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FEGLI and the Living Benefit by Paul Kalra
Paul Kalra, FEGLI and the Living Benefit
Paul Kalra is a financial planner and federal retirement expert in Lake Forest, California.Although most people purchase life insurance for the death benefit protection that it provides, many may not realize that there are other ways in which this financial tool can be used in taking care of additional needs while the insured is still alive.
Commonly referred to as “living benefits,” some life insurance policies today will allow an insured to access the death benefit funds if he or she meets certain criteria, such as being diagnosed with a terminal illness. Today’s FEGLI (Federal Employees’ Group Life Insurance) plans may allow a participant to access this type of feature.
Should the enrollee have a documented medical prognosis whereby he or she has a life expectancy of nine months or less, then they may elect to access a lump sum of cash from their FEGLI plan.
The amount of the lump sum that can be accessed is equal to the participant’s Basic life insurance amount, plus any amount of extra benefit for those who are under the age of 45, that is in effect nine months following the date that the Office of Federal Employee’s Group Life Insurance receives the completed living benefits claim form.1
It is important to note that when living benefits are accessed from a FEGLI policy – or from any life insurance policy – the amount that is taken from the policy will reduce the amount of funds that will be payable to the policy’s beneficiary at the time of the insured’s death.
In the case of living benefits on a FEGLI policy, an annuitant is not eligible to elect only a partial amount of benefit from the plan. Therefore, while an employee may opt to take just a portion of their insurance funds, if an annuitant elects living benefits, his or her survivors will not be eligible for any Basic insurance benefits at the time of the individual’s death.
More about Paul Kalra, CFP, ChFC, CLU:
Paul Kalra has been providing financial services for over 25 years to doctors, business owners and others nearing or in retirement. After a successful career with John Hancock Financial Services,in 2002, Mr. Kalra founded his own firm, Signature America Financial Planning Services, Inc. in Lake Forest, CA.
In his practice as a financial planner, Paul Kalra has found that when people are nearing their retirement years, they are faced with confounding decisions about their retirement plans, 401(k)’s, IRA’s, Social Security, Medicare, life insurance, wealth-preservation and estate planning. What motivated him to focus his practice on helping people in their 50’s and 60’s was when Mr. Kalra began facing such decisions himself and realized that the answers would have been very tough if he were not a financial planner.
Retirement and 4 percent
Retirement and the 4% Rule
The financial services industry has been depictive in the past 2 decades or so of the fact that the retired officials of the federal government have a great chance of making their savings outlive them if they align their spending and savings in such a way that they manage to limit their withdrawals to around 4 percent every year to spend on living expenses.
4 percent of Retirement:
Retirement is a phase that is going to dawn upon you as a federal employee, and this 4 percent rule’s inception dates back to the early 1990s and at that time the Federal Funds interest rate ranged from 8.1 percent to 6.24 percent. The interest rates of today have been near or at 0 percent for so long now that realists believe that the 4 percent rule is something that can be considered obsolete.
Nick Besh, who is an investment director at the Wealth management of PNC says that the 4 percent distribution was very achievable when you look at the rates of the past when you could make conservative investments. He believes that now if somebody makes investments in the same manner in money bonds and markets, then they are liable to only getting around 1 percent.
This situation leads to a need to invest more rigorously and fast. There are a lot of factors that come into play when you are deciding on your safe withdrawal rate and some, as mentioned by Nick are: Your life expectancy, market return expectations, timing of the distributions, retirement portfolio size and of course risk tolerance.
These truths are around us for a long time now and to be realistic in the world of today is the only way to survive. Making withdrawals might make your present life happier but post retirement life can get hampered in the process.
Federal government headquarters to be upgraded by Capstone
Capstone Turbine Corporation is the undisputed leader of the micro-turbine energy systems industry with them being the leading manufacturers. They have announced in the past week that they have received a gigantic order for side by side C800 and C200 micro-turbines that will be used in a combined power and heat application at the Federal government headquarters building in Washington DC.
Capstone’s distributor for the South Eastern and the Mid-Atlantic United States, E-finity Distributed Generation has managed to secure the order and it’s all set to be commissioned in the current year.
The micro turbines will be responsible for providing a collective 1MW of power and will aid in offsetting the electrical load of the building. The exhaust-emitted waste heat will alone be employed for the generation of around 315 tons of chilled water for the cooling system of the building. This project will also go a long way in supporting the US federal government in achieving its sustainability goals by the means of cogeneration measures.
