4.28.23: Audio automatically transcribed by Sonix

4.28.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Val Majewski:
Well, welcome back to the Federal Retirement Show. I'm your host, Val Majewski, with American Benefits Exchange. I appreciate you joining me for today's episode. We're going to be diving into a real life example, something that happened recently when talking to a federal employee, someone just like you when it comes to their PHEGLEY Option B and C, we're going to talk about a real life scenario. Now, why are we talking about this kind of stuff? If you've watched all of our other episodes, if you've been following the the channel, been following the show, you know that the key line that I like to use is we help and want to make sure that you are maximizing or optimizing your federal employee benefits and preparing as best you can for retirement. Now, what is maximizing or optimizing mean? It can be taking advantage of everything that the government gives you, making sure that you utilize everything that they have. And sometimes there are some free benefits or some free things, more cost effective things that you can do within the government plan. But then on the other side, there are some ways that you can save money, meaning less is coming out of your pocket by utilizing plans that are outside of the government benefit package. And that's what we're going to be talking about today to make sure that you are optimizing or maximizing your phegley. But maybe not by using the government's version of it. Maybe looking at other opportunities, other options, Some alternatives that can help you save money in the long run.

Val Majewski:
Less money coming out of your pocket that you can put towards your checking and savings. You can put towards your retirement benefits. You just want to make sure that you are set up properly when it comes to your family and your life insurance for both you, your spouse and your children. So let's dive in today and we're going to talk about revisiting Fegley and sharing with you a real life example when it comes to options B and C, So first of all, real quick, just to review, if you have not watched any of our other episodes or have not seen anything on Fegley, I highly recommend you go back and check that out. But what is Fegley? Fegley stands for Federal Employees Group Life Insurance. It is a group plan. Everybody's lumped together. Whether you're healthy, sick, smoker or non-smoker, male, female, everybody's lumped together in this group plan. It's administered by MetLife. Most people are familiar with MetLife, Snoopy and the blimp, very highly known or highly recognized life insurance company. And there are three optional coverages that you can elect when it comes to your fegley insurance. The first one I didn't mention is basic, and most federal employees are covered by basic. Actually, you're automatically covered by basic when you first get hired unless you explicitly stated by the end of the first pay period that you did not want it. And you have to have basic in order to have any of the optional coverages and there's options A, B and C, we're just going to be focusing on B and C for today's discussion.

Val Majewski:
But that is what you're Fegley package looks like. Now, what is option B? Well, option B, it's also known as additional optional insurance. It allows you as the federal employee to choose up to five multiples of your salary in additional life insurance coverage on top of your basic or any option coverage that you have. It's group term insurance. Again, federal employee group, life insurance. It's group term insurance. There is no cash value. You're allowed to keep fegley as long as you're still employed by the government. And if you're able to retire, you can keep it in retirement. But it is group coverage at the age of 40 and beyond. Coverage starts to or sorry, cost starts to increase every five years going forward. So costs can get pretty darn expensive. I'm going to share with you what that looks like. What is option C now? Option C is family optional insurance. And this is not five multiples of your salary. This is five units of coverage. A unit. Let me back up a second. Family optional coverage. This is for your spouse and kids. So up to this point, if you have basic option A, option B, all of that coverage so far is on you. The federal employee option C is the only life insurance coverage that you're going to have on spouse and children.

Val Majewski:
Now it's up to five units. Some federal employees have gotten confused in the past and have told me they have five times their salary on them and five times their salary on their spouse. That's incorrect. It's five units. What's a unit? A unit is $5,000 for a spouse, $2,500 for each child. So that's max coverage of 25,000 on your spouse. 12,500 for each child. Now, a child is defined as under the age of 22 and not married. So for every kid that you have, they will have the same amount of coverage. Doesn't matter if you have one kid or ten kids, they all have the same amount. Now, premium costs increase every five years, starting at age 35. It's based on you, the federal employee. It's your age, not your spouse's or not. Your children's age costs is based on your age. I already said children age out at 22. It does not reduce cost at that time. The cost stays the same and it's not convertible. So as your kids are aging out, they're not able to convert them to an individual plan. They just age out. Coverage is gone. Same with your spouse. It's not convertible to an individual plan or a private plan. You can't convert it from family. So let's look at a real life example here. I'm going to look at option B and option C, but this was a recent federal employee that I had spoken with, and I went over some scenarios.

