FEGLI
FEGLI or the Federal Employee Group Life Insurance is a group life insurance policy that covers most of the federal employees.
Understanding Your FEGLI Coverage, by Todd Carmack
As a benefit counselor and retirement income specialist, I have come to realize that a lot of employees do not remember what they signed up for or understand their federal employee group life insurance (FEGLI) coverage.
Basic FEGLI Coverage
Basic FEGLI coverage, if elected, FEGLI Basic coverage provides a death benefit based on your gross salary, rounded up to the nearest thousand and then $2000 is added to that figure. Example, if you make $51,486, your death benefit would be $54,000. At age 65, Basic FEGLI coverage becomes free and the coverage will reduce down by 2% per month until it reaches an ultimate reduction to 25%.
Employees do have the option to elect NO FEGLI Reduction or a 50% FEGLI Reduction. If elected, there is a premium payment required to maintain your FEGLI coverage.
FEGLI Option A
FEGLI Option A is a flat $10,000 death benefit. At age 65, coverage is free and will reduce by 2% a month until it reaches $2500.
FEGLI Option B
FEGLI Option B is optional FEGLI coverage provides 1,2,3,4,or 5 times your annual salary as a death benefit. Example – if your salary was $51,486, and you chose 5 times your salary, your death benefit would be $260,000 ($52,000 x 5). This option can become very costly after the age of 50. The cost or ‘premium’ paid to maintain FEGLI almost doubles every 5 years. At age 65, you may elect to reduce coverage by 2% a month for 50 months until it reaches 0, or continue to pay premiums.
Because of the higher premium costs after age 50, it may be in the employee’s best interest to consider looking for a level term insurance plan in order to reduce the monthly premium over time. A great resource I’ve found for reducing your FEGLI expense is www.CompareFEGLI.com.
FEGLI Option C
FEGLI Option C is optional coverage provides a death benefit for your spouse and eligible dependent children (under age 22). There are multiples of 1-5 available. The FEGLI coverage amount is increments of $5000 for spouse and $2500 for each child. Example – if you chose a multiple of 3, there would be $15,000 of coverage on spouse and $7500 coverage on each child.
At age 65, you may choose to reduce coverage by 2% per month until it reaches 0, or continue to pay premiums.
About the Author
Todd Carmack
Arizona
Other Todd Carmack Articles
Understanding The Thrift Savings Plan, by Todd Carmack
Social Security for FERS Employees, by Todd Carmack
Is The Pension Survivor Benefit Best For You? by Todd Carmack
Disclosure: BWM Advisory, LLC reserves the right to edit blog entries and delete those that contain offensive or inappropriate language. Content will also be deleted that potentially violates securities laws and regulations. Different types of investments involve higher and lower levels of risk. There is no guarantee that a specific investment or strategy will be suitable or profitable for an investor’s portfolio. All investment strategies have the potential for profit or loss. Hyperlinks on this website are provided as a convenience. We cannot be held responsible for information, services or products found on websites linked to ours. BWM Advisory, LLC is registered as an investment adviser with the SEC and only conducts business in states where it is properly registered or is excluded from registration requirements. Registration is not an endorsement of the firm by securities regulators and does not mean the adviser has achieved a specific level of skill or ability.
PSRetirement.com Can Connect you to Financial Advisors
Not satisfied with your finances, PSRetirement.com offers you the chance to receive a Free Retirement Benefit Analysis and also speak to an independent financial advisor
Federal and Postal employees have to deal with many financial particulars for their retirement planning. They need a long-term financial plan and learn all they can about their benefits and insurance costs. The whole process can get very complicated. And without proper help and guidance, mistakes can be made which can lead to some serious financial problems.
To make sure that you do not end up in financial difficulty in your retired life, you should consult a financial advisor. But before you go and talk to the first person you know, who is good with numbers, you should consider the magnitude of choosing the right financial advisor, one that is knowledgeable in the Federal Retirement benefits that you are eligible for. All of your years of service and hard work is for a quiet retirement and the person advising you on savings, benefits and insurance details should be properly qualified and experienced because your financial comfort is on the line.
PSRetirement.com offers federal and postal employees an opportunity to speak with a qualified financial advisor after receiving a free, no-obligation retirement benefit analysis. For your convenience, the website offers you a way to get in touch with a professional who can answer any questions you may have about your finances and help you resolve any issues that you may be facing.
A PSRetirement.com spokesperson talked about financial advisors and federal employees, saying, “We understand the importance of proper financial planning. That is why we believe it is important to give our readers the opportunity to speak with a local financial advisor who may be able to answer their questions. Most people understand the importance of having good advice, but sometimes you just don’t know where to look to get it.”
