Micah Shilanski 00:48
Welcome back to the Plan Your Federal Retirement podcast. I’m your co-host, Micha Shilanski, and today we’re going to get into what most people didn’t know about Medicare once they retire. And these are some really crucial thing is because health insurance is a big part of your retirement, and Medicare is probably going to be a big part of it as well. So in order to talk more about this, we brought a great advisor on the line, John Raleigh, who has a wealth of knowledge working with retirees and especially dealing with Medicare. So John, thanks for being on the podcast again.

John Raleigh 01:19
Oh, thanks for having me.

Micah Shilanski 01:20
Yeah, as we were kind of pre gaming this and kind of outlining a little bit on Medicare, right? We were really kind of talking about how there’s a little bit of misconceptions that retirees go into retirement with about how Medicare is going to work, how it’s not going to work, etc, right?

John Raleigh 01:35
Right. Absolutely. And then especially from federal side, because there’s a lot of confusion associated with for standard, I mean, non federal employee, it’s a little more straightforward. But being a federal employee, it does add a lot of questions. For sure.

Micah Shilanski 01:43
Yeah, because you have health insurance in retirement, right? If you don’t have health insurance in retirement, it makes it a little bit simpler. You have less options. But being a federal employee, you have those beautiful golden handcuffs that kind of keep you there, and one of them is health insurance into retirement. So John, what do you think about this? Let’s go ahead and talk about those rules first. What rules do we have to meet in order to be eligible to keep FEHB in retirement? FEHB or federal employee health benefit system. Then let’s talk about what that’s going to look like a little bit into retirement then at 65 when changes happen, whether you would like them or not, you need to make some decisions. And let’s get into some of the questions or some of the myths that we hear from federal employees. And some of them are, I’m just going to cancel my FEHB because it’s not worth anything anymore. Probe said, Don’t do that. We’re not recommending that. Quite the opposite, but we want to talk about that, because some people get a little frustrated. I got to pay for Medicare, and what do I got to have FEHB for? So let’s get into that stuff as well. What do you think?

John Raleigh 02:38
I think I think it makes total sense.

Micah Shilanski 02:43
So John as a retiree is getting ready, right, we got to meet a couple of rules in order for them to be eligible to maintain FEHB in retirement. So the first one is they got to retire with an ability to get an immediate pension. So what are the rules that someone has to meet to retire with the eligibility of an immediate pension?

John Raleigh 03:01
First one. I mean, I’m sure all the federal employees know it’s MRA and 30 years. And when you have that number, you’re definitely golden at that point.

Micah Shilanski 03:11
Yeah, I said 30 years of creditable service for retirement, right? So making sure that that time actually counts towards your retirement is really important. So we got MRA and 30 What else?

John Raleigh 03:22
And then you’ve got age 60 and 20 years of service now. And you made a great point there. Micah. I mean, it’s so easy to throw these numbers out and like that, but the credible service and those pieces are so important to remember, because common sense and the rules sometimes don’t glide.

Micah Shilanski 03:38
Oh, boy. We were just talking about a client, actually, right before this, that’s a retiree, and she’s kind of coming up with some issues, and one of the things is creditable service for retirement, and when she would like to separate, doesn’t necessarily align with these retirement rules, and it comes with big I’m going to say penalties is kind of a broad term, and whether that’s a direct penalty of of the 5% every year you’re under 62 or it’s an indirect penalty that you’re not eligible to get health insurance into retirement, or you have a delay in getting retirement income right. All of those are penalties in some way, and it’s really understanding what these rules are. So when we’re planning retirement out, we’re planning with the right set of rules. So we got the 60 and 20, and then we also got the 62 and five, right, that last one age 62 with at least five years of credible service for retirement. And you got the weird one too, where I talk too much about we’ve done a lot on the podcast, but MRA and 10, there’s that special early retirement option comes with some strings, so really got to be careful. But that’s kind of the first step. Is hitting one of these gates. And there’s a few others we won’t talk about as well. But this is kind of the basic ones that you’re eligible to maintain FEHB in retirement. That’s the first one. The second step is you have to be in FEHB five years prior to retirement. Now, this gets a little confused with the spouse’s rules, right? And the spouse’s rules are a little different. Is there’s two rules on the spouse as well. Number one, they must be in FEHB before you pass away, which that doesn’t mean before we retire. It probably should mean that, but it definitely means before you pass away, and they must be eligible to receive a survivor pension. So they got to be getting a survivor benefit. That doesn’t mean your spouse has to be in FEHB for five years, right? You need to be in a five years prior to retirement, and then your spouse needs to be in the program. Is really, really important. And then you get health insurance for life. It’s beautiful. You got to keep your plan. You got to change it every open season. Don’t worry. Almost nobody does, even though there’s other great plans out there. And then at 65 John, something happens if somebody’s retired at 62 health insurance is the same for three years. What happens on their 65th birthday?

