Ep #19: Phase of Retirement – 5 Years Out From Retirement

Home » Podcasts » Ep #19: Phase of Retirement – 5 Years Out From Retirement

When we consider retirement, most of us think about this chapter in our lives as a positive time—and it can be, as long as we are fully prepared. So today, Micah and Tammy will be discussing all the measurements to put in place as you approach your retirement. They will be sharing how to ensure your loved ones are protected through insurance, as well as the courses you can take to better understand your benefits.

Listen in as they explain the importance of getting an estimate from your HR before you retire so you can better prepare yourself financially. You will learn how to choose a place to retire, why you have to start retirement planning five years earlier, and what you need to be aware of with Medicare as you approach retirement.

What We Cover:

  • How to ensure your loved ones are protected.
  • The importance of understanding your benefits.
  • The benefit of getting an estimate from your HR to better prepare yourself.
  • How to choose a place to retire.
  • How to be financially ready for retirement.

Resources for this Episode:

Ideas Worth Sharing:

It never hurts to ask—all they can say is ‘no.’– Tammy Flanagan Click To Tweet 

The number one mistake I see people making is them not understanding their service history. – Micah Shilanski Click To Tweet 

Don’t target the pure vacation places as retirement destinations. –Micah Shilanski Click To Tweet

Listen to the Full Episode:

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Full Episode Transcript
With Your Hosts
Micah Shilanski and Tammy Flanagan

You can spend. You can save. What is the right thing to do? Federal benefits, thrifts, savings plans, too. You can save your own way, with help from Micah and Tammy. You can save your own way, save your own way…

Micah Shilanski:  Welcome back to the Plan Your Federal Retirement podcast. I’m your co-host Micah Shilanski and with me as usual is the amazing Tammy Flanagan. Tammy, how you doing ma’am?

Tammy Flanagan:        I’m doing great, Micah, how about yourself?

Micah Shilanski:  I’m doing excellent. And I’m pretty excited. When we were pre-gaming this podcast just a little bit, this is the second part in our series about getting ready for retirement. Last time we were talking about when you’re more than 10 years from retirement, and now we’re getting into within the golden years, right? Within five years of retirement, what are the things that you need to be thinking about doing, et cetera? And we started listing all this stuff out and we’re like, “Wow, that’s three hours worth of content.”

Tammy Flanagan:        Yes. This is the time everybody goes to pre-retirement courses and reads all the books on retirement, because you’re getting serious now. This is the golden handcuffs, for sure. In other words, you’re not turning back, you’re not going to go work for the private sector until after you retire. So now you’re really going to think about setting a date pretty soon, you’re going to think about, “Can I afford this? What am I going to do afterwards?” So there is a lot to talk about when you’re in that five-year window from either actually retiring or sometimes it’s just from your first eligibility to retire because maybe you’re not sure if you’re going to retire or not in five years, but you want to be ready in case something happens, things change, supervisors change, your employees change. So you may want to jump ship and you want to be ready to go in case you decide to do that as soon as you’re eligible.

Micah Shilanski:  Or what about, everyone kind of wishes, right before they retire, they hope that VERA or VSIP comes out. What’s that permission that allows me to come up just a little bit early. So we’re going to tantalize you with that one. We’ll talk about it in a little bit. You got to stay tuned a little longer. And then we need to talk about too the death benefits. Right? I know it’s positive when we talk about retirement, but there’s some other sides of it too, in boxes that we need to make sure that are checked. And I know, Tammy, you’re sharing, you’re just dealing with a widow and some really important things have to be in place to make sure your loved ones are taken care of.

Tammy Flanagan:        Yeah. Especially if you’re going to delay your retirement because a lot of people are eligible to retire, but they go on and work another five years or 10 years. I’ve seen people work 20 years past their first eligibility. So we get concern like, what if something happens to us? Is our spouse protected, if we’re married. What’s payable if we don’t make it till our retirement. I mean, we hope that we live a long, healthy retirement, but what if we don’t? So that is an important thing that as much as it’s not a real uplifting topic, it’s very important to discuss.

