12.24.22: Audio automatically transcribed by Sonix

12.24.22: 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 am your host, Val Majewski, with American Benefits Exchange. And we have generally been bringing you topics based on questions, based on feedback, based on experiences that we have had working with federal employees like you. And with everything going on over the past couple of years. Life insurance has been a big topic with the pandemic, with different health issues people are dealing with, depending on what stage of their career they're in. We get a lot of questions about Fegley and making sure people have the right amount of coverage. Let's go back real quick. If you have not educated yourself on Fegley, I would highly recommend going to any of the episodes that we've discussed Fegley on and getting up to speed on the different options, the different benefits that you have with your fegley life insurance, your federal employee group, life insurance. But for the sake of our talk today, I want to discuss option B, because that's the one where you can get up to five times your salary and additional coverage. And a lot of federal employees that we talked to are not sure if they have enough, not sure if they have the right amount. Not sure what they need. And this is a question that we get asked a lot when reviewing somebody fegley is how much life insurance do I need? What is the total amount that is suitable, that is adequate, That is good for me, my family, my situation.

Val Majewski:
Now I understand that everybody is different and everybody's situation, everybody's need, everybody's coverage amount is going to differ. And then we're going to discuss that here in a little bit. But it goes back to a number of things. Number one, the federal government will only allow you to get up to five times your salary. What if you need more than that? What if you need less or something that's in between, not just a general multiple of your salary, your one, two, three, four or five? But again, what if you need more than that? Well, the government only allows you to get up to five times your salary or five multiples. So we're going to discuss today. Generally speaking, what your need is and how to determine and how you can determine. Take some quick notes, do some quick calculations of what your approximate life insurance need is, and then you can see, are you covered properly? Are you underinsured? And I will tell you, in my experience, most people, not just federal employees, most people in general are under insured when it comes to life insurance based on their total life insurance need. Think about this in a in a different way. What if you were underinsured with your car and something happened? And you found out that all the damage, all the things that you need to have done to your car are not adequately covered by your insurance policy that you're paying for.

Val Majewski:
Same with your homeowner's insurance. What if something happened to your home and you found out that there wasn't enough insurance to cover the loss or cover the repairs or cover everything? You'd be pretty upset. And you want to make sure that you have an adequate coverage. Now, we don't normally think about this in the same way with life insurance. Why? Because life insurance, at least the death benefit is not something that we personally use. This is something that we're leaving behind for our beneficiaries, for our loved ones. But we want to make sure in the same way we talk about car and home and other things that we insure, let's say even jewelry. What if you lost a valuable piece of jewelry and there wasn't enough money to replace that? You'd be pretty upset if you couldn't get the same thing or you had to come out of pocket to replace that piece of jewelry. So let's go back to life insurance. And we want to think of it the same way. We want to make sure we have an adequate amount of coverage. Well, what is that amount? How much life insurance do you need? So let's dive into the information and we are going to show you how to quantify. Your life insurance need and see you can do a comparison for yourself and see if you are adequately covered at this point and stage in your career.

Val Majewski:
So how much coverage do you need? How much life insurance? Well, I'm going to go over something, an acronym for you today. I say it's as easy as dime. D, i, m e. That is the acronym that we utilize to help you determine your life insurance. Need to help quantify it, because I can just go out and say, Yeah, sure, Mr. or Mrs. Federal Employee, you need a half a million dollars. You need a million, you need $2 million of life insurance, and you may return and ask me, Well, why would you say that? And if I can't quantify that number, you're going to be pretty skeptical as to why I'm throwing that number out there. I want to be able to quantify back it up, show you with good reason why you should have this amount of life insurance. So we're going to go over it. And it's easy to remember if you just remember the acronym DIME. So we're going to be going over what does D i m e stand for and how can you quantify your life insurance need? We're going to go over an example at the end so you can see what this would look like If you're taking notes at home, if you're trying to determine your own life insurance need. Now, I will say this on the front end. If you determine that your life insurance need is lacking or is greater than your current coverage, let's say that.

