Earning Social Security Credits
By Jeff Spencer

Jeff Spencer developed his passion in helping others with financial planning at a very young age while enlisted in the Air Force, stationed in England working on aircraft as a crew chief. Over the years, Jeff has continued with his passion and recognizes how money can become a powerful tool that should be used to deliver safety and protection in our lives.

For each of your working years which you pay into Social Security, these wage amounts get recorded to your Social Security file. Based on the amounts you’ve earned from these wages, you earn Social Security credits for them. When you apply for Social Security benefits later on for things like retirement or disability, your eligibility to get these benefits is determined by the number of credits that you’ve earned.

Getting more credits from Social Security matters for both your current employment and future employment, once you’ve departed from your current federal position. Workers who are covered by CSRS are concerned about this because they will likely want to continue working until they’ve earned enough credits to be eligible for benefits. Prior to their CSRS career, people usually have credits already that they’ve earned from previous employment and military service. They could have also earned the credits on the side, although not the required 40 credits.

Federal employees who are covered by FERS or CSRS don’t need to be concerned because they earn credits for Social Security throughout their careers with the government. It is more of a concern for people with shorter careers, like people who didn’t start working until they were older or those who went a long time without working at some point. These people would likely not have enough credits necessary to claim the benefits.

Only those who are paying into Social Security can earn credits. This is the deduction entitled “FICA” or “Social Security” which you see on your pay stubs or statements.

Please contact a financial professional if you have additional questions about Social Security, or any other retirement options.

Contact Jeff Spencer

Heartland Retirement Group
HRG4Life.com

Phone: 513-903-7551

Email: [email protected]

Jeff Spencer Articles

Article: What Becomes of Your Benefits Upon Leaving and Returning to Federal Service? By Jeff Spencer

Article:  Breaking Down the TSP By Jeff Spencer

Article: Getting the Best Deal on Life Insurance by Jeff Spencer

Getting the Best Deal on Life Insurance
By Jeff Spencer

Jeff Spencer developed his passion in helping others with financial planning at a very young age while enlisted in the Air Force, stationed in England working on aircraft as a crew chief. Over the years, Jeff has continued with his passion and recognizes how money can become a powerful tool that should be used to deliver safety and protection in our lives.

For Basic FEGLI coverage, federal employees must pay two-thirds of the premium rate while employers in the private sector typically cover the cost of their employee’s basic coverage. Once covered by FEGLI, everyone pays the same premium no matter their health status, which differs from the individual coverage where premiums usually depend on the health of the person seeking coverage. Because of this, FEGLI could appear relatively more expensive, especially if healthier federal employees compared it with plans that they could potentially receive from private individual coverage.

Basic FEGLI and Option B (the option that covers your life for one to five multiples of your annual basic salary) automatically increases in value as your salary increases. This is the case regardless of pre-existing health conditions and age. The option B and C (which covers the lives of your eligible children and spouse) can also be increased in the event of a birth, marriage, divorce, adoption of a child or the death of a family member, without proof of insurability. One way that Option C can be used is to cover an individual who may not be eligible for life insurance on the private market because of poor health or age. Option C has a major drawback though since no more than $25, 000 in life insurance is provided on your spouse.

Due to Optional FEGLI’s increasing premiums, it’s wise to revisit your life insurance needs after every five years (when the premium adjusts). Insurance policies that were necessary at the time you got married or began a family may not be relevant once you are close to retirement, or your children become adults, or your mortgage is finally paid off. Also, don’t forget to update your beneficiary designation!

Bear in mind that you are covered by FEGLI regardless of your hobbies or occupation, and beneficiaries typically get paid no matter what the cause or place of death was. Unlike many other private sectors, FEGLI also provides coverage for retirees.

Survivor Annuity vs. FEGLI

Upon death, FEGLI provides a tax-free, lump sum benefit to your beneficiary. However, this should not be considered a substitute for the survivor annuity election (under either the Federal Employees Retirement System or the Civil Service Retirement System). For example, let’s say a federal employee would receive a $20,000 benefit (payable from FERS basic retirement). If that employee were to stick to the FERS spousal survivor benefit, then the retirement could be reduced by $2, 000 per year, or 10 percent, thus, leaving a benefit worth $18, 000 (as a reduced taxable retirement income). When the maximum survivor benefit is chosen, then the surviving spouse will be provided with a lifetime annuity of 50 percent of the unreduced retirement benefit, which also includes future adjustments for inflation.

If that same federal employee decides to keep FEGLI Option B coverage up until retirement and beyond, and has held this coverage for five years before retirement, then if that employee dies before their spouse, the proceeds of the insurance could be used by the surviving spouse. Also, it can serve as a replacement for the income from Wanda’s FERS retirement benefit. Let’s say Wanda’s five multiples of Option B coverage worth is $320, 000 ($64, 000 x 5). The coverage costs $138.67 per month before Wanda turns 60, at age 60, the premium would have doubled to about $304.86 a month. When she clocks 65, the cost would also have reached $374.40 monthly, and until she is 80, this will steadily rise every five years.

