#33 – HR 2478, Spousal SS, Equal Funds

HR 2478, spousal Social Security, and equal funds 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. Good to have you here, LEO Cassie. Hello, sir. Good to be here. Yes.

Let’s jump into some questions. Question number one is if HR 2478, which is a House bill all about buying time back takes effect after you retire. Can you still buy back temp time? Well, Cassie explain to us what just the basics of temp time and what you can and can’t buy back right now. So currently, his employees and that’s what this bill specifically pertains to, is for his employees and they anything before 1/1/1989, any non-deduction service, meaning temporary service, seasonal intern service, as a student or what have you, when you worked for the federal government and did not contribute to the first program, then you’re eligible to make a deposit for that service.

So that way it’s creditable under your retirement for eligibility and amputating your pension. But any service after one, whatever, nineteen eighty nine for those different pieces, of course, there’s exceptions to every rule, but for the most part they’re not able to make a deposit for that service and have it be creditable under their retirement. So this bill is going to allow folks in the first program to make a deposit for that service from 1/1/89 and beyond to to have it be creditable under the first eligibility and and pension computation.

Right.

And there are so many people looking forward to that happening. So many people look saying, oh, I hope it happens, I hope.

But they’ve been hoping for that for years now.

If this has been up, you know what, it makes sense. I’m thinking, you know what? Just do it. It makes sense. If they if they want to buy their time back, then just do it. Why are we. I don’t know. That’s me. Why are we holding out? But I don’t know all the ins and outs of why and why not so sure.

And right now, the only employees and people who have separated from service but not retired are the ones eligible to even make a deposit for that Non-deduction service. Prior to that time, people that have retired don’t have that option. Right, because OPM has already given them that option. Once they’ve turned in that retirement application, then they automatically give an employee the opportunity to make a deposit or redeposit for that service. If they see that none has been made, whether they make a deposit or not is up to the employee, obviously.

But if they say, hey, no thanks, then that’s it. They get to separate or retire, rather, and that time is not counted or eligibility or computation. And so then OPM can do their calculations on that without that service being included. So I don’t really expect that to change even if they do pass this bill.

Yeah.

For retirees now, who knows? It’s kind of like the SRS bill that’s been floating around the House floor for a number of years. You know, that special retirement supplement on whether or not they’re going to get rid of that? You know, are they going to get rid of it from everybody who has who is already receiving that benefit? Probably not, right, because they’re already receiving that benefit and maybe they would have made different choices about retiring if they weren’t going to be receiving that benefit.

And so I really don’t think that they would change somebody’s circumstances in retirement, whether it’s for the better or for worse. Right. I don’t even know if they’ll change it for a regular for his employees. They might just say, hey, this is only for the new first employees under the first Rayburn’s free program. I mean, until it’s in law, though, we know nothing. We don’t give advice for anything. We’re not even going to tell you that it’s going to take effect because there have been bills that have been floating around the house for years.

And until they pass, it is what it is. We go on. What is the what are the rules today? And and, you know, go from there so we can we can try to anticipate.

But at the same time, at the 11th hour, they can change stuff. And they do they’ll say, you know what, this is the way it’s going. Oh, you know, right before you sign it, let’s make this one switch so that, you know, for example, they could say, all right, all first employees, if you have time that you bought or the time that you could buy back, then you go ahead and do that.

But at the last minute, they could say, actually, this is only for new employees or this is for anyone hired after 2010. Only if you’re hired or if you had service before two thousand and ten that you could buy back. Or you’re right, like you said, we don’t know until they actually pass it. And we can speculate. But but you’re right. One of the things that I keep going back to is that it would be horrible if they changed it right on people for the worse, where they’ve been planning their whole retirement for this one particular thing.

And now they can’t do it at the last minute, you know, like the CSRS or other things. Usually they don’t do that because if you’re planning on it, you’ve been it’s been going on for a long time. So I don’t. But again, if we don’t know what they’re going to do, if they do anything at all. So I know, OK, that’s question number one, question number two, what is the best time to have a spouse start drawing Social Security?

That’s a great question. I have no idea, though, there are too many factors here that come into play as far as when a spouse should be drawing Social Security, like is your spouse has your spouse passed away?

Are they still living? Are you going to be collecting on a former spouse’s Social Security? Like, what exactly is your situation? Are you still working? Are they still working? They have a four one K. Do you have anything in your TSP? What’s your tax bracket? What’s your health like? What’s. Oh, my goodness. So what is the best time is the question. There isn’t there is not a best time that is for everyone.

