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, Reyna Reyes.
[00:00:39] Speaker B: Leos of the world, take heed, hearken unto me. If you are a Leo and you know it, clap your hands. No, I'm kidding. But if your name is Leo, then I would definitely love to be friends with you. If you live in Leo Indiana, let's talk. And Leo the Lion says hi. But that's not what I'm talking about. Today. LEO means law enforcement officer and firefighters. Pretty much anyone who's a special category employee of the federal government has some explaining to do. No, I'm getting you got a special situation where you've got a very cool program for your pension, so you already know who you are and you're proud of it and you're loving it. Life is good. Everyone's jealous of you and your pension, so let's see what they're jealous of. You got a pretty good situation here. This is law enforcement, firefighters, special categories, Border patrol bureau, prisons, ICE in many cases depending on your job. And air traffic controllers have an option for this as well. So what does it mean? What does it look like? Eligibility windows are relaxed for you in comparison to all of your non special category co workers in the Fed. But that is because your job is stressful. So a lot of people have said, oh, if you carry a weapon, your special categories. Not true. There's law enforcement of the va, they carry a weapon, but they are not considered special categories. Yes, you have a higher stress job working either in prisons, border patrol, air traffic controllers, things like that. And because of that stress they want you at a dodge by the age of 57. With a few caveats to that. There are some exceptions to that rule, but it's very case by case.
So when can you leave age 50 with 20 years of service? We've been hearing a lot of that recently because there's been VERA offers and DSR and that's the same eligibility windows they get. So that's kind of cool. But you live with this, you are hired into it. So once you reach age 50, you've also got to have at least 20 years of service to roll on out of there and get your pension. Now if you're under the age of 50, that's totally cool as long as you have at least 25 years of service.
Now there is a civil service scenario, but I imagine most of my civil service LEOs have retired. I would love to meet a civil service Leo that's still working. I'm not sure how that would shake out in terms of mandatory retirement age, so. But I bring it up just because it seems like fun.
So here's an example of your pension and what does it look like every year that you are a LEO? That is special categories. Once you reach that 20th year of service, every year is worth 1.7%. This is foreign to most of my people because they're used to hearing 1% or 1.1.
Now 1.7 is like manna from heaven. It is an. Is it a magical pension? Yeah. But you earned it every doggone day with the adrenaline up and down of your body.
So you earned this. Okay? You didn't just fall into this. Don't let anybody tell you otherwise. So every year at the 20th year is worth 1.7% which shakes out to that 20 years being essentially 34% of your high 3 salary. So you see, then you add in any year past that is 1%, right? Every year has a value of 1% thereafter. And some people don't want to retire at their mandatory retirement age so they exit their special categories job and go do some normal federal non special categories gig. And that's totally fine. You can keep rolling, keep going. It keeps adding to your stuff. TSP contributions, health insurance, all the same stuff. But those years are worth 1%, not 1.7.
So kind of cool there, you've got some good examples and civil service again, I'd love to meet you. You, if you're hanging out and you're still working, let me talk to you. I want to, I want to hear some stories. Now a really cool thing. Remember we have a three legged stool. So you've got your pension, which is what we're talking about here, and you've got a pretty strong one. Now leg two, you've got a Social Security contribution that would start at age 62 or a supplement because you're retiring when you're like 12. Just kidding. When you're 50 or under 50 with 25 years of service.
Now, the current political, legislative, potential change notwithstanding, you have a supplement that starts straight away for you. And you are not subject to an earnings test until the day you reach your minimum retirement age, which is different for everyone based on your birthday. But in the year 2025, most of you are retiring at 50. Your MRA is going to be 57.
So while you're receiving the supplement, you can go work another job, make as much doggone money as you want to. It doesn't matter. But then fast forward, you reach age 57, you got to watch how much money you make, because the earnings test right now in 2025 is $23,400. So if you exceed that amount, for every $2 you go over, they're going to dock you a dollar off of your supplement. So you want to kind of watch your stuff. Like 3 tsp, you can grab from it if you're over the age of 50 when you separate. Or back in 2022, they put that secure act 2.0 into effect. That changed the game for my LEOs and firefighters and special categories that says if you are. If you have at least 25 years of service when you separate, even if you're in your 40s, you can go ripping out of TSP as needed with no 10% penalty. This is huge. This has affected so many law enforcement officers that I've worked with. I have a whole little group of y' all up in New York, hey, guys, how you doing? And then I got a whole section in the mountains of Virginia. Now, I work with anybody anywhere, but I've got little groups of people that I work with on the regular. Pretty much anybody in Florida, whole bunch of Alice and then some people out in California that I talk to regularly. I've got a group of like 10, 15 people that we talk very often. This is huge. We almost had a party for this when it passed because so many people were concerned about leaving at age 48 with 20 years of, 25 years of service and not being able to touch tsp till 59 and a half. Well, that's kind of a penalty in itself that has been eradicated. So if you're a leo, you have questions, reach out. I can help you. My team can help you. We can help you make plans for income, pension. How much money can you make? When does this are the. The supplement earnings test kick in? When should you turn on Social Security? When should you grab from tsp? How should you grab from tsp, how to avoid too much tax, and how to grab just the right amount. So I hope that helps. Looking forward to talking with you. Whether you're a LEO in Indiana or just Leo the lion or if you're just a law enforcement, law enforcement officer working hard and putting yourself on the line for us. We appreciate you all of y' all in this category. We know your stress level goes very high and then comes back down again when the call's over and then it's right back up when the bell rings. We appreciate you keep plugging away and the retirement day is near. We'll talk to you soon.
[00:07:52] 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 rina directly, call 850-450-6500. That's 850-450-6500 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 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 State 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.