Always bear in mind that the money used for the settlement of these premiums are derived after deducting tax and the surviving spouse is entitled to a minimum of survivor annuity to continue coverage under the Federal Employees Health Benefits Program. Despite the fact that a surviving spouse may require more income than the spousal FERS or CSRS, if you die first, the survivor annuity has a provision of replacing your retirement benefit, in later years, FEGLI can become prohibitory to cost and is not a perfect substitute.

FEGLI Facts

In conclusion, these are some of the things you should remember about FEGLI:

• FEGLI provides accidental death and dismemberment insurance for employees as part of its basic coverage at no additional cost.
• If you cancel FEGLI, there is no refund of premiums.
• If you are diagnosed with a terminal illness, FEGLI includes a “living benefit,” which is payable from your basic life insurance before your death.
• It is group term life insurance. It does not build up cash value.
• Although your beneficiary will be paid irrespective of the cause or location of your death, if your beneficiary causes your death intentionally there is however an exception.
• You can’t take a loan out against your FEGLI insurance.

What Becomes of Your Benefits Upon Leaving and Returning to Federal Service?
By Jeff Spencer

Jeff Spencer developed his passion in helping others with financial planning at a very young age while enlisted in the Air Force, stationed in England working on aircraft as a crew chief. Over the years, Jeff has continued with his passion and recognizes how money can become a powerful tool that should be used to deliver safety and protection in our lives.

Are you considering leaving the Federal Service, or have you wondered what would happen if you did? Many are unaware of what will become of their benefits upon departure from federal service before retirement. Another common question is what would happen to them if they were to return to service.

It’s not as unusual to return to federal service after a break in service as one might think. Some people get caught up in the “grass is greener” belief, only to find that they may be wrong wrong after all.

After coming back to federal service (assuming that you are returning to a permanent position), you can continue in or enroll in all of the benefits for which you are eligible, such as life insurance, health insurance, etc. If before you left you had FEHB and decide to pick it up immediately after your return, then your coverage, for the purpose of meeting the five-year requirement, would be considered “continous.”

If your break in service within less than 180 days and you had a FEGLI, you will be eligible for enrollment in the FEGLI coverage you had at the time of your separation, and would not be permitted to select any other coverage. However, If your break in service was 180 days or more then you would not only be enrolled with your previous FEGLI coverage, you would have the option to elect other coverage as well.

At the time of your resignation, any sick leave you had at that time would be re-credited. Based on your length of service, you would begin earning annual leave (including the service that took place before your resignation).

Although you will not be able to re-contribute the funds that you withdrew from the Thrift Savings Plan after resignation, you will be able to make contributions again. If you had rolled the funds from your TSP into another qualified account, you would be able to roll that account into the TSP.

Your retirement coverage is directly dependent on what your retirement system was when you resigned, as well as the duration of absence from federal service. For example, if you were FERS at the time of resignation, you would return to FERS. If the credible civilian service at the time of your resignation is less than five-years, you would contribute 4.4% (or 4.9% if you returned to a position covered by the special provisions for firefighters, officers of law enforcement, etc.) of your salary to the FERS system. This happens regardless of how much you were contributing at the time of your departure. If you had five or more years of creditable civilian at departure, you would contribute to FERS when resigning, at the same rate you did before you left.

The rules would differ if you were CSRS before your resignation. Chances are that as CSRS, you may already be eligible for retirement, although this doesn’t apply to all CSRS employees.

The following is for the CSRS employees who have not reached retirement age when they opted in for a resignation:

• You would be required to be covered by Social Security if your break in service was for more than a year. You would need to choose between CSRS Offset and FERS as you would no longer be able to remain as just CSRS.
• You will have the option to elect FERS coverage when you return as long as your break in service was more than 3, but less than 365 days.
• If at the time of departure you were CSRS Offset but chose to elect FERS when you return, the entire amount of your CSRS Offset time that you had before resignation would be treated as FERS service.

You will have the opportunity to re-deposit any CSRS or FERS retirement contributions that you withdrew when you resigned, regardless of which retirement system you were a part of.

If you need assistance, please make sure that you contact a local financial professional:

Breaking Down the TSP
By Jeff Spencer

Jeff Spencer developed his passion in helping others with financial planning at a very young age while enlisted in the Air Force, stationed in England working on aircraft as a crew chief. Over the years, Jeff has continued with his passion and recognizes how money can become a powerful tool that should be used to deliver safety and protection in our lives.

Federal employees can receive a lot of perks such as job security, healthcare, a structured work schedule, federal holidays, etc. One of the least known benefits of a federal government job is the Thrift Savings Plan (or TSP).