It is so individual.

And so, yeah, and I don’t even have to I mean, as soon as you can, I guess I’m I mean, is there a benefit going to be more than yours is even going to be worth it for you? Like, they really got to look into different factors. And that’s one thing the the team of advisers that we have in our trusted network, that’s what they do. They help you distill down on these little nuances and how to coordinate all of these different benefits and, you know, pieces of your federal benefits and more if that’s something of interest to you.

And so if. Yeah, sure. Let us know. And, you know, we’ll at least get you in touch with somebody who can help you answer that question.

I want to I want to have a quick story. And I don’t think I’ve told the story before on Fenobabble. But there was there was someone, a federal couple who came in to one of the advisors in our trusted network and sat down and said, OK, we have a plan. We’ve created a plan. Here it is on a spreadsheet. And he took a look at that and said, good job. That’s great. Do you mind if I take a few things?

They said, sure. You know, go for it. And he tweaked it and for them. He found a way to get them over 200000 dollars more in Social Security alone over their lifetime.

Oh, my gosh. It is not yeah, it is not a small issue. It is not a small. Oh, we can get a little bit more. No, there are circumstances where you can get so much more if you do it right. And people just think, oh, I think I’m going to do it at my FERS. Well what if your average is the best? What if your spouse should dip in to his or her 401k first and you take Social Security and then later on a flip’s or I mean, there are so many.

I don’t know that that’s even a good combination, but there are a lot of combinations and you got to do it right to maximize the amount of money you get.

And it even depends on if you’re eligible to take a spousal benefit, right? There are certain employees that are not eligible for a spousal benefit because their pension is simply too much and the government pension offset comes into effect because maybe the person themselves have it paid into Social Security. They were a state employee. They were a federal employee under Casares. They were some sort of local employee where they didn’t take out Social Security deductions and they’re not eligible to collect a spousal benefit because their pensions are so high that it wipes the benefit out for them.

So it also depends on if you’re even eligible for this benefit, you might think that you are a lot of people do. And then they get stuck with that. Oh, wait, I forgot about this. That little rule in society where, you know, it’s is are your spouse’s benefit subject to the windfall elimination provision, the web provision? There are there are certain exceptions within Social Security that it’s you’ve got to take a look at what those benefits are, how much they are, if you’re going to qualify or not, and then determine if it’s worth it for you.

Yep. Yep. Again, that’s why you got to talk to someone to make sure, because I, I would hate to have seen, for example, this couple miss out on over two hundred thousand dollars over their lifetimes. Oh my goodness. That’s huge. That’s Monu modest. That could make or break somebody’s comfortable reality of the retirement. I don’t know if that’s what we’re going to comfortability, but it’s I like today.

We’re doing it. I like it. Comfortability, comfortability, writing that one down, Cassie. We’re using that again. Let’s go on to the next question. Let’s see if we can use this comfortability word once more. Can you please explain 50 cents G/C funds? OK, let me explain this to you and I’ll have you answer this and we can talk about this in the workshop. One example that I give is something I mentioned, OK, the TSP can’t do this.

And what this is, is so for example, if if someone has 50 percent of their money in the fund, 50 percent in the in the sea fund, then every dollar they take out as a distribution comes out 50 50, it doesn’t you know, you can’t go in and say, OK, I want 80 percent from the fund and 20 percent from the sea or vice versa. Or a combination or only from this one. Only from this one.

It’s it’s proportionate, proportionate, proportional. Now I’m making up words Cassie.

I’ve got your disease. So so, yeah. You you’ve you’ve infected me with that.

So you cannot go in and do that so. So that that is what that means. Let me ask you.

Talk to us about the ramifications of doing one or the other or or or doing that or or being because you can in an IRA. Right. You can say I want only that or only that. Yes.

Well, and there’s there’s more to this than just simply go OK, because it also depends on if they have if they’re talking traditional money, ROTH money or traditional ROTH post the secure act or the TSP Modernizer Modernization Act. That happened, you know, 20, 18 and 20, 20. Then, you know, there have been some changes within the TSP that have really addressed these different rules that that used to be and now they’re different. So let’s talk about what they are right now, traditional TSP you can withdraw a portion of.

But again, like you were saying, it will be proportionate to what funds you are in. So if you’ve got twenty five percent in the fund. Twenty five percent of this fund. Twenty five percent, that’s fine. Twenty five percent in the I find that each quarter of a dollar that you’re going to withdraw is coming out from those four different funds. So you’re not just OK, I want to take out the bond money because I want to make the other stuff grow right.