The administration of the company has got nothing but excitement to display for the achievement of this project. They believe that this is going to be another huge uplift in their bid towards becoming the go-to turbine energy system manufacturing company. The sales and application team was able to make the federal government’s installation configuration pretty quickly in the urge to meet the requirements of the space. This side by side installation is a great depictive of the ability of modern day technology to cater for the needs of the customer.
This is another feather in the cap of Capstone turbines and soon we are going to be writing about how efficient the system has proved to be after it has been deployed. Here’s hoping that this gigantic project proves to be completely successful.
Social Security benefits to be expanded
We all have money in trust fund accounts that we want to save for situations where we would fall in desperate need of cash. The best part about this type of held cash is that no creditor can touch it. If you are having problems with your credit card or any other payments, you can go ahead and get a small part of your salary taken away and deducted each time till you end up paying your debt to the creditor; but thankfully for all the trust fund cash holders, this is not the case. Even if the creditor gets a court order, the money is beyond their access because it’s held in trust.
Social security is the fund!
Social security is the trust fund that’s applicable to the federal retirees and the officers. These benefits are held in trust fund accounts. Once you decide to get the money that is held in this account of yours, you are saved from the grasps of the creditors and can claim each and every single penny that you deserve. If a company takes the case to court over the attainment of any of your funds, the case is going to get dismissed without any proceedings. This is the power of your social security.
Even financial institution are incapable of getting hands on your trust funds unlike your wages and other accounts. There is a catch though; how could there not be? There is this one entity that can come in and swoop away all your benefits. Yes, you guessed it right; it’s the federal government. Courtesy of the debt collection improvement act, the government has got complete authority of taking away parts of your social security pertaining to any loans you might have taken. This is not something that just exists on paper as a government authority; there have been cases where this has actually happened.
All in all, this is something that should be given attention by the government as such trust funds are meant to be expanded by them and not scooped away.
States where majority doesn’t get retirement benefits
There are many states in America where the majority of the population don’t enjoy retirement benefits and if you are happy with your post-retirement life because you are getting all the benefits that you deserve, then consider yourself a very fortunate person.
States with low retirement benefits rates:
Overall, only half of the total full-time employees manage to participate in a retirement plan for their workspace. This has been indicated by many reports that have been compiled for this very purpose. Out of the huge 58 percent of workers who are eligible to enjoy retirement benefits, only 49 percent actually sign up.
Here are the names of the states where the percentages are really low:
Florida: The sunshine state is a name that not many would have guessed of but in Florida only 38 percent of the employees get benefits. This is the lowest of all the states.
Nevada: Around 27 percent of Nevada’s federal employees are working for the leisure and hospitality firms that are amongst the type of employers considered unlikely to provide benefits. Around 40 percent of workers in Nevada participate in retirement plans.
Texas: 50 percent of the Texas workforce is eligible for retirement benefits but around 41 percent of the employees actually participate in the plans.
Among other names are California, Louisiana, Arkansas and Georgia. While other states are considerably better, the overall figure is still not something we can look at with a smile on our face. It’s the duty of the newspapers and departments like OPM to make employees aware and to make employers pertinent as well. Workspaces need to provide employees with more opportunities and when they will be presented with more options, they are likely to take upon ventures that are going to benefit them in the longer run. Here’s hoping that things work out better.
Which is the better Thrift Savings Plan Option?
Is an Individual Retirement Account better than the Thrift Saving Plan?
One of the toughest financial decisions a retired individual or an individual who is about to retire faces is to whether he or she should keep his or her retirement savings in the Thrift Savings Plan (TSP) or should he or she transfer it to the IRA. Many people prefer to move their money to Individual Retirement Plans (IRP’s) as soon as possible but many still cling to the Thrift Saving Plan. If you are confused about which of the options you should go in for then here are a few points that can help you make a better decision.
Thrift Savings Plan (TSP) Vs Individual Retirement Account (IRA)
When comparing these two popular plans, the below-mentioned things play a crucial role.
- Costs– If cost or fee of a plan is a major factor for you then opting for TSP is the best option for you. IRP has a much higher fee than the TSP. In fact, TSP has one of the lowest fee structure where you can pay only 29$ as the annual fee when you invest 1000$.