Val Majewski:
And why, again, are we doing this? Because I want to show you what you're maybe missing when it comes to your family, an opportunity that you may not have discovered, you may not have learned about yet. You may not have looked into when it comes to your family options B and C, So let's take a look at B, I already said B is where you can get up to five times your salary in additional coverage. This federal employee, 53 years old, makes over $133,000 per year. You round that up to 134, multiply it by five. This person had five times their salary. You've got $670,000 of option B insurance, 670,000. How much is this going to cost them over time? Are there better options available when it comes to their fans? Well, let's look at the costs. I said costs are going to increase over time. What does what does that look like? What does it look like now? How are these costs going to increase? Well, you can see this chart now. This chart was taken directly from the federal Employee benefits workbook that we create for each federal employee that we sit down with. There's a workbook that's got a ton of information in there. We also print up a supplemental report that looks over your incomes in retirement, your total retirement income picture, so you can make sure you're on the right track. But in the Phegley section, we just do a snapshot of their option B Now, this federal employee, 670,000.

Val Majewski:
You can look at the different grids and the different costs based on the age at age 53, Currently paying $67 per pay period works out to be $145.39 per month. That's at age 53. At age 55, that cost will go up to $120.60. It almost doubles at age 55. At age 60, this person will see the largest increase in cost. It'll more than double and go to 268 a pay period. Now we're up to $580 plus per month. So you can see in just a very short period of time, seven years, they're going to go from 67 a pay period to 268 per pay period. That's a significant increase, almost 400% increase on. There vaguely option B coverage. Now, this will continue to go up over time. If they never make any changes, that money's going to continue to come out of their paycheck. You can see over the next 20 years, if this person did not make any changes, it would cost 140,000 plus dollars. 30 years. Really ridiculous. $478,000 over a 30 year period. Now, chances are, chances are this person is going to look at their pay stub at some point down the road, probably when they turn 60 and they're going to realize, wow, my cost went way up, way up, what the heck happened? And they're going to look at canceling the coverage. So now you've just overpaid for $670,000 worth of coverage over the next seven years. Because you probably paid way too much and you had to, if that's as long as you wanted to keep the plan.

Val Majewski:
Now, this person in particular does want to keep the life insurance, does want to keep a significant amount on himself in the event that something happens. So asking me, what can I do? I certainly don't want to keep paying these cost increases over time. What are my options? What can I do? How can I save money on my option insurance, get a better plan? That's not going to be subject to these increases every five years. We'll discuss and look at that. Look like looking at option C, Option C, I was able to describe to this federal employee that, look, you have five units. Yes, maximum coverage, but it is simply 25,000 on your spouse, 12,500 on each child. Now looking at spousal coverage, didn't realize that it was just 25,000 on the spouse, number one. And number two, had no other life insurance on his spouse. So it was just 25,000, a significant amount of coverage on him, the federal employee, over $800,000 worth of life insurance coverage for him, but only 25,000 on his spouse. So it created a huge imbalance as far as the life insurance was concerned and the who had what benefits. I know that even if my spouse was working at home, did not wasn't employed, I was the primary breadwinner. I know if something happened to her. 25,000 wasn't going to cover it or isn't going to cover it.

Val Majewski:
So we want to make sure we correct that imbalance by providing a way that the spouse on top of option C can get a significant amount of coverage for themselves and provide that protection that their family needs. So we'll take a look at that. So looking at option B now, this is just a typical example. You can go back and watch our previous video about PHEGLEY and Option B and option B replacement and some additional options. But this is just a real life scenario that I'm discussing with this particular federal employee about how to save money over the course of their working career, provide a better form of life insurance for them and their family, more cost effective form of life insurance for them and their family. So the easiest way to do this, you've got a group term policy with Phegley. Let's look at individual term private life insurance on a term basis. But it's individual. It's not you're not part of the group anymore. This plan is customized for you, the federal employee, based on your age, your health and that rate, that cost that you're going to end up paying is locked in. For the duration of the plan. I just said, chances are this federal employee is going to look at the costs when they turn age 60 and they're going to want to cancel it. So that gives a seven year term plan, so to speak. Right. What if they wanted it for longer? What if they wanted more coverage? Less coverage? They want to save as much money as possible.