Micah Shilanski:  Yep. And then from there, we’re going to jump into cashflow. We’re going to get into investing a little bit, right? Talking about the TSPs, the IRAs, the Roths, really important things we need to figure out. So we have a lot of stuff, power packed through this episode. So Tammy, are you ready to get started?

Tammy Flanagan:        I’m ready.

Micah Shilanski:  All right. Well, let’s start off with kind of what we said is kind of that core thing, as you said, so many people within this five years need to go to classes and I couldn’t encourage them more, not just one, do multiple classes, however much your agency will allow. Even if you have to take your own time off, it is well worth it to make sure you understand your benefits. Because if you don’t, who does it hurt? You.

Tammy Flanagan:        Even in this virtual world that we’re living in. Even if it’s a virtual class, try to attend one that’s live where you can hear people’s questions or see people’s questions. Because sometimes there’re questions people ask, that are your questions. You just didn’t know you had that question. So I think that’s one of the great things about a training course where you’re in with 30 other people, or even a hundred other people, where you’ll hear things that you never even thought to think about. You don’t know what you don’t know.

Micah Shilanski:  And never hesitate as a presenter, right? And Tammy, you do a ton of these presentations, so let me know if you disagree, but from my end, as a presenter, always feel free to encourage audience, ask questions, interrupt me. I got a script, right? I got slides. I can get my butt back on track. But if you have that burning question, stop and ask it, we may need to address it later. It may be a little too early, right? We want to set some foundation beforehand, but always ask your question. There’s not one good presenter out there that will get mad at you for wanting to make sure your questions are answered

Tammy Flanagan:        Yeah, that’s true. And the key word there was good presenter. Because I’ve heard—we’ve all been to those classes where they said I’m not taking any questions. I’m just going to get through this material. Well, to me, what good is it, if you can’t… as a presenter, I learned so much from the questions they’re asking. Because then I can gear my presentation to those concerns. So to me, it’s very important to have a dialogue, both ways with your instructor in class.

Micah Shilanski:  Perfect. All right. So classes are really, really important. Getting benefit estimates from your HR, those are also really, really important things to do.

Tammy Flanagan:        Yes. But don’t be discouraged. Because I know some agencies, they are busy like everybody’s busy and they want you to wait until you’re a year out or two years out. But as my dad always said, “It never hurts to ask. All they can say is no.” So they may be caught up and now they’re ready to run some estimates. So always request a personalized estimate, not just the one you can go to payroll and get automatically, but go to someone in HR or someone who hopefully is a retirement specialist and say, “Can you run me an estimate for my first eligibility or for the end of 2023, when I’m thinking I might retire.” Because on those estimates, you can find if there’s any discrepancies in your service record, you can find information about providing survivor benefits. So a lot of information is on there and some of it you might not understand. So that will prompt you to have some questions.

Micah Shilanski:  And the number one mistake that I see happen, time and time again, Tammy, let me know if you have a different one, but it’s people not understanding their service history, right? What time counts and what time does not count for credibility for retirement?

Tammy Flanagan:        Probably the number one cause for delays in processing, number one cause for wrong retirement coverage. So if your service history is out of whack, the whole thing’s going to be out of whack. So that’s the very first thing. And we say this even at the last podcast when we talked about mid-career, that’s the time to fix those problems, but five years out, it’s not too late.

Micah Shilanski:  You want to fix them before you separate. This is the key, right? Once things get more complex.

Tammy Flanagan:        Sometime not possible. Yes. Some of these things you have to do before you retire.

Micah Shilanski:  Yeah. And also keep in mind with these last few years left of working, more than likely you didn’t think you were staying for this 30 years, right?

Tammy Flanagan:        Yeah. We forget what happened at the beginning of our career. That might be when we had that summer job with the park service. That might be when we had a break in service because we did leave at the five-year point and now we’ve come back. The grass wasn’t greener on the other side. So these are times when you might owe money to the retirement fund and kind of forgot all about the fact you took a refund of your first contributions or served in the military, it’s on my Service Comp Date so it should count. But hey, I didn’t pay for it. Why do I have to pay for it? So these are all things you want to get squared away before you make your plan for that date of separation, for that date of retirement.