- Control– Some people like to control every aspect of their finances and they don’t need financial experts’ advice or assistance. If you are the same then TSP is your best option as you don’t get any advice in this plan. It gives you total control over your investments.
- Investment Options– IRAs offers more options with regard to investment while a Thrift Savings Plan only has 5 investment options. If you are after more investment options to maximize your dollars, move your funds to IRP as soon as you are eligible for the same.
- Tracking Assistance– Keeping records of all the funds you have invested is a smart idea. IRAs can help you with that. It offers regular reviews and monitoring program reports to you from time to time. It also allows you to get personal advice from the experts that may help you get more value out of your funds.
On the whole, it can be said that neither Thrift Saving Plan nor Individual Retirement Account came out as the clear winner when they are compared. Your expectations from the plan matters the most when you are planning to select one. It is also advised that you must take the assistance of an expert to guide you on the option that suits you best as it will help make a better decision.
How Do TSP Investments Compare? by Paul Kalra
Paul Kalra is a financial planner and federal retirement expert in Lake Forest, California.TSP Investment Advice from Paul Kalra
Despite the roller coaster stock market over the past few years, it seems that, on average, the account balances in the TSP (Thrift Savings Plan) appear to be going up. The participants who assumed more risk – or at least those who seemed to do so – by going with the S and I funds, attained a return of just under 5% for the first half of 2015. And, those who stuck it out with a bit more volatility in foreign stocks were rewarded with just under a 6.5% return during the same time frame.1
By almost year-end 2015, FERS held an average balance of nearly $117,000 in their TSP plan, with an average Roth account balance for these same individuals of just over $7,100.2 If you are a CSRS employee, the average was closer to just under $119,000 in the TSP plan, with a Roth balance of just a tad over $11,500.3
How is the Money Distributed?
In terms of where the funds are being distributed by TSP plan holders, there seems to be a larger percentage of allocation being placed in both the G Fund and the C Fund, at 35% and 28% respectively.4
The remainder of the TSP fund balances sort out as follows (as of November 2015):
- L Funds – 17%
- F Fund – 5%
- I Fund – 5%
- S Fund – 10%5
Tracking Your TSP Investments
If you have money invested in the Thrift Savings Plan and you want to see how you’re doing – or even if you just want to check a hypothetical example – Check out the Thrift Savings Plan official page for information on TSP Fund prices and historical performance.
More about Paul Kalra, CFP, ChFC, CLU:
Paul Kalra has been providing financial services for over 25 years to doctors, business owners and others nearing or in retirement. After a successful career with John Hancock Financial Services,in 2002, Mr. Kalra founded his own firm, Signature America Financial Planning Services, Inc. in Lake Forest, CA.
In his practice as a financial planner, Paul Kalra has found that when people are nearing their retirement years, they are faced with confounding decisions about their retirement plans, 401(k)’s, IRA’s, Social Security, Medicare, life insurance, wealth-preservation and estate planning. What motivated him to focus his practice on helping people in their 50’s and 60’s was when Mr. Kalra began facing such decisions himself and realized that the answers would have been very tough if he were not a financial planner.
New Federal Budget Will Be Good For Federal Retirement Savings
President Obama has always been one for focusing on federal retirement savings and recent news arriving from the White House indicate that the President will focus on the same matter in the coming budget as well. It’s expected that some new proposals will be put forward that will aid in the expansion of the access to retirement savings accounts provided to the employees. Also, some previous provisions are also expected to be looked at.
President Obama to expand access to federal retirement savings:
It’s common knowledge that the multitude of the American working class doesn’t care about retirement plans. Around 1/3rd of the population haven’t got a savings or pension available for their post-retirement life and let’s just say that this is a stat that we would like changed sooner than later. Thankfully, the President’s proposals, if accepted, would go a long way in enabling millions of people access to retirement savings accounts.
This increase will occur the most from the legislation that requires the employers that currently don’t have any workspace retirement plan to make the enrolments on the behalf of their employees in an IRA. The employers that would do this would be compensated by 3 thousand dollars in their tax credit. This proposal was part of last year’s budget as well but the Congress didn’t approve it.