John Raleigh 05:43
Well, now you have Medicare comes involved, and even though you have FEHB, it’s there, and you need to pay attention to it, and you need to understand the options that are available to you so that you can make sure this great benefit you have gives you everything you deserve when you work hard for it, you deserve to make sure you can keep in place.

Micah Shilanski 06:02
Yeah, yeah, very much. So and then, so when we get into this aspect that again, 65 we have to apply for Medicare. Medicare A is in alpha, potentially B, as in Bravo. I like to call Medicare B quasi optional. You don’t have to get it. You just have to get it. And we can talk a little bit about that. But John, what’s the cost for Medicare Part A at 65?

John Raleigh 06:24
Well, the nice thing about it is there’s no cost, you know. So it doesn’t make sense not to pay attention to this.

Micah Shilanski 06:33
Yeah, there’s no additional cost, right? You’ve already paid for it your entire working career, so, you know, that’s been deducted from your pay. So at 65 there’s not paying anything for it. So that makes a lot of sense. But then Medicare Part B becomes a little bit more tricky, right? Now, less tricky if you are under TRICARE, or you’re under VA benefits, or something of that nature your prior military service, because at 65 you have to sign up for Medicare Part B, as in, bravo. In fact, most of your IDs expire when you’re 65 and you have to show proof of Medicare Part B enrollment in order to get a new government issued military ID. But then we have this, this option to take it on or not take it on. And John, what are your kind of thoughts on Medicare? Should federal employees should we be looking at taking Medicare at 60 Medicare Part B at 65 Should we just, like, not take it at all? Or, let’s just talk about that, if we don’t take it at all, what happens?

John Raleigh 07:24
if we don’t take it at all? That that’s when, that’s when you begin to start realizing that there’s consequences of the choices that you make, and you have to be careful on not making these choices. And I know the easiest thing to do is to punch it down the road and say, Oh, I don’t need to worry about it. Oh, I’ve got I’ve got my my FEHB, I’ve got the other patients. But the the Part B decision is extremely important, because there are consequences of penalties if you don’t take it.

Micah Shilanski 07:53
One of the things I hear time and time again from federal employees that we work with is how dedicated they are to the mission, to helping their service, to helping grow and being a true civil servant, which is absolutely amazing. But inside of that silver service, you have a great set of benefits that you really need to understand how it works for your retirement, because there’s going to come a time, whether it’s sooner than you would like, or maybe it’s on your schedule, which would be amazing, that it’s time for the next exciting chapter of your life, retirement, doing the things you want to do, when you want to do them, where you want to do them, but to get the most out of that, you need to understand how the process of retirement works, and that’s why we’re putting together a one day event, a one day class, really going through soup to nuts, your retirement benefits, but more importantly, the key things that you need to know to get the most out of your retirement. You already know the challenges with OPM and processing retirement and how long it’s going to take to get a retirement check, but that’s just one of many obstacles you need to avoid in your retirement. So the class fills up fast, so make sure you register join us for this event. It’ll be taught by myself and several great instructors that really understand your federal benefits. Our goal is to help another 1 million federal employees with retirement, and we want your retirement to be successful, so join us in the workshop until next time, happy planning!

Micah Shilanski 07:54
Yeah, they’re absolutely ours. You have a seven month window to apply for Medicare Part B, you have three months before your 65th birthday, the month of your 65th birthday, and three months after your 65th birthday to apply for Medicare Part B. And John, what happens if we fail to follow instructions the government gives us?

John Raleigh 07:54
Huh, they giving you a penalty for the rest of your life?

Micah Shilanski 08:47
Yeah, and it starts out at 10% but it’s worse than that. It’s 10% per year. Every year you choose not to turn Medicare on. So all of a sudden, 65 you’re like, ah, what Micah and John know? Whatever, I’m going I’m going no Medicare. It’s fine. Five years later, you’re like, oh, maybe I should jump on this Medicare Part B bandwagon. You jump on there. There’s a 50% permanent penalty that gets added to how much you have to pay. That’s pretty steep.

John Raleigh 10:08
Yeah, and it’s so funny Micah because as you’re asking me the questions, keep sitting there thinking and saying, I don’t ever want my client to be in that position to not to understand the total consequences of funding this down the road. And it’s really said, run into somebody that never, I mean, that hasn’t thought about it, or hasn’t even, you know, made the decisions, because they just didn’t want to think about it. And that’s human nature.

