Frequently Asked Questions for Federal Employees

7.4.25: Audio automatically transcribed by Sonix

7.4.25: 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. As always, I really appreciate you taking the time out of your busy schedule to join us to view our content. That's what it's here for. It's for federal employees that are just like you, looking for accurate, honest information when it comes to your benefits and retirement situation. So as we've done from time to time, we'll cover certain topics that I believe are important to federal employees. A lot of it does come from situations that I've had with people just like you, conversations that we've had, reviewing people's benefits and retirement situations, presentations that I've given where I've gathered information and seen that certain federal employees are dealing with things that I think will be helpful to those that are watching the federal retirement show. And this is one of these episodes where I want to share some of the questions that I've been getting recently. And, uh, the questions don't always change, but maybe the nature of the question changes, right? The content or the concept of the question is very similar to what we've talked about in the past. But maybe the situation, the specific way that the question was asked is a little different. So there's about five questions that I want to talk about today. I want to review that I've had recently with federal employees just like you. Perhaps you have the same question in mind, or perhaps you have different questions that we haven't answered yet.

Speaker1:
I encourage you to reach out to us. You can go to our website, Federal Retirement show.com. Fill out the form. One of our experts. If it's not me personally, we'll be reaching out to you. Schedule time to answer your questions and review your entire benefit situation. We want to make sure that you've got all the info and perhaps during that benefits review and reviewing your entire situation, new questions will pop up or we'll answer questions you didn't even think to ask. So a great thing. If you've never gotten it done before. Reach out to us again. Federal retirement show.com. Fill out the form. So here are the various questions that we're going to discuss today. Number one I got this question recently and this was interesting because people normally know that if you work for the federal government, you put in a certain amount of time that you're going to get a pension. One of the few companies out there, if we consider the federal government a company that still offers a pension. Right. Companies have done away with it. You don't really see that as much in the private sector. But the question came instead of collecting a pension, it said, do I have a lump sum option for retirement? And there's this is an an older school thing, right? My father worked for a company for 40 plus years. He ended up getting a pension with that company. And he did have in the end, he can take the monthly payout or he can take the lump sum.

Speaker1:
And this is something that was has been out there for years that some companies, maybe state employees or things like that still offer it. But the federal employee asked me, do I have a lump sum option with my retirement? And what they asked and what I clarified was could they get a lump sum rather than getting the lifetime payment from their pension? First of all, in order to collect the pension, you have to satisfy the certain requirements. To be eligible for that, you have to have a certain age and certain years of service. But let's say you hit all of that. What is the lump sum option? The government doesn't give you one. They don't say either take the pension or take the lump sum. But what somebody had heard, and this was maybe even a misconception, was that they'd be able to get a lump sum, uh, based on the contributions that they've made to the retirement system. And that is something that is an option that you have. It's not something I'd normally recommend, but it is an option that people have. Um, it's not really a true lump sum option as in the the old school way of thinking about it, where there's a real choice to make the lump sum, if we can consider that is really just a refund of the deposits that you put in. And in most cases, actually probably 99.99999% of the cases.

Speaker1:
Keep that money with the government, keep that deposit that you made with the government. So that way you can collect a pension, you can collect the lifetime payment, because if you remove that deposit and people may confuse this with a lump sum option, if you remove your deposit, the deposit of your contributions to the retirement system, whether it's or fers, then you essentially give up all of those years of service that you have and give up any eligibility that you have for collecting a pension, whether it's immediate or down the road. So an example of this now, where I most likely would see something like this is for somebody that maybe is not eligible for immediate retirement, maybe they're eligible for a deferred retirement. And instead of waiting until 62 to collect that pension. They're just going to take out their deposit, invest the money, do something with it, whatever they choose. It's still, in my opinion, beneficial for that person to keep the deposit in. And that way they can get a lifetime payment at age 62. But in most cases, I said almost all cases 99.999999% of cases. Leave that deposit in and collect your pension, whether it's immediate or down the road. Question number two that I got recently was should I buy back my military time? Now we'll pause there. Typically before I read the rest of the question. Typically I'd say the answer is yes, but let's keep going. Should I buy back my military time after 12 years? And what that means is this person had retired from the military and or left service in the military.

Speaker1:
They weren't collecting a military retirement, but they got out of the military. They had a certain number of years that they could have purchased back. And they've been working now for the federal government for 12 years, and they have yet to start the process to purchase it back. Is it still worth it to buy that time back? So. Expanding on the question a little bit, but should I purchase my military time after 12 years and that's 12 years of federal service without having doing anything yet with the military time? Now, in this situation and in most situations, I can't just give you a blanket statement that it's great for everybody. But in the scenarios that I've seen, I will tell you it is still beneficial to buy back your military time, even if it's even if it's been a number of years since you left service. Now, why would there be a concern at all? Because if you don't purchase back that time right away, there's an interest that is charged to the deposit that is needed to buy back that military time. So let's say you work for the federal government. You find out you can buy your military time and you don't do it right away. You're going to start accruing interest on the deposit that was needed to buy back the time.

