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Retirement Planning


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MikeOut  
#1 Posted : Sunday, June 03, 2012 1:59:34 AM(UTC)
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I just mailed off my 2801 CSRS Retirement request or application? My FEGLI according to my annuity calc will cost me $44 a month for Basic + Opt. A. The Basic is based on a salary (and high-3) of $115K per year. I don't understand the guidance i've found that the insurance will cost me $1.83 per $1,000 of coverage.
     I'm wondering if anyone is close to those numbers and if they are carrying Basic + 'A' is the premium around $44 a month. Thanks... 130 wdtg (working days to go)...Confused
Fed1969  
#2 Posted : Sunday, June 03, 2012 2:03:04 AM(UTC)
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I think the month rates are online and your can verify if they are correct.
MikeOut  
#3 Posted : Sunday, June 03, 2012 2:39:03 AM(UTC)
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Thanks for the suggestion, I found a calculator and plugged in my $115K annual salary and it made sense for my current situation Basic+A $20 per payperiod. The same coverage in retirement at 'no reduction' runs $267 a month? seems like a huge jump.  Does that make sense to those that are already there? thx...
The HalfBreed  
#4 Posted : Sunday, June 03, 2012 11:03:27 AM(UTC)
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I had my numbers run by our HR Office, and, for the basic (Salary rounded UP and add 2,000 plus the 10,000) costs me $58/month (75% reduction). My base is somewhat more than yours, but, I think the $50 or less is a better guess-i-mate of your actual costs.


The HalfBreed2012-06-03 19:11:29
RETIRED 12/19/2012 !!! Good Bye Tension !!! Hello Pension !!!
Beachtime  
#5 Posted : Monday, June 04, 2012 1:18:23 AM(UTC)
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If you choose the full 75% reduction, your FEGLI rates will be similar to what you pay now in retirement. If, however, you chose 50% or no reduction, you will pay a hefty premium, once retired, to maintain your same level of coverage. When my hubby retired, in December 2011, we chose the 75% reduction, dropped his Option B coverage (still have one kid in high school) and purchased a term life policy from a top rated life insurance company. Higher level of coverage for less than 1/2 of what we would have paid if we had kept FEGLI option B with anything OTHER than the 75% reduction. If you still need  life insurance coverage for more than you basic amount, or want that basic amount beyond the year you turn 65, consider puchasing a lower cost policy from a private company. FEGLI rates are notoriously higher than what you can find outside for anyone over 45 or so.
dhacker56  
#6 Posted : Monday, June 04, 2012 1:33:27 AM(UTC)
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Better to take Term from outside company. Cheaper.


dhacker562012-06-04 09:38:46
Fed1969  
#7 Posted : Monday, June 04, 2012 4:52:03 AM(UTC)
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dhacker56 wrote:

Better to take Term from outside company. Cheaper.


 Great comment!! Fed19692012-06-04 15:23:04
dhacker56  
#8 Posted : Monday, June 04, 2012 5:01:42 AM(UTC)
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thanx





dhacker562012-06-04 15:31:41
Fed1969  
#9 Posted : Monday, June 04, 2012 7:15:53 AM(UTC)
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I suggest you don't cancel govt life insurance until you are accept by the private sector.
lbeck  
#10 Posted : Tuesday, July 24, 2012 10:59:51 PM(UTC)
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Quote:
If you still need  life insurance coverage for more than you basic amount, or want that basic amount beyond the year you turn 65, consider puchasing a lower cost policy from a private company. FEGLI rates are notoriously higher than what you can find outside for anyone over 45 or so.
One of my basic questions is whether the basic insurance payout of $28K (for me) is inflated by COLAs since my annual income increases or is it frozen at the reitrement hi 3 number?
 
I'm in a similar situation to MikeOut except maybe age.  I'll be 68 when I retire later this year.  According to what I've read and think I understand, basic coverage will be free after age 65 for retirees.  Basic coverage is 75% reduction, right?  For me that would equal a $28K policy for free.
 
So I'm thinking, and correct me if I'm wrong, that I only need to find a $100K policy on the open market to match my annual salary, given inflation, for the next 10 years or so and then inflation may overtake value.  I haven't done calculations.
 
So if all of my assumptions are correct, I only need to look for $100K of additional coverage and then decide whether I want term insurance or some other flavor.  And if term (likely) to guess when I will die.  I haven't looked at term insurance rates lately but I'm guessing that a 50 year term policy at my age woulldn't cost much more than a 20 year term policy because of acturarial considerations.
Beachtime  
#11 Posted : Wednesday, July 25, 2012 3:19:06 AM(UTC)
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lbeck-
 
Yes, your basic life insurance in retirement, which will be 75% less than your current coverage, will be free.
 
I do not believe the coverage amount will increase with future COLA's, at least not the way I read the OPM website..
 
 
Coverage from a private insurer (be sure to select a highly rated company.....easy to find that information online) will be much cheaper assuming you are still in good health. But the older you are when you buy the coverage, all else being equal, the more expensive that coverage will be.
 
Do you really need to try and keep term coverage until you die? Many people don't want more than necessary to handle final expenses after they retire. Or maybe they want something to pay off a mortgage or other debts that are still around after retirement.
 
I'd ask why $100K for such a long time? Are you trying to leave something to your children? I could be wrong, but I don't know if there are term policies available for longer than 30 years?
 
