#37 – Chronic Health, FEHB Drain, Mortgage Pay off

Chronic health, FEHB drain, and mortgage payoff, 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.

Well, welcome, everyone. Hello, Cassie. Hello, Kevin, how are you today? I’m happy because we get to answer a whole bunch of great questions, that, boy, these questions come up all the time or these issues, I’ll say, especially with this first one, it’s more of an issue than it is a question.

So look in. All right, best time to retire for an employee with chronic health issues at 62 or a stretch as far as possible toward full Social Security at sixty seven.

So I the reason I chose this question is more we’re not going to really answer this because obviously it depends and there’s no way to know. There’s just no way to say, well, Eli, there’s no way for you and I right now to answer this and say this is what the answer is. Now, again, you know, a financial professional or a trusted network would be able to dove in and say, OK, here, here is everything and then do it and that’s fine.

But this is not a general question. This is very, very specific. And a lot of people don’t think about chronic health issues. Well, not only that, but I would say it depends on a lot of other factors, too, like how many years of service do they have as a federal employee? What is their pension going to look like? What is their financial situation going to look like? Do they have to.

Yeah. Are they married?

What exactly can they take? Like, do they qualify for some living benefits in Feigley or something like that? Where the. Or other policies, for instance, that they may have other injuries or life insurance policies or things like that, like what is this chronic health issue? What are the chronic health issues and what do they qualify for as far as money coming in to where you can spend time with your family or what have you? Because who knows, maybe if you’re at fifty seven and you got 30 years of service, then you want to fully retire earlier than 62 and take that special retirement supplement benefit because you have other sources of income coming in and you guys can make it financially and you want to spend that time with your spouse or loved ones, family members or friends.

Yeah, right. So I really think this is a case by case scenario and it depends on, you know, not just whether or not you have a chronic health issue, but then, you know, the income part of it. And what is the insurance part like? What are your you know, whatever your health condition is, who’s paying for that? Are you eligible to continue FEHB and have that as a as a resource question?

Are you going to get into Medicare at sixty five? Are you going to last that long? And I don’t mean that to be rude, but that’s just. But it’s a public health issue, right. Yep. How chronic. How terminal.

Right. Is this is to people though. I mean especially those who are younger. Don’t think that there’s going to be an issue, and so they march along, march along march along until all of a sudden something happens like what the heck? Now I have to plan for this. It is so much easier to be able to kind of create a comprehensive plan and then change rather than go into panic mode and go from, you know, I’m fine to oh, no.

Now I have to plan for something completely. Well, I mean, now I don’t know what to do because I set myself up in a situation where now that I have a chronic issue, I, I, I was about to say dead in the water. But that’s but that’s almost true, too, right. And so, yes, I know last night my my my wife and my my girls love watching these. They have like three or four doctor shows that they like watching.

And so we were watching one of them and this woman came in with she said, I have this disease and they’re like, OK, and they’re treating her and she’s having issues. And she got her and her boyfriend got married immediately. I mean, when they realized she was going down. And so they’re doing making all these plans. And then the doctor’s like, wait a minute, hold on. And they did some more tests and they said, you don’t have that disease, you have something else and you’re going to have a long life.

Yeah, you’re going to have to deal with some things, but you’re not going to die any time soon. You’ve got who diagnosed you. And she goes, well, I just did, because it was all the symptoms and my dad died of it, so I assumed that I had it. No, you don’t. Oh, my goodness. I mean, completely. And that’s the way I feel like the whole financial thing is, is, well, this is what I’m going to assume is going to happen.

And then life changes. And that’s no, that’s not what’s going to happen either for shortening the life or lengthening the life or whatever it may be. But these are we need to start planning ASAP because we don’t know what’s going to come up. So we’ve got to have something there. Yep, that’s exactly true. I mean, a few years ago, my husband got in a motorcycle accident life situation, right. And that changed immediately how we were going to move forward for the next six months.

I mean, it’s still changed what we’re doing, because physically now he has so much metal in his body that it changes how he acts.

He acts like a robot. Is that what you’re saying? Because he has so much metal? Are you saying that he looks like a robot because politically he can’t he can’t do as much.

Right. And he can’t last as long outside and things like that. I mean, those day to day things that we take for granted being healthy. That if something were to just. Slightly changes. What does that look like? Yep. You know, I mean, there are so many different things that I think people don’t. They just think, oh, it will never happen to me, right, kind of like a federal employee and my benefits will take care of me in retirement.