Val Majewski:
We can customize that. But let's just look at apples to apples for the most part. Let's say $670,000 of option B versus $670,000 of private life insurance locked in private life insurance. Here are some examples. And I'm just using average health. The healthier you are, the bigger the discount you get, the more the savings. But let's just say I'm using average health insurance or sorry, average health situation, Right? They're not in the greatest of health. They're not in the worst. They're just a standard health when it comes to their situation. What would their rates look like? Well, if we went back, you can see that they're paying $67 a pay period, worked out to be 140 plus dollars per month. So if we wanted to keep this coverage for an additional 15, 20, 30 years, what is available for this veteran employee and how much will that locked in rate save them over time compared to the rising cost of Option B? Now, I put all the savings in green here, but let's just say from age 53 to 68, 15 year period wanted to keep this coverage in place for a number of reasons. Maybe waiting for the kids to get out of college, waiting for the house to be paid off, waiting until retirement to make sure that everything is covered until then. 15 year plan, private life insurance based on standard health to 16 per month, locked in for 15 years.

Val Majewski:
That would save over $40,000 compared to family. So over the next 15 years, $40,000 would just not go out of this person's pocket. Where can that money go? Checking and savings. It can go into TSB as he prepares for retirement. It can go into a supplemental retirement account. It's just not going to the program for the same amount of coverage 20 years from age 53 to 73, be a little bit more, 288 plus dollars per month. But it would save over $71,000 over the 20 year period. Pretty ridiculous. Again, I know if I asked most veteran employees, hey, what can you do with an extra 71,000 of retirement savings? You probably have a number of ideas. What if I told you you were just wasting $71,000 by keeping fegley and continuing to pay for it? You'd probably look at me a little confused and shocked. We can help save that money now over 30 years. Cost a little bit more. Again, 492. But even at that high of a price, it would save over $300,000 over the 30 year period compared to. Option B in most cases. And I can't guarantee this 100%, but I'd say in 99.999% of cases that I've run, as long as you are in a decent health condition. No matter what age you are and where you are in your working career and how much additional life insurance you have with option B, we can find a way to save you money over a certain period of time.

Val Majewski:
When using private life insurance compared to what you would pay staying with Option B. Who likes saving money? I think everybody does. But if I told you you can do one of two things, you can continue to pay for fegley and overpay for it over time. Or you can get the same amount of coverage. Lock in the rate, save money. Which direction would you like to go in? The serious question, ask yourself that Would you rather throw extra money away unnecessarily because you just decided to stay with the government program? Or would you rather look into options ways you can save money? If you're interested, you've got to reach out to us. You've got to get a comparison done so you can see what your potential savings would be based upon your situation. Now let's look at option C, I said we're going to talk about C as well. But so right now it's group term for the spouse, $25,000 of group term insurance. There's no cash value in that for the spouse. Well, we can also look at a term plan for the spouse. Now, it doesn't have to be the exact same amount as the federal employee, but get an adequate amount of money of protection for the spouse in case something happened. That way they're covered properly. But as I said earlier, 25,000 probably not going to cover it, not going to put a major dent into the need if something were to happen to this particular federal employee spouse.

Val Majewski:
So we want to correct that imbalance. Look at private term insurance for the spouse. There's other plans we can look at. But just to compare, we're going to find a way we can customize the coverage for the spouse, get an adequate amount. Correct. That imbalance. What about for the kids? I already said a kid is defined as age 22, under the age of 22 and not married in order to qualify for the coverage through option C, but it's only up to 12,500 now. We as parents do not want to think about what's going to happen if something were to go wrong with our kiddos. Right. That's not that's not something that we want to even think about. But I want to make sure that I've got this coverage in place now for me, and this is just my opinion, Term insurance on the kids is not the most ideal way to go. And I'll explain. I like building a comprehensive plan for the kids, comprehensive meaning I want them to have the coverage in case something did happen. But my goal for them is to raise them into upstanding individuals that will get a job one day, that will raise their own family one day that will eventually retire one day. Why wouldn't I want to give them a plan that provides a little bit of everything? Death benefit protection, cash accumulation, builds up some equity and can be used as kind of a starter.