Because the market’s doing really good. You can’t do that. It’s going to proportionately take out that. Now, you can specifically take out traditional money now, though, and say, OK, I want to be taxes raised money. Right. Right. But you and the flipside is correct as well, where if you have the ROTH account with the TSP and you want to take money directly from your ROTH, then that’s fine. But again, you’re going to have the same problem with the funds where if you are, let’s use your example, 50 percent in the fund and 50 percent in the fund, that for every dollar you take out, 50 cents is going to come out from each fund.

You can’t just take the fund money because the market’s doing really bad and you want the fund as a safe. Save money right now. What you can do. Is. Go into and transfer your money around into the different funds. Then take a look at your wait for a lot to process and then go back to the boat, like to be true so that so I get that question all the time.

Well, then can I just take, you know, put it all into the G fund and then pull it from that and then put it back. And actually, technically, yes, you can. However, as we always know, just because you can doesn’t mean you shouldn’t. And there are circumstances where if someone did that, they would actually be hurting themselves more than before. And so, you know, people just it’s incredible to watch when I when I deliver this content and I’m in front of an audience and and I and I say this, I just watch people, some in their mind, you can see it going, well, I’ll just do this.

I’ll just transfer it all over to the G fund and then take it all out. And then when I see that, I have to just pipe up and say, just because you can doesn’t mean you should. And it actually probably hurt you if you do. But one of the things that I do say always is that if and this is how I worked it in the workshop, I say, if you want to run out of money faster. Do this habit come out equally from each fund as it sets?

That’s great. If you want your money to last year’s longer, you need to be able to go into certain funds at certain times and take it out or certain percentages. And you do the mix. I mean, no joke, years longer is what you can make your money last. But the but the TSP just doesn’t allow that. And that’s one of the things that I wish the Modernization Act would have fixed. But they didn’t fix that one.

That’s a huge one that they just ignored completely. And it’s sad because they should have fixed that.

Yeah. And it’s just like people think, oh, well, if I’m going to get, you know, this certain amount of money over here in this IRA, then what’s the point of rolling it over, transferring it into an IRA when I can just take that same amount of money in the TSP with our other benefits to the IRA? Yes. That you need to take a look at where you can have guaranteed lifetime income for that same amount, whether your fund depletes to zero or not.

Right. There are the I mean, I’m not saying that that’s the case for every IRA, but you need to look at additional features. Yeah. And not just the one that. Oh, well, TSP statement says I’m going to get fourteen hundred dollars a month. That’s great. That is for one different flavor of their annuity product with MetLife. Right. Right. And if you’re looking at annuities, using it with a private sector company anyways, because that’s what the government’s going to do for you, only you don’t own it.

They do. And I don’t know about you. I don’t want the government to own my money. Then I’m going to go out and look at other companies on my own and see if those are more beneficial and what those features are that are offered with those other companies, because they might have something that this company doesn’t have. And that’s what I love about our trusted advisers, is they’re going to give you that advice. You know, whether whether they’re able to help you or not is another story.

But they’re at least going to be able to answer these different questions for you and help you determine on what the what the best solution is for you. They’re finding those those loopholes and those gaps in your benefits and making sure that what you do in retirement is actually beneficial for you. They’re not just trying to make a quick dollar. If they can’t help you, they’re open and honest and they’ll tell you, hey, there’s nothing I can do for you.

Your plan looks great, but here’s something that you can tweak with Social Security to give you two hundred thousand dollars more. And I don’t bet they don’t benefit from that. Right. That is simply just something that they would have given you advice on. Of course, you might have to pay a little bit for their time, but that’s not you know, they don’t make a lot of money on those suggestions for those those different things. And so, you know, don’t be afraid to have somebody who is versed in the federal benefits and a financial adviser give you advice or or help you determine these things or don’t be afraid of our report.

Right. Because that’s free. It’s no cost to you. They’re simply trying to determine where you are. And, you know, you have to give somebody who’s who is versed in it, you know, to meet with you and determine if you want continued help or not. You don’t have to sign up for that. There is no sales pitch. There’s nothing like that is just simply find out where you are so you can make those determinations for yourself.

Right spot. Also, you want to return. That’s OK. If you would please like subscribe, hit the bell or whatever so you can get more of these videos sent to you. And thanks for being here and we’ll talk to you next time. By. If it goes 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.