Micah Shilanski:  Tammy, I always tell my clients when we’re doing this right, when you request your service record and your benefits statement, that’s your HR departments or retirement specialist, hopefully, opinion of your service history. But who’s the only one that knows your service history? You do.

Tammy Flanagan:        Yep. That’s so important that you really know what counts and what doesn’t count. And that you’ve maintained the evidence. I used to work at the FBI, so we were all about the evidence. And then when it comes to retirement, what you say or what I say, doesn’t matter. It matters what’s on that document. So for most federal employees, it’s on your SF 50s or the evidence that you might have that’s going to show when you started, when you left, when you went from full-time to part-time. So that’s something you want to keep track of and you want to keep your own copies of those rather than just what’s in the EOPF. So I would recommend making either a electronic file or even a paper file, old fashioned notebook with a three ring binder and keep those documents in there that show when you started, when you left.

Micah Shilanski:  I love it. All right. Let’s transition a little bit Tammy, unfortunately, a bit more of a somber note. Let’s go and talk about the death benefits and things about what happens when someone passes away in service, because it happens and we need to make sure we have things in place so that our loved ones are taken care of.

Tammy Flanagan:        Yeah. The good news is that your family is protected if something happens to you before you retire, there’s a very little amount of service requirement and there’s no age requirement. So you don’t have to be a certain age to die, people die at all different ages. And the service requirement under the old system is five years. But under first they dropped it down to 18 months. So like you were saying, I was working with a client the other day whose husband passed away, unfortunately at a very young age and only had four years of federal service, civilian federal service, but he had a whole career in the military. So the surviving spouse has the option to combine those together. So now she can get a survivor benefit based on 34 years, but she has to make a deposit because he hadn’t made that decision yet.

                           And he didn’t leave her a survivor benefit from his military. So this is her way to make herself whole or at least be able to be financially independent at least a little bit. So, yeah, there’re things to know about your pension benefit as far as what that worth is or what that value is. This is something you’ve never elected. So it’s just there. If you’re married, your spouse is protected for these benefits. If you were to pass away prior to retirement. So there’s nothing you needed to fill out. Although I have had people in the past, who knows who these people are, but they’re like, “How can I prevent my spouse from getting that?” So these are people may be separated, on the verge of divorce, but yeah, if they’re still legally married, your spouse is going to get those benefits. They’re entitled to them.

                           So they’re there. You may want to look on your last payroll statement that gave you a summary of your benefits. And you might see that on there, which your spouse, which your children might be entitled to. Usually those are listed on those once a year. Usually you get a summary from payroll and that’s a good place to see what that value is.

Micah Shilanski:  Now on all of these things that are out there, right? Whether it’s the pension that you might receive as a survivor benefit, the TSP life insurance, federal employee group, life insurance, private insurance, your bank accounts, all of those things that are out there, your unpaid compensation as well, right? There’s beneficiary designations. And while, Tammy, I agree, right, your spouse is taken care of, I take a stance that says you have to have beneficiary designation spilled on everything that has one. If there’s a form for it, fill it out. Because when in doubt, things will go back to the forms. Just like we said before on your creditable service, right? Where is the evidence of where things are going to go? And especially if someone is divorced and remarried, it gets a little murky on benefits and we need to make sure things are in order. So take the time, even if you want your spouse to get everything and you think that’s as simple as that, perfect. Fill those forms out that way.

Tammy Flanagan:        Yes. So really does help. And it makes it so much easier for the agency in charge of paying out the benefits to make a correct benefit assumption. But remember that those beneficiary designations, they have to hold up in court. So no erasures, no. I would recommend filling it out. They’re all fileable. You can fill them out online, print them, get them witnessed, do not get them notarized because if you get them notarized, they’re not valid. So just follow the directions on the form step-by-step. They’re pretty simple to fill out, but you don’t want to make a mistake because then they won’t be valid. They could be challenged by your ex-brother-in-law or whoever might think they deserve that money. So just make sure that you make them very clear.

