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 smarter financial decisions. Reyna 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.
[00:00:41] Speaker B: All right, Feds, I told you already about life insurance and how you want to keep it forever. You want to keep it, Porto la tuvida. You want to keep it for all of your life. Okay. There is certain insurance in the Fed that you're able to maintain forever.
Now you say, but Reina, it's so expensive, it's going to get more expensive. Yeah. Part B.
Bravo. Some people say B means bad or B means more bucks. And that's true because it gets more expensive every five years. That is part B. Only the optional coverage multiples of your salary, but not basic.
Basic life insurance is basically your annual salary rounded up plus 2000. So if I make 100 grand a year, rounded up is 101, plus two is $103,000 of life insurance for which I pay what, 20 bucks a pay period or something like. It's very inexpensive. While you're working now in retirement, you have ways that you can maintain this insurance forever.
Could you keep the whole hundo?
[00:01:42] Speaker A: Sure.
[00:01:43] Speaker B: Could you keep less of it? Absolutely. And the price, of course, is going to reflect based on what you choose. So let me make a very, very blanket statement.
No federal employee, no postal employee, in my opinion and experience, should ever eliminate basic life insurance.
Because even at its lowest point, it is no cost to keep for the rest of your life after the age of 65. Let me say it again because this bears repeating and I'll say it for the zinger. No federal or postal employee should eliminate basic life insurance because after you're 65 years old and, and retired, it's free to maintain 25% of what you had while you were working. Which means, therefore, ergo they're 40 said, therefore, you should keep it. Let me show you some of the details of this and remind you, because if you're retiring, you're in the GRB or the Fed Navigator or the Aura or you're doing paper, you've got to make this decision correctly. That way, later down the road, when your family Calls me and says, hey, Rayna, I gotta make a claim. We have something to claim.
So in this example, let's take a person who was making a salary of say, 80 something thousand dollars, okay? They would have had $84,000 of life insurance, right? So like, you know, they had 81 ish, $81,000 of salary rounded up as 82 plus 2 is $84,000 of life insurance. So you see here how much coverage they actually have now. What are they going to pay for it?
$29 a month. Let's start at the most basic, the lowest point that I'm telling you. What I'm saying is everyone should keep basic at least at a 75% reduction. So if my amount of 84,000 reduces by 75%, I'm left with the remaining 25%.
So $21,000 is 25% of 84. It will be free for the rest of my life after the day I turn 65. As long as I'm already retired while I'm working, clearly I'm going to keep paying for it. Unless I'm a postal employee. Postal employees, you all don't pay for basic while you're working.
Only after retirement. And I've gone toe to toe with people. They're like, no, I'm going to ditch it. I'm like, well, let me show you. If you only pay for two years, if you retired at age 63, or why would you ditch it when you can have it for free for the rest of your life and keep 21 grand forever and only pay 30 bucks a month for two years of your whole life? Sign me up for two.
So you've got to remember you have this. What are some of the big factors in making this decision? Number one, obviously cost.
Number two, and really should be number one, need. What does my family need if I pass away? How much money is in the bank? How much money does my spouse have? If I have a spouse, how much money do my kids have? Do I have children with. With special needs that need extra income? Right? And remember what type of money we're dealing with here. This is not qualified tsp for 1k money that uncle Sam is going to get a piece of. Ha ha. No, no, negatory, good buddy. Uncle Sam doesn't get to touch this. This is 100% tax free to the beneficiary, which means nanny, nanny, boo boo. Uncle Sam can't touch this.
So you put in money that's already been taxed and they receive it. So that other option that it Kind of started with here is what they call the 50% reduction. So you have three choices with basic, you could keep half of it. So let's say I'm already 65 and I'm retired. I'm going to only pay six or three bucks a month for the rest of my life to keep half to keep the $42,000 of life insurance forever.
Not too shabby of a price, especially coming from somebody who's quoted life insurance and she was like 14 years old.
63 bucks a month for a permanent $42,000 of life insurance. That is like stolen insurance. Stolen life insurance. Now to clarify the cost and the coverage look and feel like whole life insurance.
But it's not because it doesn't build cash value. So you can't go in and just grab out X amount of cash from here.
But many people who have whole life insurance don't do that either. They purchase the whole life insurance in order to maintain the price and the coverage for their entire life. That way when they're 90 or 80 they're not getting the letter that says, oh, now your premium is going to quadruple for the same amount of coverage.
So these are things you want to consider. Does it make sense to spend the measly 63 bucks a month on $42,000 rather than having 21 for free?
So these are things you consider and we teeter totter this a little bit with survivor benefits.
Survivor benefits are monthly only, are taxable, and only go to your honey bunches of love, your spouse. They don't go to kids, they don't go to anybody who's not that spouse or insurable interest scenario.
So these are things to consider.
Option number three and clearly the most exciting expensive option.
But again, everyone's different.
You could spend 189 bucks a month for the rest of your life for $84,000 of coverage. Still inexpensive for permanent coverage. Remember, these are two parallel lines. That is the coverage and the cost.
Two parallel lines. They stay the same forever. Well, a beginning and an end because we all will have an end. And at that end, my family gets 84 G's and I paid 189 bucks a month.
What are some factors you'll that we maybe haven't considered? Well, the big elephant in the room here, health.