If you have decided to approach your federal retirement planning with the help of a professional then this service from PSRetirement.com will greatly benefit you. An experienced financial advisor can provide you with many tips and recommendations on how you can plan out your retirement savings. They can also offer you advice on how to manage your social security benefits and how to minimize your insurance costs.
PSRetirement.com is like your partner in planning your retirement. The website provides you all the resources and information you would require to make a thorough and favorable retirement plan. You will almost certainly find the answers you need.
About the Company
PSRetirement.com is the ultimate resource for updated information related to Federal and Postal Retirement. The website contains everything there is to know about the rights, responsibilities, and the laws governing civil service and federal employee retirement systems. It also features articles related to financial planning, social security benefits, FSAFEDS, TSP.gov account, Postal Employee LiteBlue information and also several forms for insurance, such as FEGLI & FEHB, along with information on your Thrift Savings Plan and other retirement benefits.
Website: http://www.psretirement.com/
FEGLI: Federal Employees Group Life Insurance Changes
FEGLI Changes
There are not many things in today’s world that stay the same – FEGLI is not one of them. Changes are constantly happening and we must stay abreast of those changes that have a direct impact on us and our families. FEGLI (Life Insurance) has been a part of the planning process in families for as long as I can remember. I might be dating myself, but I remember when the Life Insurance guy used to actually come to our neighborhood to collect insurance premiums. He would hand out times-tables on little cards and quiz me when he came back the following week to see what I had learned. Alright, enough of the nostalgic trip down memory lane.
The Federal Employees Group Life insurance (FEGLI) program has now been extended to cover legally married same-sex spouses and their children who qualify as eligible family members through the Defence of Marriage Act (DOMA). Your eligible family members are automatically covered under the employee’s existing coverage – FEGLI Option C. Postal employees’ coverage is effective when the Standard Form (SF) 2817 for Life Insurance Election is received by the Human Resources Shared Service Center and the employee is both in a pay and duty status (use LiteBlue to review your FEGLI elections).
Postal employees have several ways by which to gain access to the form. They may request the form from Shared Services via phone or locate the form at www.opm.gov/forms.
Make sure as a postal employee that you are reading your postal bulletins for changes in policies impacting you and your family. If you are a federal or a postal employee visit often OPM’s website so that you will have the greatest advantage of ensuring that your benefits work for you and your family. Information, and in this case information on your FEGLI benefits, is your best resource for planning to retire well.
P. S. Always Remember to Share What You Know.
RELATED TOPICS – More Federal and Postal Insurance Information
Federal Employees Health Benefits (FEHB)
Federal Flexible Spending Account (FSAFEDS)
Federal Long Term Care Insurance Program (FLTCIP)
Federal Employees and Medicare
Federal Employee Dental and Vision Insurance Program (FEDVIP)
Federal Retirement Benefit Analysis & Review
Benefit Analysis for Federal Retirement
Successful Federal Retirement requires the gathering of as much information as possible about how your federal retirement benefits will work when you leave employment. Human Resources Offices should be available to answer your questions (Postal employees should visit LiteBlue and talk with a local professional). I would suggest perhaps doing a brown-bag lunch and inviting a representation from Human Resources who is a skilled Federal Retirement Benefits Specialist to go over your questions and concerns and get a Benefit Analysis performed.
Prepare a list of questions before hand. Form a group of individuals who would like to participate in the Retirement Brown Bag Forum and perhaps create a Benefits Review Form. The form should ask about all benefits you are eligible to transport into your federal retirement:
Questions you should have answers for during the federal retirement review and that would be answered if you have a federal retirement Benefit Analysis performed.
Your FEGLI (Life Insurance), the value of it in retirement and the potential cost to you as you age. Your beneficiaries and making certain your designations are updated and whether or not you should compare your FEGLI against other company’s plans before you retire.
Your FEHB (Health Insurance): Look at the coverage you have and evaluate whether it is right for you in retirement. Make certain you have made any changes as to who is covered on your policy. Often we select options and do not go back for a long time to update the options. This would be a good time to see where you are.
Your Thrift Savings Plan (TSP): Although your TSP Account is not kept in your eOPF, there are still questions you need to ask. Make sure that your beneficiary forms are up-to-date and that you are getting the best benefits from your participation (maximize when possible).
Dental and Vision (FEDVIP): Ask questions about this coverage as it usually is a coverage that is transportable but the cost is left to the employee entirely.
Long Term Care (FLTCIP): If you have not purchased a policy by the time you are 50, it might be prudent to look at policies outside of what your agency might offer. You can usually get a better deal in the market.
