In the run-up to retirement, it’s important to review all of your insurance coverage because you don’t want to be paying premiums for policies you may no longer need. For example, once your retirement income is turned on, there’s no reason to carry short-term disability insurance and you might not need that much life insurance, either. On the other hand, you may want to purchase long-term care insurance or an annuity that can be customized for your retirement needs.
Life Insurance
Many federal retirees enrolled in FEGLI want to make sure their surviving spouse will have enough money to pay debts, outstanding taxes, and funeral expenses when they pass away. However, the amount of life insurance your spouse may need depends on the retirement income they can count.
Calculate how much they’ll receive from their FERS survivor annuity, Social Security, their inherited TSP, plus income from their own retirement accounts and other investments. Once you do the math, you may find a less expensive life insurance policy is all you’ll need.
“Many FEHB plans waive copayments and deductibles for services covered by Medicare Part B.”
Healthcare Insurance
The coordination of FEHB and Medicare insurance in retirement can help decrease your out-of-pocket costs. Many FEHB plans waive copayments and deductibles for services covered by Medicare Part B. If you’re enrolled in an FEHB HMO, you can go outside of your network for Part B services and be reimbursed by Medicare because Medicare is your primary payer in retirement. Since some services covered by Medicare Part B are not covered (or only partially covered) by your FEHB plan, having both can provide more coverage in retirement.
Long Term Care (LTC) Insurance Alternatives
The ever-rising cost of traditional LTC premiums is likely the reason why only 7% of Americans over age 50 have purchased LTC insurance. Before you retire, consider alternative options from private insurers.
Short-Term Care Insurance (STC), also known as Convalescent Insurance, is more affordable and typically covers in-home care, assisted living, and nursing homes for 12 months or less. Hybrid Life Insurance is a permanent life insurance policy that can be used to pay for long-term care and provides a death benefit for your beneficiaries.
Annuities With Long-Term Care Riders
An annuity is an insurance product that provides a stream of guaranteed retirement income for life. When you add a LTC rider, it can be used tax-free to pay for long-term care in a facility. If you don’t use the LTC coverage, your beneficiaries can collect the accumulated value of the annuity as a death benefit.
For a complete review of your insurance needs in retirement, meet with an FRC® advisor.
