There are so many rules, programs, and options available, it’s easy to get wrapped up in an the often-confusing world of a federal employee retirement. In episode 108, Val dives into the complex world of federal employee retirement benefits. Val breaks down the most common misconceptions surrounding federal employee retirement and dispels myths through essential information you must know about a federal employee’s retirement.
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American Benefits Exchange focuses on providing solid financial solutions to Federal, postal, and state employees as well as members of the United States Armed Forces and small businesses. American Benefits Exchange brings years of experience and knowledge to support these niche markets.
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9.27.24: Audio automatically transcribed by Sonix
9.27.24: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Speaker1:
Welcome back to the federal retirement Show. I'm your host Val Majewski with American Benefits Exchange. Appreciate you taking the time out of your schedule to join us and view our content. As always, I highly recommend you go back and view our previous episodes. There's a lot of great information in there for you, the federal employee who's looking to make sense of your benefits and retirement information. That's what this show is all about. It is for you. It is information we believe is important to you. We answer important questions. We talk about topics that we've seen are important to federal employees as we go across the country, helping them out with benefits and retirement. Now I'm going to talk about a topic today called misconceptions. And maybe you have fallen victim to this. Maybe there have been some misconceptions that you've heard of, or you've found out that topics or items that you thought were true or not true, and it was now a misconception. But I've got a section in my book now. I wrote a book called There's No Excuse Your Guide to Maximizing Your Federal Employee Benefits. If you're interested in a copy, I highly recommend you reach out to us. You go to our website, Federal Retirement Show.com, fill out the form, request a benefits and retirement review or evaluation and you will receive a complimentary copy of There's No Excuse. You can also go on Amazon.
Speaker1:
It's there as well, but there's a section in there. This is in the the early section in the foreword where I talk about the reasons why I wrote the book, why we do what we do now. The book goes there is an informational piece, but also the benefits and retirement seminars and evaluations and webinars and presentations that we give across the country are so we can avoid misconceptions, so we can make sure that you're getting accurate Information so you can make dollars and cents out of again your benefits and retirement situation. So let's dive into today's topic and talk about misconceptions. As it says here, can you pass the test? I'm going to ask some questions in just a second and see how you'll do when it comes to your answers. But what is a misconception? What is or what are some of the misconceptions that we're going to be talking about? Well, a misconception is a view or opinion that is incorrect based on faulty thinking or understanding faulty thinking, or in understanding right faulty thinking or understanding I. This happens a lot with federal employees when it comes to, again, knowing about the finer details of your benefits and retirement situation, where did you get your information from? Where did you get that opinion from? Where did you get that answer from? Was it just talking to your colleague at the water cooler, or was it It's something you overheard.
Speaker1:
Was it something you thought was going to happen when you first got hired? Just something somebody told you about years ago? Yeah. I've always heard this, um, from federal employees, and they say work for the federal government, and you put your your 30 years in. The government's going to take care of you. You're going to be set. All you gotta do is work 30 years and you've got it made. You're going to retire with all the money that you need to retire with. Now, those of you who are federal employees now understand that that's probably not the case, right? For most people, you can't just work 30 years and do nothing else, have no preparation and be set. So that was a common misconception that I heard. Um, that's me. I'm not even a federal government employee. Right. That's something I heard growing up. You work for the federal government. It's the best job you can have. You put in your 30 years, you're going to be taken care of. The government's going to take care of you. You're going to be set. Now, what does this create? If you're believing in something that is faulty or incorrect? Well, this can create a false sense of security, depending upon what you're believing. A false sense of security. Like I just said, where people thought I put in my time, I put in a certain amount of time and I'm set.
Speaker1:
I don't need to prepare. It's all taken care of for me. I'm good. This can create that false sense of security. If you don't know all the variables, you don't have all the correct information. Creates confusion or discouragement too. So you can be confused on what's right and what's wrong. There's a lot of information out there. There are a lot of opinions out there. There are a lot of opinions, probably with the people that you're working with. Which ones are correct? Who's giving you the accurate and honest information? Where are you getting your information from? Have you checked them? Have you looked up and kind of referenced what they're talking about to make sure what you think you know is actually correct? One of the biggest things that we have is you don't know what you don't know. We just want to make it make sense. It can lead to improper or a lack of preparation. So you might be preparing in the most incorrect way possible based on a misconception, you may have this thought in your mind, and this is why you're preparing in a certain way. And it might be wrong because of the misconception. Or just like that 30 year scenario I was just talking about. It might create a lack of preparation because you think everything is good, it's all taken care of. And those are just that's just one example of a misconception.