Micah Shilanski:  We kind of make light at it, Tammy, but we have seen the court cases and talk with people and gone through about who challenges these things and people who come out of the word work. So again, have clarity in these documents. If you have ambiguity, the attorneys will be your heirs, right? That’s what that means.

Tammy Flanagan:        That’s right. Yep. So make it clear and they can be paid out quite quickly. That unpaid compensation is probably one of the most important ones for an employee to keep up to date, because that puts a hold on your last paycheck. That lump sum annual leave money that’s sitting there, can’t be paid out until we figure out who that beneficiary is. So make sure that you keep them up to date, fill them out, make sure that you have a copy somewhere that your spouse or family members know where they are so they can see, “Hey, this is what they elected. I need to know how to go about applying for the benefit.”

Micah Shilanski:  You know Tammy, this might be a good time to bring up too, one of the questions I get a lot, I’d be curious if you do as well, talking about survivor benefits, right? And we’ll talk about this more in our next episode. So the next episode, we’re going to focus on the year of retirement things you need to do. But five years out, these are conversations we need to think about as well when we were about to get into cashflow. But what happens if something happens to you, the federal employee, how much income, how much cashflow is your spouse going to have? And then B how much do they need to have coming in? Sometimes, especially with dual income individuals who think, “Oh, well, if I die…” I joke, ladies, I say, this is guy math, right? If there’s two of us alive and it costs $6,000 a month to live, and one of us dies, how much does it cost to live only 3000 a month, right? No, it still costs $6,000 a month.

                           So this is a big question when you’re deciding what survivor benefits to leave and how to have life insurance. Do you have a life insurance into retirement or not? We’re going to talk about that next episode, but it’s going to get into this cashflow question, right, Tammy, about do they have enough to make sure they’re taken care of?

Tammy Flanagan:        Yeah. It’s different in my family, Micah. And a lot of couples are like this, where one’s the spender, one’s the saver. And believe it or not as much as I love retirement and I study retirement, I’m the spender and I know that. So if I die first, my husband gets a raise because I stopped spending. So all that money that I spend every month, he can put in the bank and he’s a good saver. So he won’t spend it. He wears the same shoes for 10 years. Only has two pairs in his closet, one for funerals, one for every day. And that’s it.

                           If he dies first I’m in big trouble, because there goes half of his retirement. I only get a survivor benefit equal to half. So I’m not taking my social security money yet. I’m not touching my own 401k or IRAs or anything I’ve saved because I’ll need that later if I become the last spouse standing. So you have to think in terms of just common sense. Who’s spending it? What is it being spent on? Is it frivolous things like a new pair of shoes and nails getting done? Or is it necessities that you have to have money for.

Micah Shilanski:  Really, really important? All right. So, Tammy, let’s talk a little bit more about the cashflow side. Since we kind of got into it, then we’ll get into everyone’s favorite topic about that VERA, VSIP that may come out. So one of the things in cashflow, right, and Tammy, just as you were saying, everyone is different. You have to know yourself. One of the things I tell people all the time is, look, within five years to retirement, you should know what your retirement spending is. And I’ll give you a hint, it’s the same thing you’re spending now, right? Unless the house is scheduled to be paid off at a certain time, you were accustomed to a certain lifestyle and you are not going to want less when you move into retirement. So what does that cashflow really look like? How much do you really spend on a monthly basis?

Tammy Flanagan:        Right. And I guess there are certain things that can go down. Like maybe your youngest child has just graduated and you just paid the last college tuition bill.

Micah Shilanski:  Absolutely.

Tammy Flanagan:        And there’re the weddings and the grandchildren. So don’t you’re off the hook yet.

Micah Shilanski:  It just changes.

Tammy Flanagan:        Don’t cut yourself too short. If you have kids, it’s never ending, right? It’s a lifetime commitment in many cases. So there’s those things as well. Or if you move, right, your income could go farther in a less costly area or not as far if you’re going to spend a lot of time traveling. So think of your lifestyle and what you want it to be in retirement.