Val Majewski:
So your current coverage is less than your total need. Based upon this simple formula we're going to go over. We can assist. We can help you go to our website Federal Retirement Show dot com. You fill out the form, we'll be in touch and we can go over that. When we get in contact, you can say, Hey, I want to make sure I'm adequately covered. I think I'm underinsured. What can we do? How can we supplement that and get me up to the need that I require? So let's look at this dime. We'll start with DD. Now, DD stands for two things. It stands for death, death benefit and non mortgage debt. Death and non mortgage debt. Now, in the end, when it's all said and done for death benefit, how much? When it's all said and done, do you want to leave to your beneficiary or beneficiaries? You said this is the amount that I want to leave. This is the amount I want to make sure that they have absolutely 100% to take care of my final wishes. Maybe it's a legacy gift. I want to make sure that my beneficiaries get at least this amount when it is all said and done. That's on the the RD section. When we got to all I'll look at also your non mortgage debt we'll talk about mortgage debt here in a second. But non mortgage debt, we're talking student loans, car payments, credit cards and all of those things up.

Val Majewski:
All of the non mortgage debt that you owe. We're not talking about regular bills, but actual debts that you owe a lender or a bank. For those types of things. Add all of that up. So this would go under the RD section and we'll I'll show you what that looks like here in a little bit. But death benefit, what do you want to have left for your beneficiaries when it's all said and done and all non mortgage debt and all of that together? This is the first number that we're adding to the equation. I stands for income replacement. Income replacement. What does that mean? Well, I know that if something happened to me, my family, my wife, my kids, there's going to be a big adjustment period. Och, there's, there's a certain income that I'm earning that they're relying on that they're counting on to support the family, pay the bills, put food on the table, all some of my income. So we want to make sure we can replace that for a certain period of time to allow the family to get back on their feet, figure things out. It's going to be terrible enough if something were to happen to you unexpectedly or suddenly, your family's going to be reeling from it. Mourning. Grieving. You certainly don't want the fact that your income that they've been relying on, that they've been living on.

Val Majewski:
Is is just not there. There's no replacement for it. So most people will say, well, I want to make sure that my income, the money I'm bringing to the table is replaced for a period of, say, 3 to 5 years. Those are that's the typical amount, 3 to 5 years. So whatever your salary is, total salary, multiply that by three or five and we're going to put that in the eye part of the equation. It allows, again, the family to regroup, get back on track for a certain period of time. M M now stands for Mortgage. So we talked about in the RD part of this the non mortgage debt. M is mortgage. Why do we separate it out? Because your mortgage is typically your largest debt, your mortgage balance. So we're going to add that to the mix. Now, I understand that you are probably paying off your debts or things along the way. But we want to make sure that we're covering all of those things, including the mortgage, if something were to happen to you. So what is your current mortgage balance and how many years left do you have on that balance? How many years of remaining on your mortgage before it's completely paid off. We want to make sure if something were to happen to you, not only the other debts are taken care of and can be paid off by the death benefit within the plan. But these bills don't become a burden.

Val Majewski:
Right. And your mortgage, your home is completely paid off. This is not going to be a problem or a concern to your family. So, look, we are talking real here. We're talking about what happens if I die now or die suddenly or prematurely or unexpectedly. We want to make sure that our family is well taken care of. Life insurance, just like our car and our home. It's not something that we want to utilize. Now we know eventually something is going to happen to us and we are going to pass away, But we want to make sure that. Our death benefit protection is there for our family if something happened unexpectedly in the short term. While we still have all these debts and payments and things that we want to take care of, especially the mortgage, which is the largest debt that you're going to have or typically the largest debt that you currently have. So how many years are remaining on it? What is the current total balance? We want to add that to the equation as well. The next letter is E and E stands for Future Education Costs. So the question to ask is do you have young kids at home? Now, How many kids do you have? How old are they? How many years left of school do they have? Let's say, including college. I know if something happened to me today, I'd want to make sure through my life insurance that their future education is taken care of.