Speaker1:
Okay. So I want to make sure that we can lay everything out on the table. And that's why it is extremely important, extremely important to either attend a benefits and retirement briefing. And whether you say, oh, I did one of those ten years ago, well things change. I highly recommend that you go and check it up again. Right? You don't just go to the doctor or get a physical ten years ago and say, yeah, I got that physical ten years ago. I'm good to go. I'm everything's solid. Well things change. Same with your benefits and retirement situation. It could change over time. Rules can change, laws can change, benefits can change. So it is beneficial for you to get an updated scenario or updated seminar webinar and I highly encourage you to get a personal benefits and retirement evaluation, a personal benefits review so we can lay it all out on the table. Again, you can go to our website, fill out the form, and request that one of our reps across the country, if it's not me personally, will be reaching out in order to schedule that with you and take a deeper dive into your situation, go over the details, but let's do this. I said at the beginning again. Misconceptions. Can you pass the test? I want to go over a few misconceptions that I've heard over the course of my career, and you can see a few of these in the book, but a few misconceptions and and how you would do if I asked you this question.
Speaker1:
So first one, okay, first quiz and you can jot these down if you want. You can jot down your answer. Say it out loud. Just commit to something beforehand. But the TSP, your thrift savings plan, your 401 K does have a match, but the TSP has matched 15%. If you're in management. So if you have a higher management role, is the TSP matched up to 15% if you're in management? I've heard this before. That is incorrect. That is false. Right. So this is one thing that I've heard people have said no I the TSP. I know it's only matched 5% typically. But if you're in management it's matched up to 15%. And people are very convicted with their beliefs on this. You have to really dive deep to explain to them that this is incorrect. This is not true. The maximum matching NTSB is 5%. Number two, if you want to cancel your phegley, you need to wait for an open enrollment. If you want to cancel, you can put on there. If you want to cancel or reduce your coverage, you need to wait for an open enrollment. Is that true or is that false? True or false? That also is false. You can cancel or reduce your coverage at any time.
Speaker1:
You just cannot add coverage at any time without showing evidence of insurability. But you can reduce or eliminate your coverage at any time. This was a misconception because people thought that you just had to wait for an open enrollment. Now, speaking of open enrollment, when it comes to Phegley, open enrollment for Phegley occurs once per year. Is that true or false? So when does open enrollment for Phegley happen? Open enrollment occurs once per year. Is that true or false? That also is false. Now open enrollment for your health insurance occurs every year, but open enrollment for Fegli is extremely rare. I've only seen that one time in my history of working with federal employees, which is now over 12 years. I've only seen an open enrollment for Fegli one time. Open enrollment for Fegli is very rare and does not occur on an annual basis. Therefore, like the previous question asked, you do not have to wait for an open enrollment because they are so rare in order to make a change to your fegli. As far as a reduction or elimination of coverage. So open enrollment for your health insurance occurs every year, but open enrollment for your fegli does not. That is false. All right. Moving on. Another question that's a little bit longer one. So just follow me on this scenario. If both you and your spouse are covered through a fhb plan, a federal employee health benefit plan, and your spouse dies, your spouse passes away.
Speaker1:
The HR department will automatically reduce your premiums to reflect a single individual. So you're going through your working career. You and your spouse are on your health plan. You have, let's say, a plus one or a family plan. Your spouse passes away. Hr will automatically reduce that upon the passing of your spouse and change that to a single person. Let's say your spouse, your self plus one. Change that to a single person. Is that true or is that false? Is that true or is that false? That also is false. Now, I heard that that was a misconception. Somebody thought that it was automatically taken care of. Said, how long ago did your spouse pass away? They would tell me, and I said, no, you have to make that change yourself. The federal government does not know that your spouse passed away unless you let them know. The same can be said about Fegli option C if you have fegli, option C, which is for spouse and kids, and all the other options for Fegli, including basic and all the other options, option A and option B are for you, the federal employee. Option C is on your spouse. If your spouse passes away or your kids age out and you have nobody that's covered under. Option C, you have to cancel it. They do not automatically know that your spouse passed away.
