Posted on Sunday, 8th June 2014 by Dennis DampPrint This Post
It’s wise to evaluate your insurance needs before deciding on what options you will carry into retirement and long before filling out your retirement forms. Linda Sherman wrote an excellent article titled A Life Insurance Check-up: Assessing Your Insurance Needs that I recommend everyone read no matter where they are in their career; from new hire to those planning their retirement. It will help you evaluate what your insurance needs are and then you can make prudent FEGLI election decisions.
What FEGLI insurance options to carry into retirement is a critical issue for employees planning their retirement. If you make the wrong decision you could either leave your family with burdensome debt down the road or negatively impact your monthly income for you and your spouse.
New hires and younger employees often take their FEGLI coverage for granted and put little thought into their coverage until late in their careers. Typically, life insurance for the younger generation is the last thing on their minds. When approaching retirement this facet of our life takes on new meaning, especially for those who we will inevitably and eventually leave behind.
The younger generation also needs to ensure their spouse and children are protected throughout their young lives. FEGLI insurance costs are minimal early on in our careers and the Basic benefit offers multiplication factors for those under age 45. If you are 35 and earning $75,000 a year, your Basic Coverage is $77,000, $2,000 over your annual base salary. At no additional cost your Basic coverage doubles to $154,000! The premium for this coverage is a meager $11.55 biweekly at age 35. A great deal by any standard.
FEGLI coverage, especially for option B, is extremely expensive as we age and if you have the full 5 multiples your monthly premiums could put a huge dent in your monthly annuity payment. Jeffery wrote to me about the high cost of his coverage. When he was 64 and ready to retire his Part B premium was over $10,000 a year for the full 5 multiples. If he wanted to retain that same coverage at age 70 his premiums would have increased to $21,000 a year! Fortunately, he was in good health and obtained term life insurance at about half the cost from a private insurance company. Had he purchased the term life at an earlier age it would have cost him much less.
The amount of FEGLI insurance coverage that you need is determined by your personal situation. If your children are grown, have little long term debt, with sufficient income from your annuity, social security, and other savings to live comfortably, your insurance needs are much less than a couple with a dependent or disabled child living at home. Linda’s article, that I mentioned earlier will help you decide on what coverage you will actually need based on your personal circumstances.
My personal opinion is that Basic coverage is well worth the cost and most should consider retaining it into retirement. It is a fixed cost and doesn’t increase with age like options A, B and C does. Plus if you elect the 75% reduction at retirement when you turn 65 it is free and the full insurance amount decreases 2% a month until it drops to 25% of its original value. You can elect to carry 50 or 100 percent of your Basic insurance into retirement however you will continue to pay a Basic Premium for that coverage for life. Again, it all depends on how much coverage you need. In my personal situation I obtained whole life coverage when I was still in my 20s and that insurance, along with the reduced FEGLI insurance, was more than sufficient for us. Option A is also a good choice because the premiums are minimal and it too is free after age 65.
The Nuts and Bolts of Option A, B and C FEGLI Coverage will be featured in Part 2 of this series. In the meantime visit OPM’s excellent FEGLI calculator to determine the cost of your current options and how much it will cost to carry them into retirement. You have the option of reducing your Part B & C multiples and you can try different scenarios.
Retiree Employment Update
We updated our Retiree Jobs Center to include more relevant job searches. The searches are targeted and we improved our methods of searching national jobs boards for current vacancies.
Private companies, contractors, and state government departments use our Retiree Jobs Board to hire skilled federal retirees for part and full time positions nationwide. You will find jobs ranging from general clerks, consulting, and sales positions, to security guards, bank tellers, engineers, IT specialists, client services, researchers, writers, and everything in between. Most are part time and you can tailor you hours to your routine. Many opportunities exist for those looking to supplement their retirement income or to start a second career. We provide this free job listing service to companies that are seeking to hire experienced retired federal workers.
I am personally looking for two retirees for part time consulting services. One from the federal sector and the second a retired Personnel Specialist familiar with the Postal Service recruiting system. I need a federal manager/supervisor or HR Recruiting specialist with excellent writing skills to write articles for our new Federal Jobs Blog located at http://www.federaljobs.net/blog/. This blog is targeted to new federal sector hires. If you know of a retiree that fits these descriptions forward them a copy of this newsletter or direct then to our jobs board.
New Hearing Loss Help Forum
I would like to welcome Cynthia Compton-Conley Ph.D., a Board Certified Doctor of Audiology, Professor of Audiology, and Hearing Industry Consultant to our new Hearing Loss Help Forum. She is a retired Professor of Audiology who taught in the graduate school at federally-funded Gallaudet University for 32 years and retired in the CSRS system. She will be hosting this new forum starting this month and her first article will be published shortly with many more to come. Anyone experiencing hearing loss will benefit from her many years of experience. You will all receive her first article, How to Manage Your Own Hearing Health Care, Monday June 16th. It is so informative that I would be remiss in not sending it to the entire newsletter subscriber list. If you wish to receive her articles in the future just click on “update Profile / Email Address” at the bottom of next week’s email message and you will be able to add Cynthia’s “Hearing Loss Help” articles to your mailing list.
- Request a Retirement Benefits Summary & Analysis from a local adviser. Includes projected annuity payments, income verses expenses, FEGLI, and TSP projections.
- Retirement Planning Guide
- 2014 Leave Record & Scheduling Spreadsheet
- How to be Emotionally and Physically Prepared When You Retire
- How to be Financially Prepared When You Retire
- Master Retiree Contact List (Important contact numbers and information)
- Survivor’s Guide
- Estate Planning Guide (An 11 part series that will help readers prepare for retirement, understand basic estate planning techniques, and compile their personal “Survivor’s Guide” binder.)
Visit our other informative sites
- Federal Government Jobs & Career Center
- FREE Federal Employee’s Retirement Planning Guide
- Federal Employee’s Career Development & IDP Center
The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our article is not intended nor should it be considered investment advice and our articles and replies are time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change. The advice and strategies contained herein may not be suitable for your situation and this service is not affiliated with OPM or any federal entity. You should consult with a financial or human resource professional where appropriate. Neither the publisher or author shall be liable for any loss or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
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