2016 means a new year.
A new year that presents all sorts of future trials and triumphs, as well as resolutions that we want to accomplish for the year ahead.
For federal employees I have three things that can help build a solid foundation, not only for the year ahead, but also for your future retirement.
1. Gain More Understanding on Your Federal Employee Group Life Insurance
Why is this the first thing you should do? Mainly because it’s so easy, but can make a HUGE impact.
Here’s what you should determine about your Federal Employe Group Life Insurance, also known as FEGLI.
- What options you have currently selected (to learn more about Basic Life Insurance click here)
- How much those options are currently costing you (it’s probably more than you think)
- How much those options are going to cost you in the future (this is definitely more than you’d expect)
Federal Employee Group Life Insurance is one of the BEST benefits provided to you while you’re young and in service. In fact, the only benefits that I think are better are the TSP because of matching funds and FEHB due to the great price.
The problem with FEGLI only starts to occur when you get to age 55 or older.
Every 5 years following 35, the life insurance premium increases in price. At first it’s only gradual, but when you get to age 55 it almost doubles in cost and then at age 60 it more than doubles. If you don’t believe me check here for the updated FEGLI rate charts. It won’t take you long to realize that many times Option B because completely unaffordable in retirement.
In fact, I’ll make this offer to those who don’t want to take the time to calculate your rates:
I built a calculator in Excel that will automatically update the current and future cost of Federal Employee Group Life Insurance Option B (the one the majority of people have) based on the age and salary multiples that have been chosen. Not only does it tell me how much you’re currently paying and what you will pay in the future, it also tells me how much the lifetime cost will be if you decided to keep paying until the day you died. You can send me an email along with your phone number because I will have to get some basic information from you over the phone.
2. Check Your TSP Allocations
You would be amazed by the amount of federal employees I meet that either don’t know where their TSP is allocated or they haven’t changed it since the day they started service.
If this is you, do yourself a favor and hop onto TSP.gov and log into your account. If you’d rather do it over the phone you can call: 1-TSP-YOU-FRST (1-877-968-3778).
Why is this important? Let’s say when you first started in the TSP that you had a long time horizon and a hunger for risk. You decided what the heck, I’ll allocate 100% of my earnings to the most volatile fund available; the I Fund. At the time, this may have seemed like a good decision. The problem is, you’re now 10 years out from retirement with a family, and the riskiest thing you can stand to do each day is go to work. If you haven’t kept up with your TSP allocations, you could be putting your future retirement in serious jeopardy.
If you’re curious how to allocate your TSP, this video and accompanying article should help you get started.
This step is too easy and can make too LARGE of an impact on your retirement that it would be silly to neglect.
3. Update Your Beneficiaries.
Nobody likes talking about this, but it’s an important part of proper planning.
Unfortunately, people do not put enough importance on this step when it comes to preparing for retirement and although it may not have a large impact on you, it certainly will on your family.
Most of the time, when beneficiaries (the people who will receive the things you leave when you die) are selected, it’s done when somethings started. For example, when you joined the federal government at possibly a young age, you decided who would receive your TSP and FEGLI if you were to pass.
The problem with this is, let’s say you were 25 and had no family of your own. The most likely people to be heirs of your TSP and FEGLI were probably your parents. Not that there’s anything wrong with leaving money to your parents, but at least for me, the people I most want to protect when I pass are my family.
If you haven’t gone back and updated your beneficiaries for your TSP and FEGLI, then they’re still the people you initially selected when you started service. Although it would be great, beneficiaries do not automatically update based on life occurrences. You PERSONALLY have to make the changes.
If this is something that you’d like to look into more, I would suggest calling TSP at 1-TSP-YOU-FRST (1-877-968-3778), where they will instruct you to fill out a TSP-3 Form and also contacting Office of Personnel Management (OPM) at 202-606-1800.
Are there any other tips you think every Federal Employee should do? Let me hear them in the comments.
Forge Financial Success,