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10
Worst
Mistakes
Federal
Employees and
Retirees
Make*
*and how you
can avoid them...
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Complicated by continual
changes, your federal retirement benefits package is complex.
Difficult decisions made today or in the past will have everlasting
effects on your retirement life. Here is a list of the ten worst
mistakes made by federal employees and retirees:
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- 1 Failure
to elect a survivor benefit for a spouse who has her/his own
income or retirement. Predeceasing your spouse does not necessarily
mean that all your expenses and bills die with you. The expenses
for the automobile, house and other items which you shared jointly
with your spouse continue. You do want your spouse to continue
to live in the style to which he/she has become accustomed.
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- Solution: Elect a survivor benefit
for a spouse.
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- 2 Pick up your first
retirement check, sell your house and head for a warmer climate.
Moving before you have assessed all the pros and cons of shifting
to a new location can be an expensive mistake. You must explore
financial, emotional, cultural, medical, proximity to family
and other considerations at both your current and prospective
locations. You need to consider whether to rent or purchase a
residence and the taxes you will be required to pay.
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- Solution: Have a serious soul searching
and consider the realities and not the dreams of retirement.
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- 3 Failure to consider
your spouse's routine when you retire. Your spouse may not be
eligible to retire or your spouse may never retire from being
a homemaker. After 30 years, your spouse may not want you fiddling
around the house, in the way, for an extra 10 hours a day.
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- Solution: Don't retire until you
have something to do. Plan your retirement. This does not mean
a full schedule of volunteer work or projects. It means that
you will need an excuse for getting up and getting started in
the morning.
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- 4 Failure to realistically
review your life insurance needs at retirement. All of the optional
plans (A, B and C) of the Federal Employees Group Life Insurance
program increase in monthly premiums by nearly 50 percent at
age 55 and again at age 60. Many retirees simply keep the same
insurance coverage they had as employees. Do you need the insurance?
The mortgages are paid off and children's tuition balances have
been paid.
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- Solution: Re-explore your basic
financial needs and discuss what the purpose of insurance is
to your specific situation.
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- 5 Expecting to receive
a full Social Security retirement based on your total Social
Security earnings. The Windfall Elimination Provision will reduce
the earned Social Security benefit of a federal worker who retired
after 1985 by 40 to 50 percent.
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- Solution: Adjust your retirement
budget accordingly and work for repeal of the law.
- 6 Not electing a survivor
benefit for a spouse-either at retirement or upon marriage (remarriage)
after retirement. In order to retain FEHB, the surviving spouse
must receive a survivor benefit.
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- Solution: Elect a small survivor
benefit. The survivor can pay FEHB premiums directly if the annuity
is not sufficient to cover the premium. Recent retirees can (within
18 months of retirement) change to elect a survivor benefit.
However, a large monetary penalty must be made in order to make
an after-retirement election. Survivor benefits for a post retirement
remarriage must be elected within two years of the marriage.
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- 7 Failure to meet
the requirement to have FEHB coverage for at least five years
before retiring in order to retain the coverage in retirement.
For example, a federal employee covered by a spouse's private
sector health plan opts not to enroll in FEHB while employed
(or is not enrolled for five years). The spouse later loses coverage
(or benefits are reduced-usually upon retirement). As a retiree,
the annuitant cannot enroll in FEHB.
- Solution: Enroll in the least expensive
self only FEHB plan for at least five years before retiring in
order to continue FEHB into retirement and preserve the opportunity
to later change to family coverage at open season.
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- 8 Electing
a self only FEHB enrollment (when spouse has other non-federal
health plan coverage. Upon death of annuitant, spouse would not
be able to retain FEHB. The retiree must not only elect a survivor
benefit but also have a family enrollment in effect at the time
of death.
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- Solution: Change to a family enrollment
at the next open season.
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- 9 Enrolling
in the High Option of a fee-for-service plan when the Low (or
Standard) Option provides good benefits at a substantially lower
premium. For example, the BC/BS Standard Self Only monthly premium
in 1998 was $50.31 (compared to $139.65 for the High Option).
For Medicare enrollees especially, the Standard Option for any
fee-for-service plan combined with Parts A and B of Medicare
provides nearly full coverage of all health care expenses, with
little out-of-pocket costs.
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- Solution: At age 65, change to a
less expensive plan. This change can be made at any time from
30 days before age 65 or any time thereafter (including a future
open season).
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- 10 Two
federal retirees elect two self only fee-for-service enrollments
instead of one family enrollment. While two self only enrollments
cost slightly less (in premiums) than one family, there are several
benefit losses that may outweigh the slight premium savings.
Two self only enrollees must meet separate deductibles, copayments,
coinsurance and Catastrophic Protection Benefits. For example,
the BC/BS Standard Family catastrophic level in 1998 was $2,000
(if Preferred Providers were used). Each enrollee in two self
only enrollments would have to met the $2,000 catastrophic level
(or $4,000 total).
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- Solution: Change to family coverage
at a future open season.
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- Finally,
and perhaps the biggest mistakes retirees make, is failure to
join an organization that represents federal retirees' interests.
The only organization serving that purpose exclusively is NARFE.
You need NARFE and NARFE needs you. You need NARFE with its chief
lobbyist who has over 30 years experience on Capitol Hill in
federal retirement matters. You need NARFE with its retirement
benefits service department with over 90 years of experience
in civil service retirement processing at the Office of Personnel
Management. You need NARFE's monthly Retirement Life magazine
to keep you informed on issues that affect your life and well
being. NARFE needs you to do grass roots lobbying with your own
congressional representatives. NARFE needs you to be in the number
it can claim to effectively represent. NARFE needs you to be
a part of the good fellowship of people, who like you, are federal
employees and retirees.
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- Solution: Join NARFE today.
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- NARFE Membership
- Provides These Benefits:
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 Legislative representation
On many legislative fronts-retirement income, health care benefits,
COLA, fairness and equity issues, and more, NARFE is your representative
on Capitol Hill.
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- Retirement Life, NARFE's
informative monthly magazine, is included with your membership
and is the prime news source for information about federal retirement
and health care issues.
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- NARFE Service Centers
Service Center volunteers help federal workers, retirees, their
spouses and beneficiaries in matters relating to Medicare, federal
retirement and annuities, and federal employee health and life
insurance benefits.
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- Special Membership
Discounts Your membership entitles you to special rates on insurance
programs, dental plans, auto insurance and travel services. Other
perks include NARFE Visa and Gold MasterCard credit cards and
participating hotel discounts.
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Join
NARFE Now!
1-530-283-4996
California State Federation of Chapters
National Association of Retired Federal Employees
147 Rogers Ave
Qunicy, CA 95971
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