Micah Shilanski 10:30
Now, just to be really clear, I have several clients that have chosen not to get Medicare Part B. Now I don’t generally recommend this, right? So it’s definitely an edge case, but it was a lot of conversations with these clients, and I want them to make an educated and informed decision, because it’s their money, it’s their choice. And we said, hey, if a medical event happens, this is how much it’s going to cost you every single year, and it’s dramatically more than Medicare Part B. And for this particular client, they were fine with that. They said, you know, can we afford it? And they could. And so you said, I just don’t want this restriction. I want to be able to do these other things, etc, and I’m fine paying this out of pocket. Okay, great. But John, to your point, this wasn’t a shock to them, right? Because we’ve been planning for this for years. They get to make the informed decision, and that’s what we’re trying to encourage you guys do, which we don’t want you to do, is, holy crap, I didn’t see this coming. Now, how am I going to have to deal with this for the rest of my life.

John Raleigh 11:21
The worst case is to have a benefit available that could be positive for you, and to not understand it and not realize it and not take the steps you need. And like you said, it’s okay to say no, and it’s okay to say this is this doesn’t going to work for me, but it’s like anything else, if you make the decision not to use it and you needed it. Then you realized that it was a bad I mean, in other words, you didn’t look at all the options available to you.

Micah Shilanski 11:46
Now let’s kind of talk about what actually happens. Because here’s here’s one of the myths that comes out that I hear from federal employees. That’s like, Micah, There’s the problem with keeping FEHP in retirement is I gotta sign up for Medicare. For sure, it’s that you don’t have to what you have to. So I get it. You gotta sign up for Medicare A and B, but that now FEHB isn’t paying for anything. I have to pay the same premium for my FEHB, and they’re providing less service. This is ridiculous. I should cancel it. Well, a couple of things can be true at the same time. Are they getting providing less service? Yes, yes, they are. Why? Because Medicare is covering the first part of the bill, they are covering less of the bill. That is an accurate statement. Are they providing no benefit? Incorrect. That is not correct. FEHB still provides a benefit because Medicare Part B, and John jump in here with your thoughts, edicare Part B only covers a small portion of the expenses when you go see a doctor, there’s a wide gap of expenses, a larger gap that if you don’t have a FEHB now we have to look at a Medicare supplement plan. So we got to be looking at all this additional coverage to pay for that, and that’s really the benefit we’re getting from FEHB after 65 is that fair?

John Raleigh 12:57
Yeah, it’s fair, definitely. I mean, as a federal employee and being eligible for FEHB, you definitely are given, in my opinion, better options, but also in a more cost effective way than having to deal with non federal employees and dealing with Medicare. So it’s a much better system, unfortunately. And I know you and I have had this discussion, we don’t understand why in the general public health insurance can’t go that way, like the FEHP benefits and tying everything in, it’s definitely a more efficient, better way to go.

Micah Shilanski 13:29
Yeah, that would be phenomenal for us to be able to get into FEHB. But that’s that’s in our dreaming podcast, right? You know, in the cost difference is going to be here as well. And so I’m going to give you know, just individual per person costs as we go through this. So when you’re going under Medicare right now, the premium is about 185 bucks a month, income dependent, meaning the more money you make, the more you have to pay for Medicare Part C as well as part D, when that comes out as well. So Medicare Part B premium could be fairly high, then you have Medicare Part C, right, which is, or I should say, a supplement policy knows all different types of supplements. We just took a generic one for an example. And if you’re a single individual, not only would you have to pay Medicare Part B, your Part C plan, or your supplement plan, would be somewhere between 350 and almost $600 a month if you wanted good coverage. Okay, well, let’s compare that against the Blue Cross, Blue Shield Standard plan, right, which is 250 a month. So if you drop FEHB, you’re going to have to pay close to $600 a month just to come up with the same plan in you that you could be paying $250 a month for. So there’s a big difference here in the costs. So while people get frustrated saying, Hey, why do I have to pay this? I get that, but that is just right now kind of how the system currently works.

Micah Shilanski 14:51
Do you know the difference between a postponed versus a deferred retirement? Do you know that simply by putting the wrong date on the form, you could lose your health insurance for a life this is a massive impact on your retirement and potentially your cash flow in the future. Many federal employees are unsure which path to take, how to properly fill out the forms and what these effects are. That’s why we created a free online guide that’s going to answer seven top things that you need to know to answer whether a postponed or deferred retirement is right for you and which path you should walk down and how to fill out those forms. Now you probably asking, Micah, why are you creating this free series and guide? And that’s a great question, and because our goal is to help another 1 million federal employees with a successful retirement. And I got to say, I love sitting down with federal employees and helping them plan their retirement. But one of the things that pains me, and pains all of my team members as they’re doing this as well, is when we sit down with a federal employee and we see a mistake that they have made, that had we had known about this before, we could have avoided it. Had we had a conversation, we could have avoided this cascading problem. And we want to make sure you’re off to the best retirement you can so we created this free video series to make sure you understand the difference in deferred versus postpone retirement, and there’s a lot of differences between those. To get this free video series, make sure you visit our website, plan-your-federal-retirement.com, or click that link below so you can get the details and the information. Don’t leave your retirement to chance. Make sure you understand your benefits and you get the most out of your retirement. Until then, happy planning.

