As we enter the new year, federal employees are facing a range of significant changes that could impact their benefits. In episode 117 of The Federal Retirement Show, Val goes into significant detail about the key updates federal workers need to be aware of for 2025. From adjustments in retirement plans, healthcare options, and pay scales to shifts in remote work policies and new workplace regulations, Val breaks down the most important changes you need to know to navigate the year ahead.
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1.10.25: Audio automatically transcribed by Sonix
1.10.25: 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 am your host, Val Majewski with American Benefits Exchange. Happy New Year, everybody. 2025 we've made it. Um, it's been a little bit since we've put some content out there for you. So want to get started in 2025. And we're going to talk today about changes and things that are happening this year that you need to know about. First of all, just want to thank you for taking the time out of your busy schedule to join me to learn about the information that we're sending out to view our content. I've gotten a lot of great feedback over the months, uh, recently. And and it's just awesome to hear about the federal employees that are investing time and taking the time to learn more about benefits and retirement information and the decisions that you're making that are going to affect you not only today, but as you go through along your working career and into retirement. So thank you for that. Share it with others. Right. There's there's nothing better that I like to hear then, hey, I've referred you to a friend. I've got a friend of mine that told me about your show, and I've been listening. Um, there's a lot of information out there. You know, we're getting close to 120 episodes now. So really, thank you. Because the only reason we're doing this is for you, the federal employee that needs to know this information. So thank you for your obedience in watching this and your diligence and sifting through the material, and also your ability to share this with your colleagues and people you think need to be pointed in the right direction.
Speaker1:
But as I mentioned today, we're going to be talking about changes that you need to know about for 2025. There's not a lot, but there are some things that you need to know in case you were not aware of it. So let's dive into the changes for 2025. So what all do you need to know? What are some of the changes? What are is affecting you as a federal employee now that we're into the new year? Uh, first of all, you may have seen and hopefully you know, that you've received a pay raise this year. The average pay raise across the board is about 2%. So check your first pay stub going into this year, your first leave and earnings statement. Just double check. See what you received this year as far as a pay increase. Now what does that affect. Obviously that affects your pay your take home pay. But some of the deductions will change if you're going to compare between 2024 and 2025 after the pay raise. Right. Some of the things are based on your your total salary, like your TSP contribution. If you're putting in a percentage, not a fixed dollar amount, you'll see that percentage or the amount that is deducted increase a little bit. You'll see an increase in your Phegley deduction, because Phegley and the cost of Phegley is based on your total base salary.
Speaker1:
If you have any of the optional coverages, option B will increase because it's a multiple of your salary. And if you've hit in the in the course of time here, if you hit a birthday, an impactful birthday, you might see an increase that way. So just be aware of that. But the average pay raise 2% across the Across the board for federal employees. Now, if you're retired, there was a cost of living increase as well this year. Um, it's different if you're CSRs or Fers. The CSRs employees or retirees saw a 2.5% cost of living increase while Fers employees, some call it a diet cola, uh, received a 2% increase. It's rare that the pay raise and the cost of living increase matched up exactly for, let's say, Fers employees. But it happened this year. So again, pay raise to active federal employees averaged about 2%. Yours might be slightly different depending on the agency you work for, where you live, the locality, all that stuff, but average about 2%. And the cost of living for CSRS retirees 2.5%. Fers retirees 2%. Social security cost of living this year uh, 2.5% increase. So just so you you see all of the the the adjustments to either your current pay or retiree pay or Social Security benefits that you're getting. Those are the increases TSP. Now we did an episode on the TSP. And how that's going to change from 2024 to 2025. But just to remind you that the increase in contribution went up $500 for the standard, I'd say I'd call it the standard contribution, right.
