2 Retirement Questions Federal Employees Should be Asking

retirement questionsIt’s been said that the key to getting the right answers is simply asking the right questions. Undoubtedly, that pearl of wisdom rings true for federal employees seeking the best strategy for retirement; however, knowing the correct retirement questions to ask is imperative. Below are two simple but immensely useful questions for anyone considering stepping out on the path toward retirement.

What does my dream retirement look like?

Everyone’s retirement dream is different, and an important part of developing a retirement strategy is thinking about how you want to schedule your time. Take a moment to consider what your ideal retirement looks like. Does it mean spending additional time with loved ones or enjoying your passions? Perhaps you’re interested in a second career. Maybe you’d like to travel more.

Today’s retirees can expect to live long, active lives, making retirement more like the beginning of a new chapter of life rather than its sunset. Increasing numbers of energetic Americans are redefining retirement for themselves in new and interesting ways. What will you do with the time given you?

How will I pay for healthcare in retirement?

Healthcare expenses are a major concern for today’s retirees, and those who aren’t thinking ahead may find themselves in trouble down the road. Life expectancy is rising, and many of today’s retirees expect to live well into their 80s. Medical advances are expensive and healthcare costs can accumulate quickly during a serious illness or chronic health problem.

Everyone’s healthcare needs are different, which is why it’s important to consider how factors like age, health, and family medical history can determine potential expenses.

Fortunately, there are strategies that one can use to help tame healthcare costs in retirement. Federal employees are eligible to carry the Federal Employees Health Benefits (FEHB) plan into retirement as long as they have carried it for at least five years prior to retirement. Aside from the normal annual increases, the only other additional expense associated with FEHB seen in retirement is the premium conversion that accompanies the switch from paying the premium with pre-tax dollars to after-tax dollars. While employed, FEHB premiums are paid with before-tax dollars. However, in retirement the premiums are paid with after-tax dollars, which may play a role in the ability to itemize medical expenses on one’s tax return.

FEHB and Medicare

If retired at age 65, one is given choices concerning FEHB and Medicare Part B. One option is to not enroll in Medicare Part B and keep FEHB in place as primary coverage. This first option might be chosen by individuals who fear their personal doctors are not accepting Medicare patients. Be aware that penalties will apply if Medicare is selected later on.

Another option is to enroll in Medicare Part B and suspend FEHB. In some cases, it is advantageous to purchase a supplemental plan or Medicare Advantage plan in addition to having Medicare Part B coverage. This decision should be made after carefully analyzing all options to help determine the best plan.

Another possibility is to enroll in Medicare Part B and keep FEHB as secondary coverage. Although paying for both premiums is required, one will have access to both coverages if needed. No matter which course of action one takes, it’s often helpful to first seek professional advice. We are painting in broad strokes here. Medicare is complex!