When conversations during office coffee breaks turn to talking about retirement, there are a number of myths that federal employees continue to circulate amongst themselves. A previous article, Federal Retirement Myths That May Lead You Astray, highlighted four of these misconceptions. Here are four more that may derail your retirement plan.
Myth: Federal Employee Health Benefits (FEHB) Will Cover All Your Needs
Not if you need long-term care (LTC) in a nursing home. Statistics show nearly 70% of people turning 65 today will need some sort of LTC when they’re older. FEHB will not cover non-medical custodial care in a facility and neither will Medicare. Without LTC insurance, out-of-pocket costs for a room in a facility can be as high as $10,000 per month or more.
“Once you’re covered by Medicare Part B, you can switch to a lower-priced FEHB plan to save on premiums.”
Myth: If You Have FEHB, You Don’t Need To Enroll In Medicare At Age 65
Since Medicare Part A is premium free, the OPM advises both active and retired employees to sign up for Part A when they’re eligible at age 65. When combined with FEHB, Part A may help cover some hospital-related costs your FEHB plan doesn’t cover.
Though Medicare Part B requires paying a premium, when combined with FEHB in retirement it may provide more coverage. Once you’re covered by Medicare Part B, you can switch to a lower-priced FEHB plan to save on premiums.
Myth: You Can’t Withdraw From Your TSP Until Age 59½ Even If You’re Retired
Not true — this age requirement for penalty-free withdrawals from your Thrift Savings Plan (TSP) only applies to in-service withdrawals. Once you’re retired, you can start taking penalty-free TSP distributions in the year you turn 55. And, contrary to rumors, there is no years-of-service requirement. Known as the Rule of 55, it also applies to a 401(k) you or your spouse may have.
Myth: You Don’t Need Professional Help To Plan Your FERS Retirement
Your FERS retirement has a lot of moving parts to consider. Should you retire at your Minimum Retirement Age (MRA)? Or, work longer to qualify for the FERS 10% Bonus? Which FERS survivor benefit should you elect for your spouse? Should you carry FEHB and FEGLI into retirement? And when should you file for Social Security?
These and other crucial decisions are unique to federal workers. Without professional help you may make a mistake that leaves money on the table. Financial professionals who earn the Federal Retirement Consultant℠ (FRC) designation have completed comprehensive training in all of your federal benefits. Contact an FRC℠ advisor in your area to learn more about how they can help.
