Episode Transcript
[00:00:00] Speaker A: Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Welcome to Reyna Retirement. Reyna Reyes has dedicated her career to helping people make small, smarter financial decisions. Raina Retirement is all about breaking down complex financial concepts into language you can actually understand.
Now here's the co founder of American Federal Benefits Consultants, Reina Reyes.
[00:00:40] Speaker B: Well, Frank Sinatra said, that's life. That's what all the people say. Riding high in April, shot down in May, and it's not funny, as he would continue to say, but we need to know what the life is insurance does with your federal and postal life insurance. That is. FEG Lee, if you've heard me say it once, you've heard me say a thousand times, do not get rid of basic life insurance. And we're going to go over basic A, B and C in the fastest way possible. So stay tuned, put your ears on and buckle up because we're going to fly through this. It's only because I was able to get another kind of visual of this. A lot of people are visual learners and want to see things for themselves.
I am pretty visual. I'm pretty good. Once I've seen it, I got it kind of thing. I won't say photographic memory, but I don't know, I like to see stuff. Once I got it, I'm like, I see it.
So let's cover basic first and then we'll go from there. Remember, basic is basically your salary, basically your annual salary. They take it, they round it up, they add $2,000. So if my salary was, say, $100,000, they would round up, add 2,000, $2,000 of coverage. And that's where you see, okay, I'm gonna have a hundred thousand, $102,000 coverage forever if I chose no reduction. I've also got an option of 50% reduction or a 75% reduction when I retire. So what you need to know is that while you're working, basic life insurance is super duper duper duper, extra cheap, like really low cost. And if you're a postal employee, you know how cheap it is, you don't pay for it at all. If you're in the postal Service, everybody else, my feds, my VA, Social Security, Border Patrol, DoD, Dow, rather, all the good stuff, you pay very little. What is it, 15 cents per thousand? Don't quote me, but it's in the area, so very inexpensive. And then when you go to retire, you have these three choices. So you can take a no reduction, 50% reduction or a 75% reduction. If you keep it all, you're going to pay for all of it. Fairly expensive. You see, no reduction for this example would be about 229 bucks a month.
If I kept that hundred thousand dollars of coverage forever, I also could say, no, I'm going to keep half of it. I want to keep half of it. What's half of that? 50 grand? 76amonth at half of that coverage. What if you keep 75% reduction as an option, you only keep $25,000 of coverage or you know, a little bit higher than that because it was 102. How much do you pay for it? Well, after the age of 65, you don't. You pay nothing for this and you've got 25 ish thousand dollars of coverage forever. Now will that bury me all day and twice on Sunday? I'm telling you, your national average for a funeral right now is between 10 and 12 grand.
And the what, cremation is what, 5ish? Less than that? Maybe a grand, depending on who you know and where you know them and how, what their deal is. And body donation is free. Just saying. So tuck that one away and put that in your pipe. So these are some things you really need to know. This is why basic life insurance needs to not be gotten rid of. It needs to not be ditched. It needs to be maintained. Keep it.
And I had somebody even today mention to me, hey Raina, I didn't know this, I hadn't seen your stuff. I was talked into or encouraged to purchase outside life insurance by someone and then get rid of my fegli. Now outside life insurance can be great. It can be very good. I'm never, I'm never against buying insurance. I think life insurance is one of the most underused and under understood plans solutions out there. However, the purchase of outside life insurance does not mean you need to ditch your basic. They're usually the people that are pitching life insurance and we, we, we write life insurance here too as well.
Um, but what we're showing is that part B, what we're going to talk about in a couple of minutes, part B is what gets more expensive and that's what people sometimes want to purchase outside coverage for, to reduce B.
So that's basic. Keep it. That's the deal. What's your next scenario? Well, you've got a Ha. Basic name. So A is what they call Standard. You've got $10,000 of coverage and it is what it is. S or S, depending on which country you're from. In Spanish that means it is what it is. And it's 10 grand while you're working. When you go to retire, it's still 10 grand until you turn 65. And then after 65, it's no cost to keep. Same as what basic does. 25% for free forever. So that is 25 Hondo for free forever. Oh, and you pay nothing. Oh, or it's a big O. That's your cost, a big O. And if you got it, just keep it. Just easy. It's really inexpensive. It's like 13 bucks a month until you're 65. And then it's nothing.
