Four Important Decisions for Federal Retirement, by Aaron Steele

Unfortunately, many federal workers close to retirement make mistakes that come back to haunt them after leaving the world of work. If you want to avoid these mistakes, it’s important to listen to the advice of financial advisors and learn from the lessons of those retired before you. Here are four examples of important decisions you face!

 

1. Survivor Election

 

For those under the FERS (Federal Employees Retirement System), your spouse automatically has access to a survivor benefit as long as you’re married. What does this mean? Well, all benefits are reduced by 10% to provide income for your partner after passing away. For the remainder of their life, they’ll receive 50% of the unreduced benefit if you pass first. If they pass away before you, the benefit adjusts, and you’ll receive the full amount (without the 10% reduction).

 

This is an automatic system, but one damaging trend has seen near-retirees choose insurance to replace survivor election in recent years. The problem with this method is that nobody knows future inflation. Therefore, it’s impossible to predict the required insurance amount—this is made even harder because you don’t know how long you and your partner will live. Even the most complex, advanced online calculator can’t take these considerations into account.

 

If your partner relies on you for health insurance, this is something else that disappears if you swap survivor election for insurance. Alternatively, survivor benefits allow continued FEHB (Federal Employees Health Benefits) coverage for spouses.

 

Ultimately, consider how your partner would survive if you passed away first. If they have the resources to maintain the same standard of living, you can take more risks. Otherwise, seriously consider keeping survivor election.

 

2. TSP Investments

 

If you don’t know where to invest in your TSP accounts, you aren’t alone. This is a common problem, and some people invest wholly in the C Fund, wholly in the G Fund, or another option. At the moment, you might think that the G Fund is the best option because you don’t want to suffer big losses as you get closer to retirement.

 

Sadly, most people have no idea when to leave the stock market. If you’re in this group, don’t be afraid to contact a financial advisor to get tailored advice based on your finances and retirement goals.

 

Furthermore, we always encourage people to remember L Funds. This fund aims to provide a balanced mix of investments, and there’s an element of personalization because it’s based on your retirement date. At the same time, do everything you can to improve your knowledge in this area. While some read, others ask co-workers or attend training sessions. The more you know, the easier it becomes to make a good investment decision with your TSP. Get started with the Training Resources page of the TSP website.

 

Additionally, remember that emotions play a role in investment decisions. When you feel angry, greedy, desperate, and even happy, it’s easier to forget the facts and make bad decisions.  At all times, keep emotion away from your investment decisions even if you fear a fall in the market or believe that things are going in your favor.

 

Financial professionals are trained and experienced in dealing with people in your position. They understand the emotions that come with retirement investing, and their sanity or reality checks could mean the difference between a comfortable retirement and poor decisions ruining retirement plans.

 

3. Medicare

 

Even without Part B of Medicare, you’ll have coverage for the rest of your life thanks to federal health insurance. Many people are happy with the FEHBP coverage they received during the working years, so don’t think changes are necessary. Depending on the circumstances, this could be a mistake.

 

First and foremost, we advise checking that FEHBP is the best plan rather than just assuming. As Medicare Part B becomes the main payer of medical expenses, you might find that this is the stronger option in retirement. When Medicare takes over as the main payer, know that FEHB plans often waive deductibles, coinsurance, and copays.

 

Also, your FEHB plan may offer a reimbursement to help with the premiums for Medicare Part B. Finally, we should also note that Medicare is designed specifically for older generations; therefore, the coverage and benefits go beyond what you might find with other coverage. This includes home care, chronic condition treatment, and medical equipment.

 

4. FEGLI

 

If even the phrase ‘FEGLI’ sends shivers down the spine, know that this is a sticking point for many near-retirees. Should you increase life insurance when starting a family or getting married? Yes, but it’s important to keep an eye on the coverage and consider reducing it again once the children have moved on and you’ve paid the house off completely. For most younger workers, a common option is to have Basic FEGLI that offers the following:

 

• Option A – $10,000 additional
• Option B – Five multiples of basic pay
• Option C – $25,000 coverage for a spouse and $12,500 per child

 

As you get older, the need for life insurance reduces, and the insurance itself also gets more expensive. With all retirees facing a decision of how much coverage to carry into retirement, those who don’t get accurate advice and assistance often make simple mistakes. This includes:

 

• Forgetting Basic FEGLI – Even if you need other forms of life insurance, there’s no reason why you should lose Basic FEGLI from your strategy. For a small fee, you get good coverage, and it increases in line with your salary changes. After leaving work, there’s an option to reduce Basic FEGLI by 75%. Here, you stick with a pre-retirement level of coverage. After reaching age 65, you lose 2% per month until you’re left with one-quarter of the original amount.

 

• Keeping Option B – Option B is designed to protect loved ones just in case you pass away earlier than expected. If you’ve paid the mortgage and children have their own homes, you probably don’t need to keep this insurance so high.

 

Keep these four decisions in mind when planning federal retirement, and you’ll avoid the mistakes of millions before you!

Contact Information:
Email: [email protected]
Phone: 3604642979

Bio:
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.

Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.

Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.

Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.

Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.

With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.

Aaron can help you and your family to create, preserve and protect your legacy.

That’s making a difference.

Disclosure:
Disclosure:
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