BUDDY NIDEY- Unforeseen events can derail any well laid out retirement plans. For this reason, it is crucial that you reevaluate your retirement needs. For federal employees, FEGLI is the option of choice due to its affordability and value delivery.
Typically, people acquire insurance to offset mortgages, cover education, replace income, and pay off debt as well as funeral expenses. As you grow older, expenses such as education and mortgages take a back seat as your kids have all grown and have jobs. Therefore, you’re left with income replacement and living expenses.
Subsequently, basic FEGLI coverage is the answer to your final expenses. Typically, the government covers the basic life insurance premium for federal employees. In turn, federal employees pay only ⅓ of coverage premiums.
Once you retire, your FEGLI payouts are based on your salary and remain constant until you are 65 years of age. Usually, after retiring the default deductions are 75% of your salary. After attaining65 years of age, your coverage is free, and your death benefit decreases by 2% every month until your coverage reduces by 75%. Even though you might live longer than expected, you will always have 25% of your death benefits to cover your final expenses.
In contrast, it might not be beneficial having life insurance if you don’t have anydependents or if you’re single. Based on the choices you make, your spouse might lose half of your Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) annuity. Factors such as Government Pension Offset for CSRS retirees, Social Security, age, and occupation may lead to additional loss of income from SocialSecurity during retirement.
Other FEGLI life insurance options include the Standard option with a death benefit worth $10,000 with your age determining the premium you pay. Premiums are paid until one attains 62 years of age and retire. It’s a free option in which coverage reduces by 2% until the benefits down to $2,500.
Other FEGLI options are based on multiples of your salary. If you elect no reduction, your coverage continues into your retirement. Premiums increase every five years until you attain80 years. Even so, a full reduction is possible if you so desire which reduces coverage with 2% each month.
FEGLI’s family option covers your spouse and dependent children; your spouse gets a benefit of $5,000 with each dependent child receiving $2,500. If you are eligible for this option, you can choose up to five multiples of this option with continued retirement coverage.
As Certified Public Accountant and a graduate of the College of Financial Planning in Denver, Colorado, Buddy Nidey applies his strong analytical background to his work as an investment advisor representative. He enjoys coordinating clients’ investment portfolios with solid financial planning that takes income taxes, diversification and safety into consideration. Bud works with families up to and through retirement, mapping out strategies that maximize Social Security and other sources of income to a retiree. Talk to Buddy Nidey today to find your way to financial success.