If you are trying to leave money to children or other heirs, do you have long term care insurance? You might be better off redirecting term life premiums to a long term care policy, thereby protecting what assets you do have from being depleted and not available to your heirs.
 
As I said, based on what I read on OPM, I think you have a good understanding of what basic FEGLI will provide after retirement.....now its just a matter of determining what additional term insurance, if any, you need after retirement.
 
If you decide you DO want/need additional term, be sure to apply for coverage BEFORE you retire. You want to be sure you qualify and know what premiums will be for the term you select BEFORE you chose that 75% reduction in your basic coverage. (And finalize that outside policy) Just to be safe and keep all your options open.
lbeck  
#12 Posted : Wednesday, July 25, 2012 4:11:12 AM(UTC)
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Thanks Beachtime.  All good advice and is somewhat in sync with my own philosophy.  In answer to your questions - my children are wealthier than I so I'm not trying to fatten my estate.  My main objective is to relieve my wife's apprehension regarding her well being should I die soon after retirement.  She's aware that she'll get 55% of my annuity and up until now I've been telling her that she'll also get an amount equivalent to a year's salary should I die in office.  Now that retirement is close and I'm getting details, her 55% will cover expenses (barely) but when I discussed dropping my "life insurance policy" to 25% of what she thought she would get, she's a little concerned.  She's been a stay-at-home mom or housewife most of our marriage so doesn't have much SS.  I feel that I owe it to her to supplement my annuity with an initial slug of money so that she can at least weather through the first year or so while her expenses equilibrate with her income.
 
So bottom line is that I'm trying to match the post-retirement life insurance that she thought she had before retirement.
Quote:
Coverage from a private insurer (be sure to select a highly rated company.....easy to find that information online) will be much cheaper assuming you are still in good health. But the older you are when you buy the coverage, all else being equal, the more expensive that coverage will be.
That's been my assumption also.  I'm only trying now to determine my best course of action and whether the FEGLI is inflated with the COLA is a consideration.
 
My wife and I both enjoy excellent health but it occurred to me that I may outlive her, in which case I won't need life insurance at all.  What I'm real;y buying is peace of mind for my wife.
dhacker56  
#13 Posted : Wednesday, July 25, 2012 4:29:21 AM(UTC)
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No Life insurance is not inflated.  It drops from the face amount starting the second month after you reach 65  by 2% per year until it gets to 25%  of the initial amount.  there is a premium until you reach age 65.

lbeck  
#14 Posted : Wednesday, July 25, 2012 4:42:10 AM(UTC)
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Sorry Dhacker.  I worded my statement poorly.  What I meant to ask is if the basic insurance that I'll get for free after retirement (I'll be 68) is frozen at 25% of my high 3 at the time of retirement or 25% of my annual annuity when I die.  This question assumes that I'll live a decade or more after retirement and that COLAs will increase my annual annuity substantially.
 
Another thing that occured to me after my recent post is that there may be a wierd policy that pays only if my wife survives me, not the other way.  If she preceeds me in death then the policy is null and void.  That would be ideal for my situation.  I'll Google around and see what I find.
dhacker56  
#15 Posted : Wednesday, July 25, 2012 4:52:09 AM(UTC)
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It is 25% of the amount of your salary at retirement rounded up. NOT your annuity.

dhacker56  
#16 Posted : Wednesday, July 25, 2012 4:53:16 AM(UTC)
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It is life insurance.  You will name beneficiaries.  

lbeck  
#17 Posted : Wednesday, July 25, 2012 4:58:37 AM(UTC)
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Okay.  We're splitting hairs here, but I think I understand.  The 25% is based on your annual salary or the calculated high 3 average.  It isn't much different in my case.  But I understand from your statement that it's frozen at that amount forever. lbeck2012-07-25 13:04:28
dhacker56  
#18 Posted : Wednesday, July 25, 2012 5:04:40 AM(UTC)
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Correct.  Actually at age 68 I am not sure that it would be at the minimum amount.  2%  per month  after 65y2m.  You'll have to do the math.  But thre is NO premium since you are over 65y2m.

Fed1969  
#19 Posted : Wednesday, July 25, 2012 5:14:50 AM(UTC)
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It depends on the age you retire as to when it hits the 25%.  If you retire after age 65, it start the 2% reduction the month after you retire.  If you retire after age 65, it takes 38 months to reach the 25%.
lbeck  
#20 Posted : Wednesday, July 25, 2012 5:17:46 AM(UTC)
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I'm getting confused here.  According to the OPM guidance:
 
Quote:
If you separated for retirement before December 9, 1980, your Basic life insurance will begin to reduce by 2% of the face value each month beginning with the second month after the date you are 65 or the second month after you retire, whichever is later.  This reduction continues until your Basic life insurance reaches 25% of the face value. This is a 75% reduction. For example, if, after you are retired, your 65th birthday occurred in October 2015, your life insurance remained at the full face value through November 30, 2015. The insurance began to reduce by 2 % of the face value per month effective December 1, 2015; by another 2% on January 1, 2016; and so on until January 1, 2019, when your life insurance reached 25% of the face value.  This coverage is free.
 
The way that I read this is that the least amount that my beneficiary will get for the free coverage is 25% of face value since I'm over 65.  Is this 25% of your annual salary or 25% of the 25%?
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