The Value of Your Unused Annual Leave (Annual and Sick) – Discuss how your sick leave can extend your service computation date to support your federal retirement benefit. Your annual leave check can act as leverage until you receive your first full annuity check.
Let this be a time of getting together with your colleagues and Human Resources to make sure you retire on your own terms – knowning everything you need to know about how your benefits work in retirement is the golden parachute you need to retire well.
P. S. Always Remember to Share What You Know.
RELATED ARTICLES
Thrift Savings Plan (TSP) Withdrawal Options
For Postal Employees – LiteBlue and the TSP
Federal and Postal Employees – Choosing a Financial Professional
FEGLI – Questions to Ponder
FEGLI Questions to Ponder
We have discussed life insurance provisions offered via FEGLI (Federal Employee Group Life Insurance). OPM is responsible overall for providing the life insurance benefit to federal employees. OPM contracts with MetLife to process FEGLI claims among other important responsibilities, but OPM has your records and is able to tell you about your FEGLI coverage, but they are not able to provide you advice about how much insurance you should have.
Throughout our posts on FEGLI, the resounding theme has been centered around the questions of how much life insurance is needed to protect your loved ones and what do you want the life insurance to do for you and your family. The sample questions below might assist you in taking care of the final business of your life as you plan to retire well.
Questions You Should Ask;
• Financial experts say for my family’s security, my death benefit should replace my current income. How does my current FEGLI death benefit compare to this statement? Is this an area I need to evaluate more closely?
• How early in my career should I find a financial expert who understands my federal retirement benefits, including my FEGLI coverage? (its never too early).
• Have I thought about trying to determine the kind and amount of FEGL coverage I need in order to meet the goals I have set? Is there a cheaper option than FEGLI, how can I compare FEGLI against other options?
• Financial experts say that life insurance coverage should be 10 to 20 times your annual salary. How often should I evaluate my own insurance coverage to see where I stand?
• Do I have enough coverage to pay for my funeral expenses without placing a burden on my family and will I have some left to provide a cushion for my family?
• What should my FEGLI cover to help take care of my funeral costs and other expenses?
• Have I considered the high costs of funeral and burial arrangements and how I might lower the costs by looking into pre-funeral plans as part of the process of planning to retire well?
• Have I looked at my debt to FEGLI death benefit ratio? Even if I have good coverage is my debt so high that it will eat up the benefit and leave my family strapped?
These are simply sample questions about FEGLI that you should ponder and some food for thought to assist you in planning your federal retirement.
P. S. Always Remember to Share What You Know.
RELATED TOPICS – More Federal and Postal Insurance Information
Federal Employees Health Benefits (FEHB)
Federal Flexible Spending Account (FSAFEDS)
Federal Long Term Care Insurance Program (FLTCIP)
Federal Employees and Medicare
Federal Employee Dental and Vision Insurance Program (FEDVIP)
Federal Retirement: Getting Ready
Getting ready for federal retirement means putting plans in place for perhaps one of the biggest transitions you will make in your life. Some things you should consider if you are planning to retire in 5 years.
• Have a Federal Employee Benefit Analysis performed.
• Ask your employer exactly what they can do in terms of helping you with your retirement planning. If they can’t do what you need – find a knowledgeable financial professional that can help you.
• Begin a planning process.
• Find out the process for keeping your FEHB (health benefits) after you retire. Make sure that any FERS or CSRS Annuity decisions that you might be comtemplating won’t negatively impact your spouses FEHB eligibility.
• If you have not met the 5 year requirement to take your health insurance into retirement, check with OPM to see if the requirements can be waived.
• Compare the costs of your FEGLI (life insurance) against the cost of an individual policy (you might be pleasantly surprised how much you can save).
• Review your electronic official personnel folder (eOPF) to make certain all military and civilian service is recorded.
• You should also ask for a ‘Request for Earnings and Benefit Estimate Statement (Form SSA-7004-PC) – Social Security.
• Read up on the provisions of the Government Pension Offset.
• Make certain you are well briefed on the Windfall Elimination Provision.
P. S. Always Remember to Share What You Know.
Budget Checkup for the Federal Employee
Retirement Budget Checkup
We hope that our budgets will always show that our expenses are subordinate to our income. Make sure that your budget includes paying yourself first (PYF), such as maximizing our TSP contributions or at least taking full advantage of your employers matching contribution. After we have taken care of all of our expenses, we may not always have monies left over. Unanticipated expenses can present themselves at any time and they will and most financial professionals recommend having at least the equivalent of 3-6 months of income as savings for just this type of event. It is critical that you pay yourself first, otherwise you distribute money everywhere else and neglect to protect your future security by including SAVINGS as a fixed expense.