Micah Shilanski:  On that token, where do you want to live? These are great conversations to have at five years out. Right? A lot of people say, “I want to move back home.” Okay. Is it going to be the same as you always imagined it’s going to be or 30, 40 years later, do you think it’s going to be different?

Tammy Flanagan:        I don’t want to move back home. I love Pennsylvania, it’s a beautiful town with beautiful people but I really don’t want to live there anymore. They—the last couple of weeks, just like you’re having, Micah. I’m kind of over it. I’m done with this town.

Micah Shilanski:  Florida is a great place to be right now.

Tammy Flanagan:        Most Pittsburgh people love to come to Florida. So they can come visit us.

Micah Shilanski:  Think about where you want to be. I caution people about vacation places and I put a little caveat on this one, right? I don’t want you to move to a place that you just love vacationing to. Because if you’re only going there for a vacation, you’re in a mindset of vacation and that’s not a retirement mindset. Right. Extreme example I like to give, Tammy, is Vegas. Pretty much everybody could go to Vegas for two or three days and they’ll be fine. Four days in Vegas? No, no we’re done. Right. Imagine living there, right? I mean, people would go crazy. Now. There’re places outside of Vegas in Nevada, which are beautiful that you could be at. So don’t target the pure vacation places as retirement destinations. Most of the time when I have clients do that, they’re moving within six to 12 months. And that costs a lot of money to buy a house. And then all of a sudden, six months later, sell that house and move somewhere.

Tammy Flanagan:        Yep. That’s true. I mean, we love the beach and we did want to live in our retirement near a beach, which we do, but our vacations were always in Myrtle beach, South Carolina. And I wouldn’t want to retire there for many reasons. One is that they get cold weather. Second is in the summertime, you can’t go up and down the grand strand, you have to move a mile in an hour. So we decided to go a little farther south away from the cold weather and a little bit away from the beach to the suburbs, but we can still be there in 20 minutes. So you have to think in terms of what’s your lifestyle going to look like, what is important to you? For us, it was beach lifestyle. We love that. But you have to be careful. Like you said, a vacation is different for two weeks than it is for a lifetime.

Micah Shilanski:  Yeah. And then another thing to think about in there, where are your grandkids going to be? Right. A lot of times when I have clients going to retire and they don’t have grandkids yet, they don’t think it’s that big of a connection. I’m like, “No, let me tell you, once you have grandkids, you’re going to want to see them.” Tammy, you bring up a good point. Is it a place where your kids would want to come and visit you at?

Tammy Flanagan:        That’s right. That’s another nice thing about Florida, we’re not too far from Disney and that works at least till they’re about 10 or 12. Right?

Micah Shilanski:  That’s right. I still love Disney. I’m slightly older than 10 or 12.

Tammy Flanagan:        But yeah. So, we have a nice place to live. I would love to live closer to my grandson who’s out in the Western part of the country, but that’s not where we wanted to live. So you have to make trade offs. Sometimes your family, you can’t see them as much as you want, but we’re in this virtual world so we can still see them on FaceTime. And like you said, they like to visit Florida. So that’s a draw.

Micah Shilanski:  I love it. I always like to say, make those educated and informed decisions. Right? I don’t want to push you into someplace that’s there, but know the pros and cons because every place has them and make sure you’re making it. And I know this will go over with some people, I am a huge fan, Tammy, of renting versus buying for that first 12 to 18 months into retirement. If you’re going to move, let’s make sure it’s where you really want to be.

Tammy Flanagan:        Yeah. That’s ideal. If you can do that. And so many people down here in Florida, will do that. And many homes are available for six months rental or three months rental, at least. And then you’ll get more of a feel of what it’s really like there, what the traffic is like, where all the hot spots are to go eat and things like that. So yeah. Very good advice.

Micah Shilanski:  Tammy, we’ve even had a bunch of clients we’ve helped negotiate with about a house they want to buy, and we rented it for eight months before we bought it. And so signed the agreement, do everything to buy it in eight months. But you can back out, but you’re going to pay rent during that period of time. It helps the seller get a little bit more money out of their house and they have a buyer on the line. And if you don’t like it, great, you get to go somewhere else. If you do, perfect. You only had to move once. Right? So there’s ways you can work these things.