Speaker1:
And in some cases that that interest can be significant. You know, there was one case where I saw with a, um, federal employee that the deposit was now 3 or 4 times the original amount because of the interest that was charged to it. But when we ran the numbers, it was still beneficial for them to buy that time back in order for it to count towards their federal pension and then impact their lifetime payment. So I would definitely take a look at your situation. I have seen in most cases now, I can't say again blanket statement for everybody, but in most cases it is still going to be beneficial for you to purchase back your military time, even if it has been a significant period of time since you've left service or since you've been with the federal government. So I'd start that process right away to understand and know what that deposit amount is going to be. Go through the process. If you need to know what that is. I can get you that process step by step, you know, reach out to us. Go to that website, federal retirement show. Fill out the form and we'll make sure we get you that process to get to it. But you know, once or sorry once you know what that deposit amount is, then you can make the decision if you want to move forward or not to purchase the time. In my experience, yes, it is still beneficial even if there's been significant times since you've left service or been with the federal government as a civilian.

Speaker1:
Question number three at what age should I start looking at option B alternatives? And the nature of this question came when reviewing a federal employees family and what the optional coverages that they had. This person had option B, and they saw when we ran all the numbers, that the cost for option B is going to go up tremendously, right. It's going to go up exponentially as they get older. Um, once you hit age 40, prices increase for option B every five years and about age 50, 55, 60, that increase starts to get significant And it starts to impact your bottom line, meaning more is coming out of your paycheck each pay period to pay for option B, and it may not be beneficial for you anymore. It may not seem as cost effective. So what people try to do, and what federal employees I've seen do, is they're going to look at alternatives because they still want to keep that life insurance. They're going to look at alternatives to option B to hopefully save money. Now the thought process here is at what age is it going to be most beneficial for me? Right. Because while I'm young, as a federal employee, that price with option B is very cheap and at some point it's going to get too expensive. So, you know, where is that line crossing, where it's going to be now? Beneficial for me to start looking at option B alternatives.

Speaker1:
That was the nature of this question. At what age will it be most beneficial? And here's my general statement. If you're in great health, good health, average health, better than average health, or let's say excellent or great health, if you think you're eligible or will be eligible for private life insurance coverage. I would say that it's beneficial to look at option B alternatives at any age, any age. Why is that? Because over time, if we look at total cost of money over time or total cost for life insurance over time, no matter what age you start, if you're eligible for coverage, you're healthy enough for coverage, and you can get it with a private life insurance company. It will be more cost effective no matter what age you get it because it's kind of relative, right? Option B is very cheap when you're younger. Well, guess what else is very cheap when you're younger? Private life insurance. Now why is it beneficial to get it when you're super young? Because that costs to be locked in for the duration of the plan that you have, usually with private life insurance. Right. If you get a term policy because right now you've got group term with option B, if you want to go with private term insurance, that cost is going to be locked in for the duration of the term. It's not going to increase at age 40, 45, 50 550.

Speaker1:
And so on. So in most cases, if you're healthy enough to qualify for private life insurance, it will be cost effective as soon as you see this at any age. So the earlier you can start, the better and the more money you're going to ultimately save compared to the rising costs of option B, if you want a full family option B scenario, run for you to see this in plain English. In black and white you can see the numbers. Again, reach out to us. We can do an option B scenario and compare what the cost would be with private life insurance, versus sticking with the rising cost of option B insurance. And I can tell you again, by the time you realize it's costing you too much, it might be too late and you could have saved a ton of money if you started earlier. So it's never too early to start looking at alternatives to option B in order to save money over time. This is a very simple question, but one that you really have to consider when you're looking at retirement. And I get this all the time when we're looking at retirement scenarios and going over, filling out the retirement paperwork and making sure that the federal employees are checking off the appropriate selections, how early should you submit your retirement paperwork? And I get this question often, but recently, especially with, you know, people making decisions and things like that. Uh, by the end of the year, we're already halfway through.

Speaker1:
How early should you submit it? And I would have told you years ago that two months early is probably my general guideline. I might even look at three months now. But if you can get that retirement paperwork submitted, uh, at least two months prior to your last day, your anticipated retirement date, that should give OPM enough time to get the process started. As long as everything's filled out correctly so that you're going to have, uh, less time on the back end before you start making your full retirement check. You can certainly Put in your retirement paperwork anywhere up to the day you're planning on leaving, but I'd say at least two months in advance. So if you're going to retire at the end of the year, let's say you're going to retire December 31st. I would have that retirement paperwork in no later than November 1st, so it gives a full two months for OPM to start processing it. You want to make sure again that that paperwork is filled out properly, that you've made all the right selections. Because OPM is backlogged, they've been backlogged since I started working with federal employees way back in 2012. Um, the backlog varies of how bad it is, but there's always been a backlog when it comes to retirement applications. And if your application is correctly filled out and everything's appropriate and everything's done correctly, chances of it getting processed quicker is better. I can't say it's a guarantee, but it's definitely better if there are mistakes made.