This step is destined to make the post-retirement lives of millions of Americans a lot better than they would turn out otherwise. It’s worth mentioning that even though the initiative has been taken by the President, the final approval lies in the hands of the Congress and while the excitement went in vain last year, this year it’s hoped that things might just turn out for the good. This particular plan, once approved is probably going to stay for quite some time.
The Hated Federal Performance Appraisal-About to Change?
If you are a federal employee, most likely you have been through or given a dreaded Federal performance appraisal. They are similar to performance reviews or assessments given in the private sector, however, they are becoming less-used in the private sector. With them required by law for federal employees do not expect them to go away any time soon. Yet are they hated enough for OPM to consider changing the entire system?
Federal Performance Appraisals
These appraisals are used in assessing federal employees in their current position and have a bearing on promotions, discipline, awards and even in firing. If you are looking for a promotion or transfer these can have a big impact on whether you get it or not. Yet, many feel that they are not effective and simply create work and stress disproportionately to what their worth is.
The Office of Personnel Management (OPM) has as recently as January 2016 told federal agencies to include employees in these appraisals more. The OPM is not willing to abandon the system yet, especially since they are legally obligated to conduct and administer the program. But they are calling on managers to add a plus to the system. They want employee engagement on these appraisals to be more involved. With recent surveys of the system, both by the OPM and private surveys calling into question their validity and concerns of favoritism, this change should be welcomed by employees.
Recent Surveys
A recent FedSmith survey showed that an overwhelming majority of respondents do not get feedback on performance throughout the year at 63%. Only half felt their most recent appraisal was accurate and 50% felt that the criteria for the review were subjective. Even more worrisome is that 62% felt that management was grading on a curve and that there was some sort of quota system. This specifically is against OPM rules for these appraisals even if you are on a performance for pay type employment.
This survey, although not a scientific study shows that although employment contracts are changing, remuneration is changing even within government contracts, but the appraisal system is either not trusted, not effective or grading on a curve, which is strictly prohibitive. Although these are respondents ‘opinions’ there are enough of them to be concerning and warrant further investigation.
Federal Performance Appraisals Changing?
The OPM has decided engagement with employees is needed, and this is definitely a step in the right direction. In a recent revelation before a Senate sub-committee, the OBM’s (Office of Management and Budget) Chief Performance Officer testified that they were looking at a new performance management system.
Will this system be implemented through all agencies? Probably not anytime soon, but it is obvious that performance appraisals have both fallen behind the times and fallen off its own mandated objective criteria for evaluation. If you are a current federal employee, be sure to ask for performance feedback, before and after an appraisal. These still have a bearing on the future of your career even if they are lacking of late.
NEW ORLEANS IS CLEANING HOUSE – by Dianna Tafazoli
New Orleans Mayor Mitch Landrieu decided with a vote from the New Orleans City Council on December 17, 2015 that the Confederacy had been on the wrong side of history and that change had come to New Orleans. Four statutes that stand in Lee Circle will come down as part of New Orleans’ commitment to remove the last vestiges of its racist past.
The statutes of Robert E. Lee, G. T. Beauregard, Jefferson Davis and the Liberty Monument are scheduled to take their new position either in a museum or a War Park that will put the statutes in their proper context according to the Council. The place where the statutes once stood called Lee Circle will go back to its original name, Tivoli Circle.
The vote to remove the statutes was not unanimous by the City Council. The dissenting opinion was that the statutes should remain in place with an educational focus telling the story behind the statutes. However, the overwhelming opinion was that such an honor should not go to individuals who echoed the sentiments of inequality and racism that denied African Americans the right to life, liberty and the pursuit of happiness.
Mayor Landrieu proposed and championed the removal of the statutes encouraging the City Council to remove symbols he described as a “perversion of history”. There are many states with the same perversion of history if you will – my home state of Virginia being one. We have a number of those gentlemen who stood on the wrong side of history standing on the streets of Old Town Virginia and some other places. We even have a highway named Jefferson Davis Highway. Perhaps, Governor McAuliffe or newly elected Alexandria City Mayor, Allison Silberberg, could take a page out of Mayor Landrieu’s playbook. Trivia question: If Terry McAuliffe and Mitch Landrieu pitched their hats in the ring for the POTUS job who do you think would get the most mileage?
P.S. Always Remember to Share What You Know.