Speaker1:
They do not automatically know that you have no kids under the age of 22. Same with your health insurance. They're not going to know to make a change and let you unless you let them know. So these misconceptions have cost people some time and money, right? They were paying for an additional plan. They don't get those monies back. They made the change though. They can get it fixed. But they thought it was already taken care of. Misconception. False sense of security there. No one thinking it was already taken care of. My federal pension, social security and TSP income are not federally taxed. So when you retire and you get your pension, Social Security and any income that you draw from TSB are not federally taxed, is that true or is that false? True or false? If you said false, you're also correct. So this is a misconception that I saw. Hey, I work for the government. I've heard this is what somebody told me. I heard that my pension, Social Security, NTSB are not federally taxed. Well, it depends on what tax you're talking about, but not federally taxed. You are going to be taxed as far as what whatever portion of of those benefits are taxable, you will definitely be federally taxed. Now where did the misconception came in is when it comes to state income tax, there are some states that do not charge state income tax on pensions, social security benefits, or 401 K income.
Speaker1:
There are some states, like my home state of Texas, that do not have state income tax at all. So if you want to look at getting a pay raise or having less of your money come out in retirement, it might be beneficial to look at a state that does not charge tax on your retirement benefits or have state tax at all. But the misconception was that neither of those income options were taxed federally. And that is incorrect. That is false. You will have portions of those benefits taxed on the federal side. Okay. Last one. Since the TSP is a government run program, it is protected from market risk and loss. I had a federal employee talk to me about this one, and I wanted to see if this. He wanted to see if this was true or false. Is this true or false? Now, this should be probably the easiest one in here, and it is 100% absolutely false. Um, the Thrift Savings Plan is an investment type account. It's your 401 K, and it is subject to all the risks and rewards that the market could provide. Now, there is only one option if you want to keep your funds 100% safe from risk and loss. And that's the G fund. That's the only fund that's guaranteed never to lose. You can check out the performance history on that and see that it's not performing extremely high.
Speaker1:
Um, not giving you a whole lot of return around a little under 2.5% on average over the last ten years. But the rest of the TSB, all of the other funds, the FCA, SNI are all subject to the risks, the ups and downs of the market. Same with the mutual fund window as well. But I did have a federal employee that said, no, this is a government plan. This is a government run program and it is safe and protected because it is a government run program. I can't lose in the TSB. I don't know where that misconception came from, but it was there and it took a little bit of time and doing to show them. Now, granted, um, you may have other misconceptions, things like that, but this was a tough one to overcome for this particular person, and it was shocking that they had gotten this information and believed this information and were committed to this information and stuck on this misconception. So understand whether it's any of the questions that I've asked you here, or maybe you have your own things, reach out to us. If you think that you might have a misconception, you might think that you've been giving faulty information, incorrect information, and you're relying on that information that you got that is faulty. Reach out to us and allow us to make sense of it.
Speaker1:
Allow us to clear it up for you. The easiest way to do that is again to go to our website Federal Retirement show.com. You can request some information. You can request a full benefits review. We'll be in touch. We can get those questions answered. So how did you do? Did you pass the test? I didn't try to make it difficult. This this was not the SAT. This was not the mcats, you know, or a bar exam, but just try to see. Hey, are there any of these misconceptions that you were believing in? Do you have those misconceptions of your own. Would you like to go through some questions and make sure that you have the accurate and honest information that you need going forward? Yeah. Reach out to us. We'd be happy again to make sense of everything for you. So whether or not you got confirmed of what you already knew, or maybe I confused you a little bit more and you need more information and reach out to us. We want to chat with you. We want to talk with you. We want to go over your benefits and retirement situation and make sure that you've got everything you need to be successful in retirement, because I do not want you to have that false sense of security. I do not want you to be relying on incorrect information. I do not want you to be improperly prepared for retirement, as my the title of my book says, it's there's no excuse.
Speaker1:
There's no excuse to not be prepared. There's no excuse to retire the way you want. There's no excuse not to know everything you need to know. And the remaining part of that title of the book is your guide to maximizing your federal employee benefits. Maximizing. Take advantage of everything the government gives you. Well, how do you take advantage of something? You need to know everything about it. You need to know all the ins and outs. What's the good, the bad, the ugly, so you can take advantage of all the government gives you. And we want to eliminate misconceptions. And that way you know what, you know what you know. And we don't have that saying if you don't know what you don't know. So again, reach out to us. We'd be happy to help. I appreciate you again, taking time out of your schedule to view our content, to view our podcast, our radio show, go back and view our previous sessions. Um, I really, really do appreciate your time. The comments, the feedback that we get is extremely positive, and that's why we continue to do what we do, because we know this is valuable information that you, the federal employee, are looking for and needing to make the best decisions. So again, thank you for your time and look forward to seeing you on a future episode.
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