There are some things we may overlook when doing a check-up to keep our finances on track. Always remember to do the following as you map out your vision to Retire Well:
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Carefully check your bank accounts and bank statements ensuring the bank’s balance is aligned with what your records show. It is amazing how much money consumers lose each year due to banking errors and other inconsistencies. Banks do not always catch their errors. You must be your own chief executive when it comes to safeguarding your money.
When you receive statements from your savings and investments, read them over carefully and check for error and omissions.
Employers are generally accurate with paystub information, but errors do happen. Additionally, because the paystubs of federal and postal employees are so complex, even if your paystub is correct you may be spending THOUSANDS of dollars each year that you don’t have to in the form of overpriced FEGLI costs (search the internet for “FEGLI rate comparison” – you’d be surprised how much you can save). Check your statements carefully each time you receive one. Always keep the last statement of the year and compare it with your W-2. If everything matches you can place it in a file to get ready to file your taxes. If there is a conflict, go to your Human Resources Office and ask for an amended and corrected W-2.
P.S. Always Remember to Share What You Know.
Budgets Change Because Your Finances Change
Budgets and Changing Finances
Are budgets forever? Can the budget you prepared 2 years ago help you manage your money today? The answer is NO. Budgets are not forever and what was true two years ago is not true today not where your budget is concerned.
Even if your income has not changed, expenses have gone up and perhaps some have decreased or even been eliminated. Your TSP balance has certainly changed and possibly the amount of FEGLI that you should own. Budgets are not static, but must change as circumstances in your life change.
Why do we need a budget? We need a budget to stay on track and monitor our expenses against our income. You may choose to keep your budget in an automated progam such as a spreadsheet like Excel or some other financial software program that you find suitable. You can also rely upon your bank / credit union or financial advisor to help you put together a realistic goal for both savings and expenses.
Keeping your records organized and in separate files will make getting ready to file your annual taxes a cinch. You will not have to run around collecting and sorting mountains of receipts kept in shoe boxes. I am not saying you shouldn’t use the shoe box method of filing. If you do, your file boxes should act as individual folders all containing unique information. You don’t have to take all the shoe boxes to your accountant, rather you can separate the materials out into individually marked envelopes for easy assessment.
Although, we live in an increasingly automated society many individuals are more comfortable doing things manually. The entire planning process and getting prepared for retirement is individual. The concentration and focus is more about you reaching your goals than on how you do it. We want to reach the finish line with our bags filled with everything we need to retire well.
P. S. Always Remember to Share What You Know.
Basic Employee Death Benefit: Applying for BEDB
Applying for Basic Employee De
ath Benefit
If you are a federal or postal employee part of your discussion for putting in place end of life provisions should include what your survivors need to know about applying for the basic employee death benefit.
Whether you are FERS or CSRS all applicants must complete the Standard Form (SF) 3104 – Application for Basic Employee Death Benefit. There is no need to worry about what to do because the instructions are fully outlined on the form. You may under certain circumstances have to complete additional forms.
If the deceased was retired at the time of death and you are the surviving spouse, you would be required to complete SF 3104A – Survivor Supplement which is an attachment to the SF 3104. Here again, the instructions are found on the form.
If the deceased was still an active employee upon his/her death and you are a surviving spouse or the former spouse, you and the deceased’s agency of employment are required to complete SF 3104B – Documentation and Elections in Support of Application for Death Benefits when Deceased was an Employee at the Time of Death. The 3104B can be acquired via the deceased federal employee’s former agency of employment. Instructions for executing the 3104B are found on the form.
Once applicable application materials have been completed it should be submitted to the employee’s employing agency of record if the deceased was still an active employee at the time of death. If the deceased was a former employee or a retiree, the completed application should be sent to the Office of Personnel Management’s Federal Employees Retirement System at P. O. Box 45, Boyers, PA 16017-0045.
Some of the small things we need to know can become an obstacle at a time when our emotions can least afford to be challenged. Start putting the business of the end of your life in place now so that your heartache and sorrow will only be because you are saying goodbye to a loved one.
P.S. Always Remember to Share What You Know.
The federal or postal employee may also have been covered by FEGLI.
Surviving spouse of postal employees may need to visit LiteBlue for information and forms
BEDB – Other Details You Might Need To Know
Additional BEDB Information
Many persons receiving survivor or BEDB death benefits will make address changes, bank account changes and other changes after submitting the application. If you happen to change your bank account before you receive payment, keep the old account open until you are assured that the payment has been deposited into the new account.
When you are fully acclimated into the system and begun receiving annuity payments, you can conduct much of your business online, including making any changes you deem necessary. You will receive a password to utilize the services of the online system once your payments begin.