Yeah, I’m always the case. And, you know, it’s we just don’t know what’s going to happen. And so we need to plan for worst case scenario. Best case scenario, what does that look like? And then we’ll be covered and maybe make a play in it, you know, I mean, we can’t play forever. We can’t plan for every situation, but. If we can plan for those two different factors, best and worst case scenario, that if we fall somewhere in between, we’re going to know exactly what we need to do.

Right. And I think that’s I think what you said actually is a good Segway into the next question. Why don’t you read that one? And let’s let’s talk about this. OK, generally speaking, is the first retirement payout sufficient to pay for continued federal health benefits?

I don’t know. Yeah, it depends. You’re right. You’re right. You don’t know, because here’s another great example of things change in the workshops I talk about. You know, we give an example and an example. Employee gets twenty six thousand dollars a pension each year. But but I say, OK, now you realize, although that’s what the number says, that isn’t actually what you get. And then we start going out and talking about that’s what you get.

But then you take away this, you take away this, and then all of a sudden people start realizing that, oh, my heck, at some point. I’m going to have more deductions that I am going to have pension. And and those that work and that complete, that’s a complete change. I mean, you know, before we’re talking about health changing, this is a this is a money change, although nothing really changed in your life, it the whole money situation changes at that point.

And so there could be a time when you’re actually although FEHB is taken out of your pension, that you may have to start paying for your FEHB out of your pocket because it may the deductions may be more than what you get in your pension. Have you seen that in some of the reports or some of the things that you’ve dealt with? Yeah, actually, there is a few times where people have a negative net because of their elections starting off, because of their early elections and their fear premium on top of what their pension is, because think about it, if somebody is retiring at 62 with five years of service or 10 years of that high three, if the high three is not high enough that it’s not covering those deductions, depending on what the elections are.

And if you’re sixty two, who knows if you qualify for certain, you know, life insurance policies or what have you outside of family at that time. I mean, I dealt with folks who are 50 and fifty five and can’t qualify for other life insurance products outside of family. And so I think people again, they take that for granted when they’re younger and they think, oh, the government’s going to take care of me while I’m retired. And they don’t think about yes, they will.

But it’s still going to be at a cost like they’re not providing these benefits for free.

Mm hmm. You still have to pay for them. And then we need to look at also, though, what are the other expenses that we have as well? I mean, not just the federal benefits. And one of their income sources that we have. Mm hmm. Right. That we can tap into maybe we have to start collecting Social Security at 62 rather than waiting till sixty five or sixty seven, because financially our pension isn’t enough to cover our other expenses.

OK, I want I want everyone to understand this. I want everyone to understand exactly what Cassie is saying. Please understand that there are circumstances where starting off your pension, it is possible for your pension not to pay for everything and you will actually have to pay out of pocket for some of the things you need starting from the very beginning. I Cassie no one thinks about this. No one now has a clue that this might ever happen to them, which is why it is so important to understand this way before you go in.

I cannot imagine the reaction of a federal employee who is all excited about retiring retires and then realizes they don’t get their pension, but they have to pay out to get what they need. That is a completely different set. That is a different life than what they thought they were going to have for the rest of their life at that point. Right.

And go back to the previous scenario where they have chronic health issues or something. Right. If you added in an FEHB plan where they’re paying more for the plan because it’s covering more in their region or their whatever rate they pick, the best plan that works or what they need. For those chronic health issues and their prescriptions and all of these other things. Right. But then they get to retirement and they realize my pension is going to be enough to cover my FEHB premium, I have to select a different plan or else a lower plan coverage, but then you’re paying more out of pocket.

What does that look like? Right, right. Right. How are we going to juggle all these different financial situations if you have to pick a lesser plan? Or a different plan that has lesser coverage, rather, does that mean how much more are you paying out of pocket for that coverage that you need for those prescriptions that you need? Mm hmm. What’s the difference? And is it worth it to even do that? Right. Right. Like, there are so many different scenarios and these are the types of topics that financial advisers in our trusted network will talk with people about.

I don’t know how many times I’ve been on the phone with those advisers that I’m talking to them about how TRICARE coordinates with FEHB or how, you know, what is the difference between a self plus one and a cell phone option or a cell phone family itself plus one option. And why is there a premium five hundred dollars a month?

How can an FEHB premium be five hundred dollars a month, you know, and then, well, they’re on an HMO plan rather than this plan, and they don’t realize that it depends on the type of plan and coverage that an employee needs. And so they really have to just drill down on, OK, if an employee is in a situation where their balance or their pension is negative, even if they get rid of their family because they’re trying to get as much of their pension as possible, who isn’t then they need to look at possibly switching their FEHB plan.