Tammy Flanagan:        That’s work. Yep. You have to just do a little homework. Just like everything else, it takes a little planning.

Micah Shilanski:  All right. You want to transition, talk about everyone’s favorite retirement topic? What they hope comes out right before they retire?

Tammy Flanagan:        I forgot because we haven’t had many of those in recent years. Just when you least expect it, your agency might want to pay you to retire. So when we say VERA, that stands for Voluntary Early Retirement Authority. So even though it’s a voluntary action, you have to get the authority. Your agency has to offer it to you, because I’ve had people who say, “I’m going to volunteer to retire at age 50.” Well, did your agency offer you a VERA? No, I just want to volunteer. I said, “That’s called a resignation.”

Micah Shilanski:  That’s right. But we need the other half.

Tammy Flanagan:        If you get the offer, sometimes the offer comes with a VSIP, which is a Voluntary Separation Incentive Payment, which could be an amount up to 40, is it $40,000 for DOD and some other agencies or 25,000, which is more of the standard VISP. I mean, I know it’s not a half a million Google buyout, but hey, it’s something more than you would get on a regular retirement. So for some people that could be the key to give them that extra little push they needed to make that decision. They’re financially ready, they’re mentally prepared, but they just don’t know when to go. Well, offering me 25,000 or 40,000 might be just what I needed, but don’t count on it.

Micah Shilanski:  You hit the nail on the head right there. Right. They were already ready to retire. And I think this is the illusion of that VERA, VSIP. That, oh, when it comes out, if I wasn’t ready to retire, I’ll change gears and now I’ll be, the answer is going to be no, right? That’s not the way it works. So VERAs are great. As you said, the Voluntary Early Retirement, when you have all of your ducks in a row, you’re financially ready, you’ve set things up, you know what your plan is going to be and all those pieces are, then great. Now you get to get out a couple of years earlier than you wanted to, perfect.

                           VISPs workout perfect when it’s the year you wanted to retire anyways, but for 25 grand, that’s really not enough money to incentivize you to retire years early. It’s not going to make up your TSP contributions, much less your pension and everything else that you’d be giving up and your paycheck by the way, because when you retire, you give up your paycheck. So you’re giving that up. So really knowing those, not having a delusion, that this VERA, VSIP is going to save you for retirement.

Tammy Flanagan:        Yeah. I remember one quick story, back in the ’90s, when all the defense military installations were downsizing and I got these movie theater auditoriums to give presentations on the buyout, the VERA, VSIP. And the people are almost like a party atmosphere. They’re dancing coming in the room and “Oh, I’m going to get to retire early.” And they’re like 43, 45 years old. They got their 25 years of service ready to go. Well, by the end of my, what I thought was an uplifting, presentation, they started to realize that one fourth of their salary, wasn’t going to cut it. They’re going to have to get a second career. I mean, it could be a great opportunity if they wanted to change gears because now they’ve got lifetime health benefits and a small pension, but it certainly wasn’t enough for most of them to retire on because they weren’t financially ready yet.

Micah Shilanski:  Absolutely. Yep. So on that note of being financially ready, what does that mean? That means going back, the same way what you said just a minute ago, your TSP funding, your IRA funding, right? What are you doing in those areas in order to make sure? Now I love people when they’re maxing out their TSP, right? It’s a great place to stick money to grow. But Tammy, one of the ways when we get within five years, retirement, that I love working with clients on is if they’re not max funding, their TSP… TSP is a great way to force you to live on your retirement dollars. So let’s say that your retirement spending just isn’t going to be what your paycheck is now. Perfect.

                           Well, within five years of retirement, start putting more in the TSP. Start living on those retirement dollars early, because now you forced to save them in the TSP, which you really can’t pull the money back out. Right. It’s just kind of a one-way savings account for right now. Yes. There’s some exceptions to those rules, but it’s pretty much a one-way savings account that’s going to do a really good job for you. Even if you only put it in the G fund, at least it’s money going that direction for the future. And it has you spending less today.