Dianna Tafazoli
INTRODUCING MR. CYBER SECURITY by Dianna Tafazoli
Clifton Triplett is the Cyber Advisor in the Office of Personnel Management. Mr. Triplett comes from SteelePointe Partners, a global management consulting company. In the wake of the cyber security attacks and the fingerprint theft of millions of federal workers and their families, including retirees and contractors, security is not only sensitive but a key determinant as to the tenure of the OPM Director and the Cyber Advisor.
Mr. Triplett has over 30 years of experience under his belt with military experience as well. Mr. Triplett is a graduate of the U.S. Naval Academy and seems to have the knowledge and discipline needed to form partnerships and put strategies in place that just might protect the safety and security of federal workers going forward. When a candidate has military experience on their resume it somehow just reads better and tells another story. Military personnel are trained first and foremost to be leaders and take on responsibilities through a collaborative effort. Who knows better than military personnel how to work in a team?
Mr. Triplett certainly has his work cut out for him but with his work experience in some of the major Fortune 200 companies he just might have what it takes to prevent another breach of security for federal workers.
P. S. Always Remember to Share What You Know.
Dianna Tafazoli
IT IS OPEN SEASON FOR MEDICARE -by Dianna Tafazoli
As the year nears its end there are so many things to do to ensure our readiness for the coming year. We need to make a list and check it twice to find out if we are covered or not of if we simply need to make a few changes to take care of our health needs. We don’t make a pot of stew and leave it sitting on the oven for days without it going bad. By the same token we shouldn’t choose a health care plan then set it aside and never go back to see if it is taking care of our changing health care needs. Needs yesterday may not be needs of today or even tomorrow.
Every year the Center for Medicare provides an opportunity for Medicare recipients to examine and evaluate their current policies to determine if the level of coverage is suitable for their health care needs. The period of open enrollment runs from October 15, 2015 through December 7, 2015. It is worth the effort to take the time to compare the many Medicare plans on the market from original Medicare to Medicare Advantage.
Every state does not offer Medicare Advantage plans that in most cases uniquely combine Parts A, B, C & D covering everything from doctors’ visits, to hospital stays, to prescription drugs. You don’t need a Medicare Supplement generally when you have a Medicare Advantage Plan. Some other plans may or may not have a prescription drug component (Part D) which may require you to find a supplement for the additional coverage needed. Remember Federal employees when Medicare eligible don’t need to ever purchase a supplement if they have remembered to always keep their FEHB (Federal Employees Health Benefit) plan. Medicare and FEHB provide enough coverage to take care of your health care needs as you prepare to enjoy your life in retirement.
Always read any brochures and all other information provided by your health care carrier so that you can stay on top of the changes taking place in your policy and if your carrier will continue to provide services in your state or locality.
P. S. Always Remember to Share What You Know.
Dianna Tafazoli
5 Things That Surviving Spouses Must Know About Social Security
Carrying on with your life after you have lost a spouse is a painful ordeal. Yet, you have to do it and live your life in peace. One of the things that can help you fight off the grief is the financial stability you get due to the social security offered in the USA. If you don’t have any idea about how can you claim the money and what factors influence it then here are a few useful things that may help you in taking the right financial decisions.
Unlocking the mystery behind Social Security Benefits for the Surviving Spouse
- One at a time: When you have lost a spouse, you have to choose among survivor benefits or the benefits you get based on your work history as you cannot get both at the same time. You need to pick one at the time and let the other one grow with time.
- The amount of your survivor benefit depends on your age and your spouses’ decisions: If you opt for the survivor benefit, the amount would depend on your age and the amount your late spouse would have received (or was receiving) before losing his or her life.
- Not taking social security can be for the best: In case your spouse has not taken the social security yet, the amount you will receive would be higher as compared to if he or she was taking the benefit. So you should always try to delay taking social security for your spouses’ benefit if you can afford it.
- You can get survivor benefit at 60 years of age: You can choose to make use of your survivor benefits at the age of 60 rather than 66 which is the current retirement age. In this case, the amount of money will reduce.
- Survivor benefits grow only until your age is 66: If you have opted for using the benefits given to you on the basis of your work history, the survivor benefit will grow only until you reach the age of 66. After that, it will just be sitting there.
So, if you are eligible for both the benefits as the part of your social security, it is advised that you opt for the work related benefits early on as it has no impact on your survivor benefit. Let the survivor benefit grow until you reach the age of 66 and then use it.
