Maybe 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.