Val Majewski:
We just talked about my income would go away, and I want to replace that for my family to live, to pay bills or things like that. Also, I want to make sure that any future education is taken care of. Now, I don't know what they're going to be doing or where they're going to go to college or if they're going to go to college or if they'll want to go to some other kind of trade or other thing. But I would like to provide a cushion there. And that that burden that. Thing that whatever it is they're going to do, that cost is taken care of. As a result, it's going to be bad enough that I'm gone and I'm not there to go through this with them. I do not want anything financial to be a burden to my family, my kids, my spouse going forward. So. Do I have young kids at home? Do you have young kids at home? How old are they? How many kids do you have? And what if you can give them a scholarship? Maybe they're super young and you were thinking of sending them to private school or private high school or you want to take care of their future college. How much does college cost today? How much does college cost are going to cost in the future? We can provide that amount that could be taken care of through the life insurance, through the death benefit if something were to happen to you.

Val Majewski:
So let's say you had two kids that were younger. They had a number of years until they were going to be going to college. What if you can provide a scholarship for them? You said, okay, I'm going to give them 25,000 a year for four years. So that's 100,000 for each kid that I want to build into my life insurance plan to take care of their future education costs. That could be something that you provide. And if we're looking at the total, we're adding this now to the mix. So we've gone over RD. I am and now E RD death and all non mortgage debt I income replacement M is your mortgage now E is future education costs. Those are all things that we're adding into the equation now. What can we subtract from the equation? Subtract take out? Well, we can subtract any current assets and normally we're thinking of financial assets like IRAs for one case, other life insurances that you currently have in place. Any other checking savings monies that are not needed on the day to day. They're more long term type assets. So current life insurance that you you have plus assets like IRA for one K things are going to pass to your beneficiary already. If something were to happen to you, we can subtract that from the equation to get us your starting point, your approximate need for life insurance.

Val Majewski:
And I say starting point because you may want a little bit more, you may want a little bit less depending upon affordability, because remember, these plans cost some money. And if you're a federal employee and you've already got fegley, you're paying for this already. But what if we can make it more effective, more efficient, more cost effective for you and effect more effective on the side of giving you the proper death benefit? What if we can give you the better plan, Right? Customize it for you and your family. Make sure that not only is the need adequate, but reduce the cost as much as possible. That's something we can do in building your plan, right? These are customizable If you're looking at private insurance compared to what the government has, everything is pretty much set with the government. You can choose certain options, but it's not as customizable as going with your own private plan. So let's look at an example. What does this look like? And I'm going to go over just a typical scenario and why and this is just a generic example based on my experience with what people are looking for and what they need. Yours could be slightly different, but you can plug in your own numbers here and we're just going to do some simple math. So what if I wanted to leave my my beneficiaries when it was all said and done, I want to leave them $50,000.

Val Majewski:
I'm thinking worst case scenario, to pay for my final wishes, whether that's a full funeral, casket, burial or if it's cremation or if it's whatever, I want to leave my beneficiaries when it's all said and done, at least 50,000. And let's say my non-mortgage debt. My non-mortgage debt was 25,000, and that could be low. Maybe you have more debt than that, maybe you have less. But let's say 50,000 is what I want to leave when it's all said and done. And I've got 25,000 of non mortgage debt, whether that's credit card student loans, car payments, what have you. So my total in the RD section, if you remember back a few slides is death benefit, final death benefit and total non mortgage debt. So my RD is 75,000. Now let's look at income. Let's keep the numbers round. And let's imagine I make 100,000 per year and I want to replace that for up to five years. So if something were to happen to me, there's a cushion that my family would get in order to get back on track, figure some things out. Maybe they've got to move because the house or where we're currently living is not is not the place they want to be anymore or it's not affordable, whatever it might be. Things could change if something were to happen to me. So I want to replace my income 100,000 for five years.