Whether you choose to receive your BEDB payments via direct deposit or the direct express debit card, you will receive all other information relevant to you at the mailing address on file with the Office of Personnel Management.
If your mailing address changes before the processing of your application is completed by OPM and you have not received your claim number you should write to the Office of Personnel Management giving your name, date of birth, social security number and the same for the deceased federal employee. If you have received your claim number you can communicate with OPM via telephone of write to register a change of address.
When addressing any BEDB questions and/or concerns to OPM be sure to always use your claim number on all correspondence.
P. S. Always Remember to Share What You Know.
More information might be available to you on FEGLI and survivor annuity payments
Surviving spouses and family members of postal employees should visit LiteBlue for additional information
Receiving Your BEDB and Survivor Annuity Payment
Receiving your BEDB Payment
Many individuals who came of age when a lot of the automation we take for granted today was not in existence, have some reservations about BEDB direct deposit and taking care of their financial affairs online. The Department of Treasury through which federal benefits are paid requires all federal benefits be made by electronic means.
Believe it or not, there are still some individuals who do not have bank accounts; they simply choose to handle their business otherwise where they find the most comfort and security. The government recognizes this concern and for individuals who do not have bank accounts, payments can be made through a Direct Express Debit Card. The BEDB annuity payment is automatically deposited to the card on the date you would otherwise receive your annuity payment and is immediately available for your use.
There are some benefits you cannot receive by direct deposit or the express debit card and they are the Basic Employee Death Benefit and the survivor annuity payment if your permanent address where you would ordinarily receive payments is outside of the United States in countries where the automated programs are not available.
You must notify the Office of Personnel Management as to how you wish to receive your BEDB payments by completing Section 1 of SF 3104 – Application for Death Benefits. You can also send the Direct Deposit sign-up form (SF 1199A) to OPM’s Retirement Operations Branch – Boyers, Pennsylvania – P. O. Box 440 – 16017-0440. You and your bank must complete the form. You can also fax the information to OPM. Visit the OPM website for a current fax number.
Open communication is the path to a future you are prepared to meet.
P.S. Always Remember to Share What You Know.
The deceased may have had additional life insurance through FEGLI.
Postal employee families are encourages to visit LiteBlue for information
BEDB: Basic Employee Death Benefit
Basic Employee Death Benefit (BEDB)
Federal employees’ spouses may be entitled to a Basic Employee Death Benefit (BEDB) upon the death of the employee if the following conditions are met:
• You were married to the deceased employee for at least nine months. If the death occurred as a result of an accident, then the 9 month requirement does not apply.
• You were the parent of a child born out of the marriage even if the child was born after the death of the employee or retiree. You are also entitled if the child was born out of wedlock and you and the deceased federal employee later married.
Under these provisions as the spouse you may be eligible for the BEDB that is equal to 50% of the employee’s final salary or the employee’s average salary if it is higher than the final salary plus $15,000.
The $15,000 is increased by the Civil Service Retirement System’s cost-of-living adjustments.
The same benefit may be paid to a former spouse in whole or partially if there is a court order on file at the Office of Personnel Management (OPM) qualifying the ex-spouse to receive the benefit. The former spouse must have been married to the deceased federal employee for at least nine months and did not remarry prior to reaching age 55.
It is important to know the facts so that important aspects of your federal retirement benefits and provisions can become part of your planning process to retire well. If there are details about your benefits that you need more clarity on, visit your human resources office if you are an active federal employee. If you are retired use your CSA number to contact the Office of Personnel Management so that you will know everything needed to live and retire in comfort and security.
P. S. Always Remember to Share What You Know.
You May also wish to look into Federal Employees Group Life Insurance (FEGLI) benefits
For more information on benefits of CSRS employees click HERE
For more information on benefit of FERS employees click HERE
Information for Postal employees will be found at www.LiteBlue.usps.gov
Postal Retirement and Benefits – Postal Employees
Postal Retirement
There are some slight differences between the benefits of Postal employees and Federal employees. We would like to explain a few of them here and potentially give you reason to seek out additional informtion from a qualified benefit expert to help you with your own specific circumstance and questions about postal retirement. Employees in the federal service, not including the Senior Executive Services (SES), earn about 26 days of annual leave per year after 15 years. After the same period Postal Workers, earn a maximum of 20 days.
The leave structure is 10 days per year up to 5 years of service for the Postal Service as compared to 13 days for the first 3 years of service as a regular federal employee. From 4-14 years of service, regular federal employees receive 19 days of annual leave while postal workers receive 15 days after 5 years.
Federal employees also earn 4 hours of sick leave per pay period, while postal employees earn 3 hours per pay period to safeguard against illness and accidents. Because of the structure and the mission of the Postal Service the compensation profile is different from the regular federal service.