Speaker1:
The maximum that you can defer out of your paycheck. Uh, went up 500 to 23,500 this year for, um, you know, folks that are contributing to TSP. Now, if you're 50 and older, the catch up contribution is still 7500. Awesome. But there's an increase now. They call it the super catch up, if you will, or the enhanced catch up if you are 60 years old through the age of 63, so 60 to 63, your catch up contribution went up from 7500. 500. Now you can contribute up to an $11,250, in addition to the maximum contribution of 23,500, um from age 6263. Pretty pretty awesome there. After the age of 63, once you turn 64, it goes back down to the 7500 as the catch up contribution. But just to let you know that super catch up is new for 2025. Also for postal employees, if you're part of USPS, your new Postal Service health benefits program begins this year, so check that out. Um, you know, within the different carriers out there offering the new postal program that begins this year. So for postal employees, be on the lookout. Check out more information on the Postal Service Health benefits program for those that are, uh, taking Medicare and Medicare Part B, the premiums for part B increased this year. If you're contemplating taking part be increased this year to $185 per month. Now, this is before you know any of those Irma, those adjusted amounts for income if you make too much money.
Speaker1:
But the the typical part B premium increase to $185. Now Irma, I did an episode and had a special guest on talking also about Irma. You can go back and learn more about the income, um, restrictions or the income adjustments that can happen to your part B premium if you make too much money. But those begin this year. It means if your modified adjusted gross income, if you're a single filer, is in excess of $106,000, or if you're filing jointly with $212,000, this is your modified adjusted gross income. And it's a two year lookback for part B premiums. So they use the income from two years prior. If it's above these limits, depending on how you file, you could owe more than $185 per month for part B, so just be aware of that. And that sometimes goes into the determination or the the choice that a federal employee is going to make and whether or not they're going to participate in part B, because in some cases in retirement, we've talked about this before. It may or may not be beneficial for you. Now paying for part B, you get part A, excuse me, of of Medicare when you first turn 65, that's what you've been paying into your entire career or during your working career. But you have the choice when you turn 65 to take part B or not. Go back and view some of our episodes where we talked about this, but understand how that cost and the opportunity or the the chance that you might pay more due to those Irma restrictions.
Speaker1:
You might pay more in your part B premium. So it does go into the determination. A lot of federal employees I talked to, you know, they're asking that do I need to take part B while I'm working? Do I need to take part B when I'm retired, what are the advantages or disadvantages of each? Without going into crazy detail here, reach out to us. I didn't mention it earlier, but our website WW Federal Retirement Show.com. You can request some information. Fill out the form. One of our reps. If it's not me personally across the country, we'll reach out to you, go over your personal benefits and retirement situation and get your questions answered. Okay, so that is the or those are the changes when it comes so far in 2025. One more thing that just recently happened. If you've been following the news, the Social Security Fairness Act was signed. This was yesterday, uh, January 5th, 2025. Now what this does, they've been talking about this for years. This has actually been legislation that's been proposed, never passed since I started working with federal government employees over 12 years ago. But this eliminates windfall elimination provision and provision and Government pension offset, otherwise known as WEP and GPO or WEP and GPO, and this affected mostly CSRS employees. Because you did not put into Social Security during your working career, but you may have accumulated enough quarters over the course of your working career working outside the government, which would get you a Social Security benefit, and WPA and GPO would reduce or have reduced your Social Security benefits because of the employment you had, or getting a pension from a job where you did not put into Social Security.
Speaker1:
So this Social Security Fairness Act eliminates WPA and GPO, and more details are to follow how they're going to implement that and when they're going to start paying you your full benefits. So they're not reduced anymore. So so be on the lookout of that. This just happened yesterday when it comes to, you know, approving this and having this signed into law. So be on the be on the lookout for that when you see this. So just brand new stuff. Again, it affects mostly CSRs employees and and those who were collecting spousal Social Security benefits that were CSRS employees that didn't pay into Social Security, but now they're going to eliminate that. You should be regaining your full Social Security amount. Lastly, Roth IRA limits remain the same as far as contributions, right? So if you're under the age of 50, you can put in $7,000 per year into a Roth IRA that's outside Roth IRA, not Roth TSP. Roth TSP is subject to the same limits I talked about on the previous slide, but Roth IRAs, those limits remain the same 7000 for those under the age of 50, and then an additional $1,000 more.