Val Majewski:
So that would be a total of 500,000 that's thrown into the mix in this equation. Now let's go to mortgage. My total mortgage balance that I owe, let's say it was 300,000 and we're just talking mortgage balance, 300,000. I put that into the mix, future education. I gave that example on the previous slide or the E slide, talking about 25,000 a year. For four years for each kid. Now, it could be more. It could be less. Just depends on on how you're feeling about the future education costs. But let's say I have two kids that are younger. Maybe they're middle school, elementary school age. They've got a number of years until they're going to be in in college. And I want to make sure that their future education is taken care of in the event something happened to me. So 25,000 a year is what I'm using. Times four years, times two kids, I'm looking at an extra $200,000. So we add all that up and now we subtract current assets. And let's imagine maybe I had 41k that had 100,000 plus dollars in it. I had some life insurance already. Maybe it wasn't a big amount, whatever it might be, we're going to subtract that. So for this example, let's say current assets, life insurance, retirement savings, other things for $250,000. We add it up, we subtract the current assets. This need for this family, this situation would be 825,000 of life insurance that is needed.

Val Majewski:
So we look at the full equation, and this is a good starting point. So, well, if something were to happen to today based on all this criteria, you'd want to make sure you've got at least 825,000 that they are going to receive in additional life insurance to take care of all of the the current expenses, the current bills, the future expenses for education. Give you some time to get back on your feet. And in the end, when it's all said and done, set aside that money that I have for my final wishes. Right. Take take that certain amount of money out to pay for my funeral, cremation, whatever it might be. Now, look, we're talking death here. So I don't want to be morbid, but we just we have to prepare, as I said, with homeowners and car insurance. We don't want to think about needing to file a claim. But when it comes to death benefit protection, we want to be assured that our family is taken care of. They're not going to worry about a thing. The plan is set that if something happened to me. They're taken care of. Now, I hope that I'm paying for this plan for a long time before something happens. But I want to make sure that it's in place today in case something did happen, because stuff can happen. And I've heard tons of stories of people that either didn't sign the application or didn't get things in on time or didn't take the physical exam that was needed because they didn't want to and they didn't get the insurance because of that, or there were some procrastination involved.

Val Majewski:
And next thing you know, something happened and that coverage was not in place. On the flip side, I have heard of people that have signed the paperwork at the last minute, got it done, made sure it was taken care of. And yes, something did happen and the family was was provided for, was taking care of the claims were paid. So we want to make sure not only that you understand what your life insurance need is, but that you can properly take care of it. So if you have done some simple math on your own or you want to sit down with us and do that math with you and talk about your situation, look at your current need, or we can look at it with you. Look at your current life insurance that you have in place and supplement or fill the gap. That you have so that we can make sure you've got everything in place should something happen. That is the biggest peace of mind, knowing that if something were to happen to me and we don't plan on it happening, nobody does. But if something were to happen to me, my family, my loved ones they're taking care of, I can rest assured knowing that they're going to be just fine if something happened to me.

Val Majewski:
So looking at all the information and making sure that you've got that that adequate amount, you understand how to quantify your life insurance, need to reach out to us. We can certainly go over this with you. We can walk you through the dime process. And we actually have a worksheet that we can provide for you called the dime worksheet that we can use to add up all these numbers and go through the calculation. And in the end, if you determine that you, your family, you need this extra coverage, we can point you in the right direction, make sure you're set up properly and you can get that in place in a short period of time. Again, it provides that peace of mind that a surety that you are taking care of, your loved ones are going to be taken care of in the event that something happened. So I hope you enjoy the information. I hope you found it extremely valuable. You're able to do the simple math along with me, reach out to us, go to federal retirement, show, fill out the form, will be in contact with you and we can go over your dime worksheet, your dime situation, and properly cover you when it comes to life insurance. Again, I'm your host with the Federal Retirement Show. Val Majewski, we look forward to seeing you on a future episode.

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