Tammy Flanagan:        Yep. I did that with a friend of mine actually, because she wanted to retire and I looked at everything I’m like, “Oh, Carol, I don’t think it’s going to work for you.” And she’s private sector, but putting $135 out of her paycheck into her 401k and no pension, by the way, this is going to be tough. So I said, “If you could save,” I was just joking, “Five or 600 by weekly, then you’ll be spending less now, that money will go towards what you already have saved.” And believe it or not, she did it. And now here she is five or six years after we had that conversation. And she got used to living on less. Now she has enough saved that she can match with her social security. She can match what she was bringing home.

Micah Shilanski:  That’s outstanding.

Tammy Flanagan:        So give her props for that because most people can’t visualize saving that much, but her tax withholding went down when she started saving more in her savings plan. So that’s a kind of a little fringe benefit of putting more money in your thrift, especially in the traditional thrift.

Micah Shilanski:  Yeah. Those are all connected. Well, Tammy, we only got a few minutes left, but let’s dive into, real quick, some really important things that people need to think about on the insurance side of things. One, you have great benefits as a federal employee, we talk about this all the time, but there’s a little bit of things worth in that five-year window that we need to make sure of. Right?

Tammy Flanagan:        Yeah. The two really important things. And this is why we used to say, especially when it was a lot simpler back in the good old days, that your retirement planning should start five years before you retire, because we have this five-year test when it comes to health benefits and continuation of life insurance. So those two benefits require that you’ve had those as an employee for five years, then they’ll follow you into retirement as long as you retire on an immediate retirement. And I wanted to bring up on life insurance, very rarely does FEGLI have an open season, but they had one back in 2016. And if people remember this, they said, you can sign up in 2016, but it’s not going to take effect until October of 2017. They wanted to make sure you were still alive, that you weren’t on your death bed when you made that election.

                           So in order to have that new coverage that you added for five years, that means you’d have to wait until October 1st of 2022, when it will be the five years since you made that election. Now, if you had basic and option A for the last 35 years, you’ll get to keep that. But if you retire this year and you didn’t have option B for five years, then that’s not going to follow you. So that’s the rule there. And for health benefits, it doesn’t matter if you had Blue Cross one year and GEHA the next and now you have Aetna, you still have five years in the FEHB program, but if you were under your spouse’s private sector plan and just jumped into the federal health plan, now you’ve got to stay in it for five years in order to retire with it. So make sure that you’re going to meet that five-year test because as you know, Mike, and this is one of the, if not the most important benefit.

                           So having that lifetime coverage is just awesome. Dental and vision doesn’t require five years, but you have to be eligible to retire to keep the dental and vision. And the only insurance benefit that’s truly portable is your long-term care insurance. Once you’re enrolled in that, even if you resign, you can still maintain that plan. You don’t have to stay long enough to retire, to keep your long-term care. But the other insurances, the FEHB HIP and the health benefits and FEGLI do have requirements that you’re eligible to retire when you leave. So yeah, just make sure you know the rules.

Micah Shilanski:  I know we were talking a little bit, I think in a previous podcast, with one of our early ones, we’re talking about FEHB and Medicare, but what happens to our listeners that are within the 65 realm, right? Maybe 63, 64, they’re going to stay another five years. So after 65, they’re going to be working as a fed anything in particular we should be thinking about with Medicare.

Tammy Flanagan:        Yeah. And that always kind of makes people pause like, “Oh no, I’m turning 65. I’m getting all that stuff in my mailbox about Medicare supplements and Medicare, what do I do? What do I do?” Well, the only thing you need to do if you’re still working, and here’s the important part, and you have health insurance through your employer. So if you’re still a federal employee and you’re carrying the health insurance, then you can delay Medicare part B enrollment with no penalty. And I would encourage you, and so with social security, encourage you to delay that until you retire. Then you’ll have a special enrollment period when you retire, even if you’re 72 years old, you’ll be able to pick it up without a penalty for late enrollment at that point. And that’s also true if you’re the one carrying the health insurance for your spouse, then you’re going to keep working and your spouse is turning 65. They can delay part B as long as they’re under your current employment health plan. So that’s a nice way to save that money on Medicare part B, which is a little pricey these days.