So part B.
So we already talked about this a little bit. B is by definition optional coverage that you can pay for in addition to basic or A or whatever you have. And it's units of your salary. So you can get one or two, three, four, five times your salary. Each unit is a multiple of your salary rounded up. So, so if my salary is 76,200, then my basic life insurance is 77 grand per unit times five. You get it.
So you pay for that. But it increases in cost in increments of five years. So every fifth year, Shabam, you have an increase in cost. And they don't like alert you. They're not calling you, they're not giving you a letter. It just goes up in cost. And your notice is when your paycheck looks different.
In fact, age 60, I think I'm funny. I call it the Sanford and Son year because remember that show? He'd be like, it's the big one. I'm coming, Elizabeth. And because he was having a heart attack on every show at some point. And whether it was real or not, we, we all love that show. I had to explain that to my 27 year old. That was, that was great. But you understand because at age 60, the price has almost doubled. In fact, it's over double when you turn 60 from what you were paying at 59.
So that's when some people say, raina, what the heck can I do? Well, you can decrease it or you can ditch it altogether. I'm not a fan of ditching it because you've been paying for it all this time. Good grief. So sometimes we'll reduce it from five units, maybe down to one or two just to keep the extra coverage a little bit. In addition to anything you have outside or as a bird in the hand while you're trying to get something on the outside. Reach out to us if you have questions on insurance. Obviously we can help. They only the kind of insurance we try to help people get is the type of insurance I mentioned previously, where there are living benefits where you don't have to die to get paid and you don't have to bleed to get covered. What I mean by that is there's no nurse. We don't have to send a nurse out to you unless they find something that they want to check out and, you know, get a little bit nosy. So part B, you've got some interesting choices. You can keep it all, which most people will not.
In terms of five units, that is. Now let's say you've got two units. Or let's say you've got two Units and you're retiring and you're already over 65 years old.
So that means you've got some interesting choices. Base part B gives you a choice of full reduction or no reduction units. What does this mean? Well, it gives you the option to keep paying into perpetuity for the price of the insurance in that year. At your current age, it will continue on the path where it increases every five years.
So sometimes people will keep the one unit realizing that at age 65 it goes up, but it doesn't go up much. It's a very little increase at age 65.
Now age 70 is another Sanford and Son years. So that's when some people say, meh, I'm gonna go ahead and keep this extra unit until I turn 70. And then I'm gonna change it to something called full reduction. Full reduction means whenever you tell them to make it full reduction, start fully reducing. It will start like you see on the grid here. It'll start at the current coverage. So let's say my coverage is a hundred grand. That's my unit of, of. Of Part B's per unit because my salary was, you know, 99, 500.
So I decided to do a full reduction now because I'm 67 and I just don't want to keep paying for it. Or I turned 70 and I want to stop paying for it.
I send in the form, hey, make this all. Make this unit a full reduction. They will stop charging me.
The coverage will then reduce slowly by 2% a month until four years and two months later, 50 months later, I now have no coverage any longer. Note the red line on the bottom.
I was given a great comparison to this. It's like unplugging your fan.
You unplug the fan, you're not paying for electricity anymore, but it's still keeping you cool for a while until it finally ceases. And that's how the coverage works. You stop paying for it, but it decreases in value. So if something happened to you in that four years after you made it go full reduction, you have some extra coverage for your family in addition to any outside coverage. And basic and A, assuming you had them, well, you had to have had them to have B. But in addition to them, if you kept basic, obviously kept basic and then if you had A.
So there's some interesting things. This can get a little convoluted in people's minds, especially because there's a lot of things with letters ABC like Medicare and all this. This is a big reason you may want to reach out to get connected with me and my team to go over some of these options. Not to mention, yes, outside coverage is a very good thing. And in retirement that's when people start dealing with all the drama that I mentioned. The living benefits pay for things like cancer, heart attack, stroke, multiple sclerosis, Alzheimer's, traumatic brain injury, cystic fibrosis, aortic graft surgery, major organ transplant, and there's a provision called chronic illness that pays for the same reason as long term care and pays like long term care. So it's definitely something a lot of people want to look into because my goodness, if you can have one price, one premium, one plan and it covers for all that stuff, my gracious. Something to definitely consider. Now I'm not here to pitch insurance, but I'm here to let you know these things exist because if you didn't know they were there, how are you going to get them? And I've already been paid by this stuff. My husband had the stage four cancer. We got paid by the living benefits. And you're not going to find a greater advocate for living benefits than me and my family.