Speaker1:
So 8000 can go into a Roth IRA for 50 and older, kind of the Roth IRA catch up. But what did change and what did increase are the earnings limits in order to contribute to a Roth IRA. So we get asked a lot, you know. Should I contribute to a Roth IRA outside of the government, outside, in addition to. My TSP and everything that I'm putting into the pension system? Um, what a lot of times determines whether or not it's beneficial is do you earn too much money? Are you not eligible to contribute to a Roth IRA because you earn too much money? Well, those limits went up. So it depends on whether you file single or joint. But you can see that the the maximums went up $165,000 for for single. It went up as well for those that are um married and filed jointly. So just understand your your limits whether or not you can contribute to a Roth IRA. Uh, if you earn too much money, this is the maximum to contribute it all to a Roth IRA. There are reduced contributions, uh, starting at 150,000 for for those filing single. So if you if you are in that corridor, 150 to 165, You see a little bit of a reduced amount that you can put into a Roth IRA, but making over these amounts, you're not eligible at all to contribute to a Roth IRA for that year in which you earn too much income.
Speaker1:
So there have been a lot of talk, a lot of questions that I get asked from federal employees. You know, should I contribute more to tax free retirement solutions? I've given you my opinion before on that. You can see our previous episodes. I like tax free dollars in retirement. It's not the end all be all. It doesn't mean that everybody should do that, but I like it. The more money I have that I'm collecting in retirement that's not subject to taxes I believe is beneficial for me. It doesn't matter which way taxes go. I prepaid Uncle Sam. I've got them out of my pocket. He's not a partner of mine. With that account in retirement, I'm not going to be negatively affected by, you know, taxes going up down the road. So I do like tax free dollars, but it's an individual basis. It's a personal preference. We can talk more about that when it comes to your personal review. And speaking of your personal review overview and and why you should reach out to us to go over your benefits. It is like getting a checkup. You know it is a new year. Why not go through and get another checkup, another physical when it comes to your benefits and retirement situation? That way you know if you're in the right place, you know, if you're in the right spot, you know, if you're heading in the right direction and it's the same. I mean, I'd go to the doctor, get my annual checkup, you get your blood work, you get your analysis done.
Speaker1:
Is everything looking right? Are my numbers in range? And I highly recommend getting this done on an annual basis. That way, you are ensuring that you're heading in the right track and there's no alarm bells, no red flags and and all of that. Even if you got it done last year, reach out to us. Let's get it done again. Because or reach out to the rep that did it with you, because you just want to ensure make sure that you're heading in the right direction. That's that is the main goal, right? If you get a clean bill of health, thumbs up. Pat on the back again this year. Awesome. You're doing the right things. But your situation may have changed, right? Um, you may have gotten married. You know. Things may have changed, you know. And work income wise, bills, obligations outside of the government, whatever it might be. And you want to make sure again you're heading in the right direction. You're on the right track. You're going to retire when you want, how you want, living the lifestyle that you want. And that's where we do the federal benefits review using our workbook, our workbook software. We go over all your numbers and just take a snapshot of where you are today. Look at how you're projecting or how you're trending as you get closer to retirement and make sure everything's green, right? Everything's in in order and on the right track.
Speaker1:
So those are the changes. Those are the things that are different here for 2025, not an extensive list, but take advantage of the contributions you can put in the TSP. Take advantage of the contributions you can put into Roth IRAs outside if that's suitable for you. But look at all the things that are different. For those that are CSRs, you know, and collecting Social Security. Awesome stuff regarding the Social Security Fairness Act, and you're going to be to be getting some more benefits. An unreduced benefits now. But just look at the updates and see how that's going to be implemented, and when you can expect to receive more into your Social Security. If you do have questions again go to our website. Federal Retirement show.com. Fill out the form. One of our reps will be in touch. Review your entire situation. Make sure to get your questions answered. Well, as always, I really thank you for tuning in and joining us here at the Federal Retirement Show. Continue to view our content. Go back and look at the the previous episodes, a lot of stuff out there for you and your colleagues. Refer us, recommend us. Tell your colleagues they need to tune in there on a long drive. They can knock out a number of episodes, gather all this information. They can become more knowledgeable as well. So again, thank you. Happy New Year to everybody. Enjoy it. Have a safe and healthy 1 in 2025 and look forward to seeing you on a future episode.
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