I don't know what my health is going to be and how long I'm going to need it. So when you retire, take inventory, look at your health. This will help determine what you may or may not want to maintain.
Now I'M only showing you basic here. Remember, you have other versions. You may also have a, which is a flat $10,000 of coverage and it is dirt cheap. When you're 60, you'll be paying $13 a month until the day you turn 65. And then after that, you keep 2,500 forever for free. In addition to the basic.
And then there's option B. What if you have five times your dog on salary? This is the one people say, oh, no, it's going to keep getting more expensive. And this is true.
I think I'm funny. And I call age 60 and age 70 the Sanford and Son years. That's when you're, you know, you get your paycheck and you say, it's the big one. I'm Kevin Elizabeth.
My oldest son has heard me say this for like three years now.
And I say to him, yeah, that's the same for the sun year. He's like, what is that? Like you've been listening to me for all this time? You don't know what Sanford and Son. I had to show him YouTube videos of Red Fox, so he understood what I meant. Because this, everyone knows this reference that's about to see this. You turn 60, you see that your price more than doubled, and you're saying, holy cow, probably not.
And up here you're again saying, holy cow, probably not. Now remember, health is a factor. If you're retiring at 65 and you're saying, let's see, $400 a month for $400,000 to my family, and I just got some bad news, you're probably going to want to keep paying it because remember, once you ditch this coverage, it is gone, baby, gone. You're not going to be pulling this back up again.
So in many scenarios, I encourage people to maintain maybe one or two units of part B, the one we're looking at here at least, just because, number one, you can always ditch it, you can always get rid of it. But once it's gone, can't. Never could. You can't get it back again.
So those are things to consider. And these all add up together. So you might see the cost per thousand way less on part B because it has a shelf life.
Now, it's not just you that you're covering. There's family coverage as well. You might have coverage on your honey bunches or the kids. Now remember, the kids are covered up until the age of 22.
So these kids are covered for up to 12, 500 until they turn 22 and not a moment after.
So if you're not married and you had coverage on your chillings, then you might want to contact your friend Raina here and let her help you eliminate slash, potentially get a refund for this extra cost that you've been incurring. And if you're married and continue to stay that way, you want to maintain this on the spouse because there are no Sanford and Son years here.
When you're looking at family life insurance, $25,000 of coverage and you might pay 84 bucks a month by the time you hit 80.
So not too shabby for that amount of coverage. Lump sum tax free.
And health is a factor here too. I've had many a conversation with a retiring employee whose spouse had umpteen thousand more health challenges than they did and this was the only coverage they had at the time. Well, remember, life insurance says how old are you today and how's your health? And it's a snapshot. And if that snapshot ain't a good one, then you may not be able to get additional coverage. So it's always makes sense to keep the bird you have in your hand rather than chasing after the one in the bush. And that's sage wisdom for you and your posterity. But beyond that, if you want to look at outside coverage, call me for that too. We can do that as well because again, while you have the bird in the hand, we can still chase the one in the bush, which you want to keep, the one that you have already. So if you have insurance, we leave it alone. We try to see if there's anything else additional and. And then you make the decision after that. So on the whole, in closing, if you have basic, you want to keep it. If you don't and you got rid of it, hakuna matata, it is what it is. But if you did already get rid of it and you only carry term insurance, let's talk because there may be some permanent stuff you want to consider for you and the fam. And remember, if I'm going to look at any outside life insurance for you, it it's with the goal of trying to have coverage that you don't have to die to get paid and you don't have to bleed to get covered. Meaning there are life insurance plans where they have living benefits. And you may have heard my little magical story about the hubs and how he had a cancer journey. But when he was diagnosed with that, we had a plan that was able to pay him cash, cash money for that diagnosis because of the one life insurance plan that he had that was able to annie up in the worst possible time of our life.
So if you think I'm a believer because of that, then you're darn tootin right because we received that check and he's living to tell the tale, which is the best part of it. But life insurance doesn't need to be. Only when your life is over, you can receive payments for things like heart attack, stroke, cancer, multiple sclerosis, Alzheimer's, traumatic brain injury, loss of limbs. There's even a chronic illness benefit writer that is pays for the same reason as long term care like I can't do for myself, bathe, dress, eat, stuff like that. And then also critical injury to where if I get injured and I can't do two out of the six activities of daily living, they will pay me a lump sum as well. So this is not a pitch, this is something you should just consider because if you don't have something like that and something happens, you can't get it later.
The hubs my husband, he he his options for life insurance post stage 4 cancer are incredibly minimal. And you everyone does the coulda, woulda, shoulda if I had just had some more insurance and I even thought it after we cashed in on some of this, I'm like man, I should have got a bigger policy. But something's always better than nothing. Never get rid of basic Never get rid of A if you have it because it's free. Also, if you're married and you're gonna stay that way, keep C forever and and then we'll talk about part B. And if you need outside coverage, reach out to your friend. We'll talk about it. Have a wonderful rest of your day and we'll talk to you soon.
[00:14:20] Speaker A: Thanks for listening to Reyna Retirement. With a strong commitment to ethical standards, Raina works hard to find the right solution for each individual or family who reaches out for advice. To contact Reyna directly, call 850-450-6500. That's 850450 6500.
Or to reach the team at 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 note of 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, FELI, and FEHB are all registered trademarks of the U.S. office of Personnel Management. American Federal Benefits Consultants, Agents 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.