What are the different considerations that they need to be looking at? And these financial advisers are on the phone with me to ask me that. So that way they can go back to the employee and really distill down, even though they’re not making anything off of it because they’re not covering health benefits or even, you know, entering people into these policies because they have coverage with FEHB. It’s just a simply an educational conversation. Of how we can maximize somebody’s pension and get them what they need, so that way they’re not having to do with a negative pension balance or owing the government money, because who wants to do that in retirement or life?

Right. And they’re taking a look at, OK, what is all of these different factors that come into play here and how do we put all these pieces of the puzzle together so that we can help the employee have the best of their retirement? Because that’s our ultimate goal. That’s so the the issue I just keep thinking, you know, we’ve only hit two questions. We have just a couple of minutes for the last question, but things that people just don’t think about now, this next question is different because people do think about this one.

But the two questions we’ve had so far, people don’t think about or don’t consider typically until it happens. And then you’re and then it’s panic mode, trying to figure out what to do and skip the panic mode. Let’s skip that and just be solid on what we’re going to do ahead of time rather than trying to do it at the last minute. Oh, boy. I mean, I know I teach this team. I teach that to my kids all the time.

Be prepared. Right. Be prepared for anything that comes along the lines. You know, if you want this in the future, make sure that you’re set up to get there, not just assume that it’s going to happen. And yeah, but but I know we’ll have to say, I don’t I don’t think it’s so much a factor of federal employees. I you know, you darn federal employees. How can you do this? I think it’s more of a factor of the culture within the federal government.

Is the government going to take care of you? And that’s what they go by. And and we have to realize that that isn’t quite. True, unfortunately, right. OK, so let’s see. Should I seek to pay off my home mortgage before retirement? Yeah, I don’t know, right, how much you owe. Are you going to downsize, sell your house to downsize? Yeah. You may not want to pay off the bigger mortgage if you’re going to gain enough to be able to pay for a house and have a mortgage.

Yeah, if you’re going to have enough equity and profit coming from your your other house. Right. So I don’t know. It depends.

It really does depend every time. I mean, each one of these questions today. It depends. It depends. It depends. And honestly, to tell you the truth, in the workshop that I do, most of the questions that are asked on the webinar in the Q&A section are it depends just about every time. And and I can understand why people won’t say what do I do with my with my mortgage, for example? What do I do specifically?

Well, people you know, it really depends because you’re right, I’ve seen people take out a mortgage in retirement because it is financially better. And so in their situation and people think, well, how can that be? Well, you know, according to taxes and all and write offs, et cetera, et cetera, there are circumstances where that happens. So everyone has to figure out their own. So, again, it depends. So from that, because it depends, of course, if you would like to report that Cassie, by the way, puts together and she is awesome at putting these things together, just go to Fednobabble.com and get it.

Any last words of wisdom here? Cassie. Take action. If you are thinking about these questions or if you have pondered, you know, thinking about them yourself or if you know of somebody who is thinking about these questions, you’ve got to get answers and you’ve got to it boils down to the numbers and you’ve got to take a look at what that is for your situation. So please go to Fednobabble.com. If you don’t have a financial adviser who is working with you regarding your benefits, because you really have to coordinate those with your other products to to make sure that we’re really taking a look at all of these different things and getting you, again, the best out of your retirement.

You’re not going to be able to do that without having somebody to help guide you in planning for those different types of scenarios and coordinating your federal benefits. And so, you know, if you are curious about that at all or again, have somebody who is curious set in the league, let’s get talking to them. You know, we’re only giving you information. We’re only giving your information to one adviser so they can work work with you. They’re versed in the federal benefits.

They know what they’re talking about.

Again, I’m preparing the report for them. And so they’re able to ask whatever questions they want. And we’re digging into different scenarios or different benefits that people might have questions on and just giving them the best information. So that way they can really do that planning and for themselves. And you owe it to yourself.

I mean, we plan for living during our working career and everything else.

Right, to plan for our family. We plan on the house that we plan all of our finances. Then why don’t we plan for retirement? And I think this is one of the things that is just isn’t taking seriously very often. So take hold of your retirement and do some planning.

Good at just go act good. All right. Cassie appreciate it. Talk to everyone next time. Have a good one and see you on the next episode next week. See you then. If it goes. And it goes now. Now, now, 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.