Workings of the Thrift Savings Plan

The TSP is similar to the 401(k) that is available for civilians. Employees may or may not allocate a part of their salaries into this plan and then invest it into a mix of any of the 6 available funds (discussed below).

Even when workers do not select the kinds of funds for investment, TSP invests the money collected in a target-dated, age-suitable fund referred to as the Lifecycle Fund or ‘L’ (The fund was previously called ‘G’ but has recently been changed to L).

Workers can select between a Traditional or Roth TSP. Similar to a 401(k), contributions to the Roth TSP get taxed as income. However, they are typically not taxed during withdrawal. Contributions to Traditional TSPs are taken from taxable income, but tax needs to be paid during a withdrawal. It is possible for employees to make contributions to both Roth and traditional. However, the annual limit currently applicable would stay the same as it gets considered as one type.

People who begin working for the federal government or join the military after a civilian career have the option to roll over varied individual 401 (k) and other retirement accounts into the Thrift Savings Plan. Also, workers can roll over the contributions to the TSP into the IRA or 401(k) after they leave a federal government job.

Like the civilian retirement plan, people can take out their money when they are 59.5 years old without paying any penalties. Similarly, the minimum required distributions begin when you become 70.5 years old. Each person tends to have dissimilar RMDs and hence it is advisable to seek professional, financial help.

Many different options are available for workers if they want to withdraw the TSP money before they become 59.5 years old. You may take a loan on the amount in balance, you can apply for a financial hardship, or you may go for complete liquidation. There are many other situations offered by TSP where you can access the money before the time limit is over and you need to find if any of those options are applicable to you.

What is the method of contribution to TSP?

Military and federal workers can set up their TSP contributions through the Thrift Savings Plan website. Many employees are often given the option to go for TSP contributions during the basic training or on-boarding process.

Even in case of employees who opt out of making any contributions from their wages into the TSP, the government allocates 1 percent of their pay to the TSP for free. This does not have any impact on your overall salary.  This contribution begins the moment you become a federal employee, or after you have served for 60 days in the military.

This one percent contribution by the government to the TSP comes with a vesting period before the employee can have access to it. Employees in the federal government need to wait for 3 years before that 1 percent is theirs. In some cases, the vesting period may be 2 years as per the type of federal employment. Thus, people who do not remain a federal employee or a military personnel for a minimum of two years can lose their 1 percent, which goes back to the government.

In case of employees who do opt for contribution to the Thrift Savings Plan, then the government will contribute a part of your allocation. Due to the automatic contribution of 1 percent, workers typically get matched contribution of up to 5 percent.

For the initial 3 percent contributed by employees, the government also puts in 3 percent; for the next 2 percentage points paid in, the government pays 0.5 percent each. Workers have to allocate 5 percent of their wages to get a full match by the government. The government does not match contributions beyond 5 percent, but employees are welcome to make allocations of more than 5 percent of their pay to the TSP.

People who have served in the military may be familiar with phrases like ‘hardship pay’, ‘hazard pay’, ‘separations pay,’ etc. You can also choose to have a part of such ‘pays’ to be allocated to your Thrift Savings Plan. This contribution will not be matched by the government, but it is a great way to pump up your contributions to the TSP when you are away for training or get deployed.

Jeff Spencer Discusses the different funds in Thrift Savings Plan

• (G-Fund) The Government Securities Investment Fund only invests in US Treasury securities. It comes with almost no risk, but low returns.
• (F-Fund) The Fixed Income Investment Fund invests in different government and corporate bonds. The returns of the fund are dependent on interest rates. It is comparatively low-risk, but returns may not be that great.
• (C-Fund) The Common Stock Index Investment Fund tracks the S&P 500 index. The fund is exposed to market risk and there is no guarantee of returns. But the S&P 500 index has typically done well.
• (S-Fund) The Small Cap Stock Index Investment Fund tracks the Dow Jones US Completion Total Index. It is exposed to market risks but offers increased returns as compared to bond funds.
• (I-Fund) The International Stock Index Investment Fund follows the MSCI EAFE Index. Since this fund deals with international investments, market risk is much broader.
• (L-Fund) The Lifecycle Fund is made up of Income, 2020, 2030, 2040, and 2050 funds, each of which come with varied risk and portfolio structure.

If you need assistance with your TSP, or you have additional questions, please reach out to a local financial expert for advice and assistance:

Contact Jeff Spencer

Heartland Retirement Group
HRG4Life.com

Phone: 513-903-7551

Email: [email protected]

Jeff Spencer Articles

Article: What Becomes of Your Benefits Upon Leaving and Returning to Federal Service? By Jeff Spencer

Article: Getting the Best Deal on Life Insurance by Jeff Spencer

Article: Earning Social Security Credits by Jeff Spencer