Micah Shilanski:  It gets real, especially when you’re working, right, it could be even more pricey. And if you don’t have to pay for it, you’re not going to get a big benefit. Well, let’s delay it because again, you said there’s no penalty because you’re working, which is a great thing.

Tammy Flanagan:        When you need the most health insurance is when you’re the most sick and hopefully while you’re working and hopefully relatively healthy, it’s okay just to continue with your federal plan. And some people actually do continue with their federal plan for the rest of their life without adding part B. But in another session, we’ll talk about Medicare and FEHB coordination. Or have we already done that? I can’t even remember. We’ve done so many.

Micah Shilanski:  I know, right. I think we have. I think we chatted about it a little bit probably during open season, you know what? Episode 10, I’m looking at our list. So if you go to planyourfederalretirement.com/10, one zero, then it should show our FEHB open season and Medicare.

Tammy Flanagan:        Good. Yeah, because that’s such a big question.

Micah Shilanski:  Yep. Well, Tammy, let’s transition just a little bit into… I know we hit the highlights on these things, right? And this is, again, such the importance of taking a class, but let’s transition into some action items for our listeners. What are things that we could do this week in order to help improve your potential quality of retirement,

Tammy Flanagan:        Contact your HR office to find out if you can ask questions and request a retirement estimate, that would be my number one to do list item. What about you, Micah?

Micah Shilanski:  I love it. I’m going to say sign up for a retirement class, whether it’s in person, whether it’s virtual, if it’s virtual, as long as they have a live session, right. Maybe it’s some prerecorded stuff in a live Q&A totally fine, but make sure there’s some sort of live Q&A and attend it even if you don’t have questions. Tammy, what you said it was so apropos. I get so many questions from people and other people like, “Oh, that’s my question too, but I didn’t know how to ask it.” Or “Oh, I didn’t think about that. That’s a great question.”

Tammy Flanagan:        Or I thought it was too silly. None are silly, believe me.

Micah Shilanski:  Yeah. Bring them home.

Tammy Flanagan:        Yeah. So another thing I’d put on my to-do list is to make a copy of my service history and not just the one from my retirement estimate. The one where I can show this is when I started, this is when I left, this is my military discharge certificate, this shows that I paid my deposit. So gather those documents and if you have to put them in a three ring binder, along with copies of your beneficiary forms, you’ll need them. And possibly your beneficiary might need them someday.

Micah Shilanski:  Yeah. There’s one of the things we do every couple of years for our clients is we do a list of all of their assets with their beneficiaries and give it to them because this is really important to know where those are. Last thing I’m going to leave you with is what do you spend a month? And if you don’t know off of the top of your head, you need to go figure it out. Right?

Tammy Flanagan:        Or look at your paycheck.

Micah Shilanski:  Exactly.

Tammy Flanagan:        How much of your paycheck are you saving after you get it in your bank account?

Micah Shilanski:  Yep. What’s that net paycheck? That’s the easy answer. But this is a number you should know off of the top of your head. And if you don’t know, don’t beat yourself up too much because everyone I asked almost no one knows the answer to that question, but this is something you should know because it’s going to help you subconsciously guide decisions, especially getting ready to retire.

Tammy Flanagan:        If you want to learn to live on less, put more money in your retirement savings, that’ll reduce that paycheck and not as much to replace.

Micah Shilanski:  It’s hard to just turn down that. Speaking a little bit, right. It’s amazing how it all works. Perfect. Well, Tammy, next time we’re going to jump into the year of retirement. So we have some exciting tips to share with you then as well, some different things that you need to look at. Some similar, we’re going to talk about it a little bit more, but some other things, what are you doing in that 12 months prior to retirement? So that’ll be the next in this series. And as usual until next time, happy planning.

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