Postal employees regularly get pay raises and are compensated for overtime, night shift differential and Sunday premium pay. There are also minor differences in how FEGLI is paid. Therefore, when postal employees work on their own financial plan and postal retirement future, it is valuable to understand the structure of the postal employees’ total compensation and benefits plan.
P. S. Always Remember to Share What You Know.
For Postal employees; learn about LiteBlue
Learn about your FEGLI benefits and how you are covered.
Financial Advisors and Federal Employees
I was recently asked if my trainer of financial advisors and planners interested in the federal workforce differed from training federal workers? Without missing a beat, I said most emphatically “It certainly does.” It is more intense because financial advisors for federal employees need to know more about the Federal Retirement Systems than the federal workforce themselves.
The Federal Retirement Systems probably have some of the best benefits you will find all things being equal. It, too, is a system of immense rules and regulations that can be undeniably complex, even for someone who has spent a career absorbing all of the nooks and crannies.
The Civil Service Retirement System (CSRS) often referred to as the old retirement system was enacted in 1920. The world has changed a number of times since then and many amendments have been made to the system. One must be constantly updated on the changes so as to be an excellent source of information dissemination. I find that many financial advisors and planners I work with who wish to begin helping the federal workforce think of simply helping the workers manage their money. There is nothing wrong with that premise only that would leave the federal employee missing out on a great number of potential benefits
Federal Employees Partnering with Financial Advisors
Financial Advisors and Financial Planners (really the same thing) are important pieces of the partnership needed to guide the federal employee workforce to safe harbor so that their sails can withstand the uncertainty of storms that will surely come in their lives. To strategize such a journey requires acquiring a very sound knowledge of the Federal Retirement Systems (FERS, CSRS, FEGLI, FSAFEDS, etc.).
We are not talking about becoming Federal Retirement Specialists, but we are talking about partnerships that will equip these professionals to help manage the financial resources of a very unique group of employees. When you cast your net to work with the federal workforce in helping to plan their retirement, it needs to be cast wide because federal employees are as diverse as their many duties and responsibilities.
Although there are two retirement systems technically, there are a number of aspects that apply to special categories of employees as well, like firefighters, air traffic controllers and law enforcement officials.
Yes, my approach to conversational training with financial professionals is much more intense and absolutely focused on ensuring they know the language of the federal retirement systems and its workforce so that they can give them the tools necessary to retire in comfort and security.
If the federal workforce gets a course in the basics of the Federal Retirement Systems, then the professionals they entrust to handle their hard earned money – get the ADVANCED-ZERO TOLERANCE version with lots of hand-holding collaboration. I learn as much from Financial Advisors and Planners as they learn from me. We are all invested in making life in retirement and before a little easier to maneuver for federal workforce.
Financial Advisors who are knowledgable in federal and postal benefits need to be able to help you with your TSP account and Thrift Savings Plan fund choices, your Federal Employees Group Life Insurance (FEGLI) selection (both while employed and any potential reduction elections that you might want) and also possibly help you with your FSAFEDS and FEHB elections.
P. S. Always Remember to Share What You Know.
Recommended Articles
For Postal Employees – LiteBlue and the TSP
Federal Retirement Benefit Analysis
Is The Pension Survivor Benefit Best For You? by Todd Carmack
A Little-Known Opportunity Can Increase Your Retirement Income. by Mark Sprague
Retirement Planning: Critical Ages
It is a personal decision to decide when to retire but there are some age-based considerations that will help to guide federal and postal employees when planning and making retirement decisions. Retirement planning can never take place too far in advance.
The rule of 5 is important in the Federal Service (FEHB for instance). Generally speaking, if you have worked for at least 5 years you may be entitled to a number of benefits.
In addition, the chart below illustrates some important age-based considerations for your retirement planning.
Age 50
• Begin age-based catch-up to defined contribution plans and individual retirement accounts (IRA). Beginning with the year you reach age 50, federal law allows for the deferment of a certain dollar amount per year to a qualified defined retirement plan. The catch-up amount is $5,000, indexed in $500 increments. The age-based catch-up amount for IRA contributions is $1,000.
Age 55
• After separation from service, you may begin withdrawing from a qualified plan without paying a 10 percent penalty.
Age 59.5
• You may begin withdrawing from qualified retirement plans, if retired or from an IRA without incurring the 10 percent penalty.
Age 62
• You can begin receiving your Social Security benefits; however, the amount may be reduced by as much as 30 percent, depending on the date of your birth.
