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. Reina 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.
[00:00:40] Speaker B: Well, people like myself and maybe yourself, if you want to retire sometime, always have to sort of recognize that maybe what was cool during our culture, it's waning and waxing a little bit. And the new culture has new terms like sus for suspect, and what are some of the other ones but the biggest one, or you're so extra. Or what is it? You're so basic. Well, you know, I probably want to talk to you about basic life insurance so we can at least sound super hip when we're talking about our life insurance because you at least have basic coverage, or I hope you do. So let me tell you, why in the world is basic so important even while you're working? It is super duper inexpensive.
It is one year of your salary. See on the left here? It's your salary rounded up. And then they add $2,000 of extra life insurance. Now, my postal life, my postal life, my postal employees, you don't pay squat for your basic life insurance. It's very cool. You're taxed on a portion of it, but that's irrelevant. It's not a cost, right? You're, you're, you're not spending any money. Everybody else, you pay about 15 cents per thousand, which is dirt stinking cheap. So we love basic life insurance. So why do I bring this up? You're probably saying, raina, I've checked out your channel before and you talked about basic life insurance back in the day. Well, I'm super glad you're seeing it for a second, third, fourth time. But some people still have not got the memo. And I want to encourage you, if you're anywhere during your federal or postal career and somebody comes knocking at the door to tell you, hey, buy this other life insurance and ditch your fegli. They are not meaning basic if they mean basic. Like, if they say to ditch basic, go ahead and earmuffs.
They're talking about be Bravo.
B. Bravo gets more expensive every five years. Basic does not.
So please, if you are introduced to Outside insurance. That's great. I help people with insurance all day. Life insurance, health insurance, all kinds of stuff, disability coverage. And we can help people, you know, protect the longevity of the premium so the price stays the same for longer, for more coverage. That's great.
But getting rid of basic life insurance, in my opinion and experience, is a travesty. Let me tell you why. So you see here on the right hand side, when you retire, you're going to have three choices for basic life insurance.
You could keep all of it, half of it, or a quarter. A quarter. It's a sweater weather. No, you can keep a quarter of your basic life insurance after retirement at a minimum. And that's the lowest amount you can keep for the lowest cost.
So in this example I've got here, if somebody has a 72,000 and some change salary, their basic life insurance is 75 grand in retirement age. 65 is an important number. There's different prices before and after. So let's just go with the after price because you've kind of gotten rid of that extra. There's an extra Little Premium before 65 if you've retired before then. So let's say I'm retiring and I'm 66.
These are my choices straight away. I can pay 168 bucks a month to keep that $75,000 of coverage forever.
That is two straight lines.
Price stays the same forever and coverage, or rather death benefit, stays the same forever. Both of them.
Now, if I don't want to pay that amount because maybe I have other coverage or I've paid everything off and all I'm concerned about is burial, maybe I'll look at the half.
What's half of 75,000? What's my quick math? What is that, 32,5. 32 grand of coverage for 56 bucks a month.
Now that's a pretty rocking deal, especially if you live in the life insurance space like I have since I was 14 years old. We used to work with my dad. We've seen prices for all kinds of stuff. You get a pretty good idea of what's what. $56 a month for $32,000 of coverage is a incredibly strong price. Very good, very competitive, better than most. And that stays again the same forever. But you say, well, what is it if I don't want to pay anything?
What, what's that? You say, I have free life insurance coverage from my job.
Yes, you do. That's the whole purpose that I'm encouraging everyone to keep basic life insurance because at a minimum, you keep a Quarter of your basic life insurance forever for forever free. And what is 25% of $75,000? That is 18,007 50 forever for free. Your national average for a burial is between 8 and $12,000. So remember, that's the standard vaulted casket.
Cremation is, you know, half of that three to $5,000. And body donation is free. Just saying.
So tuck that little morsel away in your memory and remember that Raina told you first that you've got free coverage from your job no matter how old or unhealthy you get. And that's totally fine if you want to stack a bunch of other coverages on top of it. But I cannot stress enough how valuable free $18,000 of coverage is. And if your salary is more than, then so is your basic life insurance. If you're 100. If $100,000 is your salary, then 25,000 is 25% of that. If it's 300 grand is your salary, then there's your 75 grand forever for free. So remember, your salary determines your basic life insurance. Please don't be one of these people that says to me, oh, you know, I didn't need this or whatever. I have this conversation, unfortunately, more regularly than I would like to have.
I get it maybe once every couple of months.
Oh, I waived that. It was garbage. And I know they don't mean basic, and I know they don't understand the, the variety of what they eliminated. Part B gets more expensive every five years.
Basic does not. A does not. And C is coverage on your family, spouse and kids up to a certain age. If you have more questions on that, I would encourage you to reach out to myself and my team. My direct number here, 850-45065-Hondo. And I can connect you with either myself or the right person on our team to help you with whatever subject we need to go over.
And that, Eggley, is a huge subject because it's a big bit of a foundation for your retirement benefits. Now remember too, we want to also plan for our health. FEGLI is the only insurance plan that the government gave you or offered to you that comes with what they call living benefits. What this means is if you get diagnosed with the bad news, you have nine months or less to live, they will advance you the total lump sum of your basic life insurance. And how much income tax do you pay on life insurance?
You don't. So you don't pay tax on this benefit either. Why is this a huge thing? Maybe you've seen my little story before of my husband who was diagnosed four years ago with stage four colorectal cancer. We've had quite a few federal employees who had that similar diagnosis. My husband did not get a terminal diagnosis, but many have. And once you get the news that it's nine months or less, I encourage you to make this claim, dial this number, get that party started or get that claim started. That way you can get money in your hands. You could probably imagine how many people wanted to maybe pay off their home and do major prep for their legacy for their family in to offset what the impending future may have when this kind of news comes down the pike. And it's really great to know that you can get a year of salary, lump sum without income tax to help achieve that goal and plan for the future. That's what people do. We even had a gentleman who was diagnosed with stage four lung cancer actually and was about ready to take the withdrawal from his TSP to cover the cost of the house debt and some other things. Well, he found this out from one of our workshops and it was a teary eyed happy moment to say I didn't know I could do this. Now I have this amount of money. If he does still grab from tsp, it won't be as much because remember, a withdrawal from TSP is taxable and this individual was 45 years old. So there would have also been the penalty cost for being under the age of 59 and a half. Now let me just head you off at the pass. If you were going to be one of these, let me comment on this and say that Social Security disability protects you from the penalty. That is true. This individual had not yet had time to even apply because of the speed with which it advanced. So yes, that could be true. That is true. And when you get the approval. But again, not everything applies to everyone depending on where they are in their journey. So again, reach out. We can help you understand this, prep for it and make those right decisions because once they're made, they're made forever. We'll talk to you soon.
[00:10:15] 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 Raina directly, call 850-450-6500. That's 850-450-6500. Or to reach the team at American Federal Benefits consultants, call 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 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 or any independent contractors do not provide tax links, 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.