John Raleigh 16:27
It’s definitely set up to penalize you if you don’t follow the system, but it also benefits you if you do. I mean, so it’s a, it’s really an important decision that that has a lot of consequences if you fail to make decisions that are best for you and your family.

Micah Shilanski 16:45
Yeah, 100% and then the other thing that comes in here is Medicare Part D, as in as in drugs. Most of the time you do not need Medicare Part D, because if you keep FEHB, they have a Medicare Part D qualified plan as their prescription drug plan. So the vast majority of the time you don’t, which is really nice. Most of my clients, when they transition to 65 it’s pretty simple. Most insurers assume you’re going under Medicare on FEHB. And so when you show up at your primary care provider, your doctor, you just give them your Medicare A and B card, and you also give them your FEHB insurance. And then that way, they know what to Bill. And then most of the time because you have Medicare Part B, very little out of pocket, most of the time, depending on what plan you have, an FEHB, your co pays are waived because you’re under Medicare, so you are getting a little bit more of a benefit for that. And also, I’m a big fan of going from the Blue Cross Standard plan to the Blue Cross Basic Plan. And really the difference in here is you get a reimbursement from Blue Cross under the basic plan for up to $800 per person if you’re enrolled in Medicare Part B, so it’s going to help reduce some of that premium, which is great. Big difference in these plans is the standard plan. Of course, you preferred providers. Of course, are great, but you can also go outside the network fairly well. Under the Basic Plan, you really cannot go outside the network, it’s fairly punitive, so just things to look into. But again, these are things you can look into once you can make the decision and save you 1000s of dollars throughout your retirement.

John Raleigh 18:16
It’s that old adage, too, and even when I was just listening to you there, Micah, we find ourselves stepping over quarters to pick up pennies all the time. And this is one of those things, you have to be very careful to make sure you’re picking up the right point. The ones that are the best for you.

Micah Shilanski 18:29
Yeah. And it can be daunting, so I totally get that right. You’re comfortable with your health insurance. Now this big change is happening. Hey, there’s a risk. I don’t want to do this, like I get that, but that cost of not looking into it, and they actually the cost of not taking action is 1000s, if not 10 1000s of dollars, right? So that’s what I tell my client. Is like, how much? How much do you make an hour? Whatever that dollar amount is, just think about it right now. So it’s okay, great. What if we could look at your health insurance, and let’s say on the high side, it took five hours to go through, but over your lifetime, you saved $10,000. Your hourly rate for that five hours is $2,000 an hour. Would you like to get $2,000 an hour? I was like, Yes, I would like to get $2,000 an hour. This is great. Well, let’s spend five hours. Let’s look through these plans. Let’s make these changes, and you could save this $10,000 over your retirement. That’s real money that you get to keep. So it’s again, John, I love your aspect. You’re stepping over dollars to pick up pennies, right? Let’s look at all of the information first and really make an educated and informed decision.

John Raleigh 19:36
And I go back to if you think about it, as hard as federal employees work for their career and get through their career. Why not maximize the benefits that are available to you? Maximize them for your few and your family and your family’s sake.

Micah Shilanski 19:51
All right. So this podcast is all about action items, and I’m going to say I know this is coming out in September. We had a little bit before open season is coming out. Big thing is to take action, right? The knowledge isn’t power. Implementation of knowledge is power, and that’s what we want you guys to do. If you’re a younger federal employee listening to this, we didn’t talk about other future podcasts on a high deductible health plan. Man, those are amazing, especially for you. For younger people, are really healthy people. If you’re looking at, you know, retirements coming up, make a Medicare plan. I like to have a basic plan several years in advance. Now do I know the exact firing solution of everything I’m going to do? No, because the rules are going to change in the next five years, but I have a really good idea of what I’m solving for. So in five years, when I go to make this decision, it’s a lot easier.

John Raleigh 20:33
Makes total sense. I mean, it’s the way you’re able to be successful, for sure.

Micah Shilanski 20:41
Perfect. And our other goal is we want to help another 1 million federal employees with retirement, and we cannot do that without your help. So share this message. Give us a great rating. Send this out to your friends, to your coworkers. When you have questions, make sure you submit them, and you can be featured in one of our podcast or one of our FERS federal fact checks. John, thank you so much for being on the pod. I really appreciate it.

John Raleigh 22:10
Appreciate it too!

Micah Shilanski 22:12
Until next time, happy planning.