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:
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.
Solution: Elect a survivor benefit for a spouse.
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.
Solution: Have a serious soul searching and consider the realities and not the dreams of retirement.
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.
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.
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.
Solution: Re-explore your basic financial needs and discuss what the purpose of insurance is to your specific situation.
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.
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.
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.
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.
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.
Solution: Change to a family enrollment at the next open season.
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.
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).
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).
Solution: Change to family coverage at a future open season.
F inally, 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.
Solution: Join NARFE today.
NARFE Membership Provides These Benefits:
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.
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.
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.
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.