Age 63.5
• The Federal Consolidated Omnibus Budget Reconciliation Act (COBRA) law makes health insurance in most employers’ group health plans available for at least 18 months after separation; however, you bear the full cost, including the portion previously paid by your employer (plus a small administrative fee). Upon reaching age 65 and you enroll in Medicare Part B, federal law requires access to Medigap health insurance at standard rates. Combining COBRA and Medigap effectively ensures access to health insurance beginning at age 63.5.
Age 65 – 67
• Depending on your date of birth, you may begin receiving unreduced Social Security benefits without being impacted by earnings limits.
Age 65
• You may enroll in Medicare, if eligible, and by keeping your FEHB coverage, you will have sufficient coverage in retirement. Medicare pays about 80% of coverage and your FEHB will make-up for any outstanding portions for services covered. When you reach Medicare eligibility, Medicare becomes the primary in most cases, while your FEHB acts as a supplement. Note there are some services that Medicare covers and FEHB does not, the reverse is also true.
Age 70
• You may begin maximum Social Security benefits, if the starting date was delayed to this age. There is no advantage to delaying benefits past this age.
Age 70.5
• Required minimum distributions from qualified plans like your TSP, IRAs, and deferred compensation plans begin the year after you turn 70.5.
There have been many changes in health care laws; therefore it is always recommended that you review your policies and plans often. You should also find a good, highly trained, financial professional to help you with your retirement plan and benefit and insurance selections.
FEHB and Postal LiteBlue Access
P. S. Always Remember to Share What You Know.
Social Security: More Information
It is important that we gather as much information as possible to ensure the best use of our resources in retirement and maximizing your Social Security benefits (SSB) is an absolute must if you want to get the most out of your working years. Consider the facts below as part of your plan to retire well:
• Income from pensions, annuities and investments are not impacted by the earnings test. Earnings only apply to wages from a job or net earnings from self-employment.
• Forty credits are needed over the lifetime of one’s work career to qualify for Social Security retirement benefits.
• No estimate can be given if you have not earned enough credits to qualify for Social Security benefits.
• The closer you get to retirement, the more accurate your SSB estimations will be because there are fewer fluctuations in earnings and changes in the law.
• Currently you earn one credit for every $1200 you earn in wages or self- employment income. Earnings of $4800 will give you the 4 credits needed for one year.
• Actual Social Security Benefits calculations cannot be provided until you apply for benefits.
• Earnings may increase or decrease in the future.
• Once you begin receiving your SSB they will be adjusted for cost-of-living increases.
• Estimated benefits are based on current law (Laws are subject to change).
• Social Security Benefits may also be impacted by military service or pensions earned via work where you did not pay Social Security taxes.
For Federal and Postal employees the challenges of understanding Social Security stems from the fact that your employment benefits are already incredibly complex to fully understand. When you ad in Social Security you now also have to recognitize that if you focus solely on claiming at 62, 66 or 70 (the basic dates most people mistakenly select) you will miss out on a HUGE potential opportunity. Educating yourself on the different Social Security claiming strategies is a must. Recognition that if you are eligible for Social Security Benefits, in many instances if you delay claiming Social Security, your benefits will grow at 8% per year. That is an 8% guaranteed return from the U.S. Government – not too bad, especially when CDs pay 3% or less. All of this leads us to a simple reasoning, we highly recommend that you talk with a financial professional who is an expert in your FERS, CSRS & FEGLI benefits as well as one who has a great deal of expertise in Social Security claiming strategies.
P. S. Always Remember to Share What You Know.
Read more about your Social Security benefits
Having a well defined Retirement Plan is more important now than ever before
Federal / Postal Retirement Planning Report Card
Retirement Planning Report Card
From your Thrift Savings Plan to FEHB to FEGLI, each of us will be ‘graded’ on our Planning Report Card. Much like when we were kids in school how well prepare ourselves on these topics, will have an impact on how well we do. If you got good grades in school, your parents often rewarded you with something special, sometimes even money to show the value and significance of getting good grades. Your Retirement Planning Report Card, however, is far more important than if you got an ‘A’ in your Social Studies class. This Report Card will truly impact the rest of your life.
You have reached another milestone in our lives where once again a report card is important. The difference is if you get a good report card by planning ahead for retirement (such as using your Thrift Savings Plan fully), your reward is to live in comfort and security. Proper planning allows you to retire on your own terms and take the worry out of how you are going to survive now that your income is much lower than it was as an active employee.