Speaker1:
If there are things that are going to delay the process, then that's not a good thing either. So getting it in early, making sure it's filled out properly is key. Now this is a question that's phrased different times. So the last question I'm going to talk about today and this has has come in a lot of different forms. I just got an email from a federal employee that wants to schedule a time to review their situation. And they ask this question in the email, but it's how do I ensure that I'm going to have enough money in retirement? How do you ensure that you're going to do it now? I can never guarantee that you're going to have enough money because certain circumstances and situations, they do change over time, but we make the best guess estimates as you go. And how do you ensure you're on the right track is another way I'd phrase it, but how do you know you're going to have enough in retirement? Well, you've got to get an estimate done. You have to have a review of your benefits. And this better employee was reaching out to do just that. It started off saying, hey, I want to schedule a time to review my situation. I want to ensure that I'm going to have enough money in retirement. So we're going to schedule a time. We're going to review all of the benefits. We're going to review all of the retirement income sources.

Speaker1:
And you can see or this federal employee will see if they're on the right track. We try to compare pre-retirement income to post retirement income because why most federal employees want to make the same amount of money in retirement that they're making right before they leave. They want to live comfortably if not making more right in retirement. So that way you're you're above and beyond. There's ways you can do that if you plan properly, but it all takes a concerted effort to review your situation. Get all of your questions out there and see your numbers in plain black and white, right. It's easy to compare pre income pre-retirement income to post retirement income. Are you on the right track. And I've made this analogy before but I like it. And it's a great one to think about. You don't want to assume that you're in great health okay. You don't want to just go through life saying, hey, I feel pretty good. My health is good. I don't need to get checked out by anybody. You don't see too many people do that. People still, even if they're feeling great, go to the doctor and get a checkup, get a physical done, get a status update of where they're at, and you're hopeful that you walk out of that doctor's office, head held high pat on the back. Hey, everything's looking great. We'll see you next year. Awesome. But you don't know if they're going to find something.

Speaker1:
You don't know if there's going to be a problem. You don't know if the bloodwork or the analysis is going to come back and show something that you didn't know you didn't feel, and if you you did have that happen, you're going to ask, well, what do we do next, doctor? What are you going to prescribe? What's the solution? What's the remedy? It's a very similar thing that we do now. I'm not in a white doctor's coat. Lab coat. I'm not. I don't have an MD behind my name or a doctor in front of my name. Uh, but what we do is similar in nature. We have somebody come in and we're going to review the benefits. This person that we're scheduling that ask this question, we're going to sit and review their situation. And they are probably hopeful that we're going to give him a pat on the back, a thumbs up. So they keep doing the same thing. You're on the right track. Right. We'll see again next year. But what if we find something? What if we find that they're spending too much money on certain benefits? What if we find that their future retirement income is not going to be where they want it to be? What if they. What if we find something else that's going wrong within their situation that they can improve upon? Their most likely going to ask us, hey, what do I do? What's the solution? What's the prescription? What's the remedy? And we can ensure that they're getting on the right track or back on the right track.

Speaker1:
And this is where this question came, is, how do I know that I'm going to have enough money in retirement? You have to plan ahead. You have to review. You cannot just assume that everything's going to be fine. There's that false sense of security that I've seen with people that work with the government say, hey, the government's going to take care of me. I work my 30 years, I'm good to go. And I've mentioned that before on this show, but you've got to get checked out. And this was another question from a federal employee who reached out. Thank you for reaching out, by the way, and for getting on the schedule so we can do this. But hopefully you have the same concern. How do you ensure you have to get checked out? You have to get a checkup. You have to get a federal retirement physical every year so that you know, 100% that you're heading in the right direction. And if you find out that you're off track, well, then ask for guidance so you can get back on track so you can get back to the future that you want to have because it is reliant on you. There's only so much the government will do. You have to take control of this, put it into your own hands, and that way you are confident. When you head into retirement, you know you're going to retire how you want, when you want living the lifestyle that you want.

Speaker1:
So I really do appreciate everybody who's been sending in the questions. Please keep them coming. Uh, we love having these kind of episodes because it's it's probably answering questions that you might have. I know sometimes they're very generic in nature. I apologize, I want to get some specific questions out there as well. But you. If you have others. If you have questions that we have not answered yet. Uh, first of all, I'd go go view our other episodes. Look at all the other content that we have available for you. There's probably something in there to answer your question, but if you'd rather get a quicker response, go to our website Federal retirement show. Com fill out the form. We'd be happy to sit down with you, open up the entire situation and review it and get you the guidance that you are are looking for. Um, if you like this, please subscribe. Get notified when a new episode comes out and refer a friend. Tell a colleague, hey, this. This show's been beneficial. You got to listen to this. You got to see this. Um, share it with others. Because we only, you know, are successful if we are reaching more and more federal employees. So thank you again for taking the time out of your busy schedule. Thank you for time for viewing our content and look forward to seeing you on a future episode.

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