Val Majewski:
I put that in quotes starter retirement program for them. I'll share with you an example about my kids. My kids are born. I decided because I had a great grandmother who did this for me to get them a permanent life insurance policy. But I set that life insurance policy up in a way that it will build significant cash value over time. Now, when they become a full fledged adult, meaning they're out of college, they're on their own, maybe they're starting their own family, I can look at them and say, look, this is something that your mom and I started when you were very little, and you have two options. You can either take the money that's within this plan and use it as a head start for whatever you're looking to do, or I'd highly recommend you continue to take the payments and make these simple payments every month as kind of your starter retirement plan. Continue to build cash in this policy that can be used down the road on a tax free basis. Now that's a longer conversation. When my oldest is at the point where he can understand all of that stuff. But it's something that I've started for both of my kids and they'll have a significant amount of cash value built up at that time. Or I'd recommend they continue to build and pay that premium so that down the road they can use that as their starter retirement program.

Val Majewski:
There's a lot of options for children instead of just getting the 12,500 from option C, why not build a comprehensive plan that protects them on both angles if something happened? Yes, there's death benefit protection, but the goal would be building cash, building equity, something that they can utilize down the road. And they're going to be extremely grateful and thankful that their mom or dad or both set this up for them. So let's review option B and option C, Like I said before, if you have questions, reach out to us. Go to federal retirement. Show.com fill out the form. We're also giving away a free book. My book. There's no excuse. We did an episode on it. But if you sign up, request the information and you complete a benefits and retirement review analysis, we will send you a free copy of the book. But that being said, if you have questions, go to the website, reach out to us. Let us run that comparison for you. So option B, just to review, what is it? Well, you can get up to five times your salary. You can get a significant amount of insurance. But as we said, it gets very expensive as you get older. And the older you get, the bigger the jumps are when it comes to the costs. So be aware of that. Get so expensive that eventually you're going to cancel it. How long that is, it's a group plan. You can keep it forever, but at some point it's going to get cost prohibitive and you're going to get rid of it.

Val Majewski:
Is that ten years from now, 15, 20, 30, that's up to you and how much you can stomach pain, the cost. But if you're going to need that coverage and want that coverage, why not look at other options? Why not looking for more suitable, more cost effective options? Why not do that and save yourself a ton of money, money that can go into your checking and savings or into your retirement accounts? The only negative about that is you have to qualify health wise. You have to be in at least a decent health situation to qualify for private life insurance. Option C As a reminder, it's only up to five units of coverage. Again, 25,000 max on your spouse, 12,500 max for each child that's under the age of 22. They age out once they attain 22 years old. We have an imbalance there when it comes to the insurance we can have on ourselves or yourself as a federal employee and the amount that can be on your spouse. We can correct that through private options for your spouse. We can build a better plan for your kids so that way when they turn 22, because we want our kids to go well beyond 22, we can have a plan that goes with them and grows with them and builds cash and builds equity and can be utilized in a number of different ways.

Val Majewski:
Again, I just showed you the story of what I've done with my kids. So again, when we look at Phegley in general, especially the optional coverages you got B and C, you've got ways in which you can save money, ways in which you can provide more effective, more suitable coverage. Reach out to us. This is what we're here for. This is how we help our employees. Right. I said maximize, optimize your benefits. You want to make sure you are set up properly, kind of in a more of a set it and forget it mode. And you know, right away, once you make that choice, you start saving money over time compared to what you would have been spending with option B And you know, you've got a good amount of coverage set up for both you, your your spouse, potentially your kids potentially if you want to go that route and you know that you're doing the best thing for you and your family, instead of just going with what the government has, there are better and more suitable options out there for you. That is my opinion, but I'd love to share that with you. Review your situation and just see what direction is best for you. Well, thank you again for joining us and learning more about specifically Options B and C today. Again, my name is Val Majewski with the Federal Retirement Show and look forward to seeing you on a future episode.

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