Your planning report card should include estimates of your pension income which will resemble reality the closer you get to retirement. Your Retirement Planning Report Card should also include information on your TSP.gov account any Social Security Benefits you might be eligible for and even your life expectancy. If you are postal employee you will need to access your LiteBlue account and gather any forms that you would like to maintain in retirement. Look to include your total estimated monthly retirement income and your estimated monthly expenses. Do not forget to include any additional savings and IRA’s that you have along with your spouse’s savings too. Other items you think are relevant will help you paint the best picture possible of your retirement future. It is always a good idea to consider talking with a financial professional who focuses on Federal and Postal retirees (Liteblue information can be found HERE). They are tough to come by and the average ‘Advisor’ probably doesn’t know much about your benefit package, but if you can find a FERS, CSRS and FEGLI expert – you should do yourself the favor and sitting down with them to discuss your needs.
There is quite a bit of work to do to get ready for retirement, but the sooner you get started the closer you are to reaching your retirement goals.
P. S. Always Remember to Share What You Know.
Quiz for Federal and Postal Retirement
Retirement Readiness Quiz
If you took a retirement readiness quiz how ready do you think you would be? If you find that you have already completed a task, then you are a STAR. If you need to still get busy accomplishing the task, then simply make it a part of your Individual Action Plan (IAP) for implementation. This is not actually a quiz where you get graded but more of a global positioning system to help you navigate successfully to where you want to go. Beside each item indicate if it is COMPLETE OR PENDING. If the item is pending estimate a date when the item will be complete and the action you will take to make it happen.
• Have you quantified your financial objectives? In other words, have you estimated how much money you will need to live the life you desire in retirement?
• Have you set goals for retirement?
• Do you have doable strategies to achieve those goals?
• Can you itemize the strategies to achieve the goals you have set for retirement?
• Do you know where all your important records are?
• Have you informed someone you trust about your important records?
• Do you know how to reduce your FEGLI expenses and who to work with to make that happen?
• Do you know how you spend every single dollar and cent?
• Do you know how to access the TSP.gov website
• Are you saving enough money in your Thrift Savings Plan (TSP) and is your current mix of funds right for your needs?
• Have you prepared an estimated retirement budget and devised steps to help you operate within your budget?
• Do you intend to leave a big inheritance to your children, other family members, or a charity? If so, have you set aside money or made provisions to accomplish that goal?
• Have you thought about where you will live in retirement and the cost involved?
• What would you do in the event of an unexpected and extended disability before you retire?
• Do you have an emergency fund?
• If you are a couple, are both parties completely aware of the status of the financial situation?
• If something happens to either of the parties, is each member capable of managing the family’s finances independently?
• Are you taking full and total advantage of any tax-deferred savings options offered by your employer?
• If you have dependents that rely on your income for survival, what plans have you put in place in the event of your death?
• Are you taking care of your health so that you can have a good quality of life in your retirement years?
There are many more retirement readiness questions we could pose, but I think we have sufficient fuel to allow us to take a good look at our readiness for retirement. Remember if you have not done any of the things listed, it’s ok, you need only make them a part of your individual action plan and get started activating that plan as part of your goal to Retire Well.
P. S. Always Remember to Share What You Know.
Click HERE for information on CSRS
Plan Building: How Do I Get Started?
~~HOW DO I GET STARTED WITH A PLAN?
By now you are probably asking – How do I get started setting goals that are SMART and putting a plan into action? You get started by first simply writing down what you desire your retirement picture to reflect. Write down your goals, evaluate and analyze them so they fit your circumstances and values.
Create a strategy that is doable with short, intermediate and long-term goals with time horizons that are based in reality. Make certain that the plan you create can be put into action without causing undue stress on your emotional and financial well-being. Lastly, make room to monitor and track the movement of your plan, leaving time and space to modify the plan as circumstances and conditions change in your life both for you and your family.
A plan that starts out SMART ends with giving you in retirement the lifestyle you desire and deserve.
P. S. Always Remember to Share What You Know.
Retirement Plan for Federal and Postal Employees
Your Federal and Postal Retirement Plan – Will It Work
How do you know if your retirement plan is a good one and if it will work? Think about the strategies below:
• Your overarching goals for retirement are outlined (stay flexible).
• You have clearly written down all of your financial goals for retirement
• Are you maximizing the benefits of your TSP.gov account
• You have a spending and retirement plan for all of your income sources.
• You always review your goals before spending to avoid impulse spending.
• You have included the development of a budget that you monitor now and will continue monitoring into retirement.
• Your retirement plan includes a very close estimate of how much you can spend on clothing, entertainment, eating out and vacations.
• You plan ahead for major expenses and purchases so you don’t have to rob your savings.
• You have an emergency fund to cover unexpected expenses (3-6 months or more). You decide what fits your circumstances.
• You do comparison shopping always (ie. Search for “FEGLI comparisons” on the internet).
• Set aside some money to spend as you please, only after you have paid yourself first.
Your retirement future is important business, but you should still have some fun as you set your priorities to retire well.
P. S. Always Remember to Share What You Know.