What's the next one? What's, what do we, what do we have for Johnny? A brand new car? No, we got option C. Now let's see here. How are you going to remember how option C is not covering you?
Well, I live in the south and how do we say children in the South? They say children or chillin. So this is not coverage on you, this is coverage on them. Chillin and your spouse. So children and family, children and spouse. Remember, C means children and family, spouse. So it's a package deal. You're covering whoever's There to be covered by it, and you got the spouse. If you're married, let's say you're not married. Are you still covering kids? Yes, if they're under the age of 22. Now, people think 26 because of health insurance. Negatory, good buddy. It's age 22 is when they age out of life insurance from the family benefit. Another reason you should give us a call because you want to lock some coverage in for them kids. This is not to say, oh, they're gonna. Something's gonna happen to them. Life insurance is not a hex. This is protection, prevention, insurability. Protecting insurability and extra living benefits. My goodness. So. But again, people say they're reciprocal. Hey, Raina, I'm still married, but my kids aged out of the coverage. Could I get a price break? What do you think?
Again, negatory, good buddy, because it's a packaged deal. You're covering whoever's still there to be covered, whoever's still eligible, whoever's left.
So if you're married, you should keep it 100%. Look at the prices on this. My goodness. $30 a month for $25,000 of life insurance at age 65. 41. When you're age 70. I mean, my goodness. So inexpensive for another 25 grand. Now, is 25 grand sufficient on your spouse?
Probably not. You should probably look outside as well. Of course. We can help with that. You get the point. That horse I beat, I beat the. I beat the horse down. But you need to understand, this has a no reduction and a full reduction option, too.
I would never use a full reduction option on family life insurance. Why in the world would I do that? It's so cheap. Just keep it there. We have it. Now, if you've been paying for life insurance, family life insurance, and you're not married and you don't have children under the age of 22, and you find that you're still paying for it, reach out to us. We can help you potentially get a refund. Yes, refund of the overpayment. I've helped quite a few people do that.
I've seen big numbers, small numbers, and any number in between. But, hey, whose money is that? Yours. And who has it right now? MetLife is the life insurance provider right now for Fegli, for federal employee group life insurance that has been chosen to manage the life insurance that you have. So there you have it, folks. That is life insurance from the federal government and postal service in a nutshell. No, this is me in a nutshell. And there it is in a nutshell, right there on the single page. It's kind of busy. It's one big document. But sometimes when you see this as a timeline in your mind, you understand some of these have options to stay the same, some of them do not. Some of them have multiple options where you could keep some, decrease some, or fully eliminate it. And it is best if you go over that with somebody like myself and the team to really determine what makes the most sense for you and yours and how much money you want to keep spending on it and how much you don't and why would you want to keep it and when can you ditch it and all of those things. So reach out, get scheduled. We'll make some plans for you and yours and go over all the options you have and see if there's some mortar we need to put between the bricks. We'll talk to you soon.
[00:15:12] Speaker A: Thanks for listening to Reyna Retirement With a strong commitment to ethical standards, Reyna works hard to find the right solution for each individual or family who reaches out for advice. To contact rena directly, call 850-450-6500. That's 850-450-6500 or to reach the team at the American Federal Benefits Consultants, call 1-800-872-8857. That's 1-800-872- 8857. You can also go online to americanfederal.org not affiliated with the United States Government. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. The information is intended to be educational in nature and does not provide a guarantee or specific result. All copyrights and trademarks are the property of their respective owners. American Federal Benefits Consultants is an independent organization, not a government agency or affiliated with the federal government or any state government. The terms CSRS, FERS, FEGLI and FEHB are all registered trademarks of the U.S. office of Personnel Management. American Federal Benefits Consultants, Agents, Consultants Consultants, or any independent contractors do not provide tax, legal or investment advice and do not engage in the solicitation or sale of securities. Consult with your tax advisor or attorney regarding specific situations.
