Mid-year is a great time to review your financial options

With the calendar year half over, it’s a good time to review your financial life. For people in the Federal Employee Health Benefits Program (FEHB), open season isn’t far off. For a few housekeeping tips to keep in mind at this mid-year point,  Federal Drive Host Tom Temin spoke with financial adviser Abe Grungold.

Interview Transcript:

Abe Grungold Well, Tom, thank you for having me on today. And if you are a federal employee and you got married or divorced this year, or maybe you move to another home or apartment, you need to update your federal employee benefit forms and beneficiaries. It’s very important to do that. And fortunately, the government has a form for every occasion.

Tom Temin All right. And what if nothing’s changed in your life? Is it a good idea to review it anyway?

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Abe Grungold Absolutely. You need to review everything that’s going on with respect to your benefits. You need to review your health insurance form, your life insurance, your TSP, and many other available forms regarding federal pay, and unfortunately, death benefits. You need to make sure that these are up to date.

Tom Temin Yeah, these are longish forms and it’s probably a good idea to make sure everything is correct anyway. So you just redo the form and resubmit it? You think it’s a good policy?

Abe Grungold Well, every agency is a little bit different. Some agencies have a payroll program or they do many of their benefits through some sort of a online program, which makes it easy for human resources. Other agencies that are on the high technology end of it still have to submit the paper forms. So there are many different types. And a really important form that a lot of federal employees don’t know about, it’s called the SF 1152, and that’s the designation of beneficiary In the event that you pass away as a federal employee, how that form handles unpaid wages. Who is going to get that last paycheck? And that form is very important.

Tom Temin Yeah. So if something has changed in your family life, then for example, if you got divorced or if a child became of majority age or whenever anything can happen, grandchildren came into the picture, then you would want to just make sure everything is the way you want it to be, given the changed circumstances.

Abe Grungold Yeah, certainly. The day that I got married, that following Monday when I came back from my honeymoon, I went down to HR and I filled out my SF 2809 relating to health benefits. And it’s a table of permissible changes in enrollment. It’s called a qualifying event. The day I got married, I added my spouse to the health benefits. The day I had my daughter, she was automatically put on the health benefit, so I had to fill out a form for her as well. So yes, you have to update your forms, because no one is going to do that for you. You have to be responsible for doing it yourself.

Tom Temin And what should people be thinking about with respect specifically to health insurance at this point in the year?

Abe Grungold Well, for health insurance, you should really be looking at how much have you spent so far this year. If you are not participating in the federal spending account, which you can put money aside to pay for benefits, you need to think about how much money you’re spending towards your health benefits. And the FSA program is a very good program to participate in. You can save quite a bit of money on your taxes, as well as pay for benefits. But you also should be looking at to see if the present coverage of your health plan satisfies your medical needs for yourself, for your spouse and for your family members. Is it providing the health benefits that you need?

Tom Temin Because health changes and circumstances arise during the year, and the open season isn’t all that long. It’s only about three weeks. And so that’s maybe too short a time to really do all the math, add up all of the possibilities before you go out and choose a plan. So it sounds like you’re saying forearmed with some knowledge about what your circumstances are at this moment. It might make your time more efficient during open season in comparing the plans themselves.

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Abe Grungold Yes, certainly, if you develop some sort of a health issue, you need to look to see does your health plan cover that health issue? And if it does it, you need to make an adjustment during open season to seek out a plan that you can afford and provides the health benefits that you need. So prior to open season, the comparison chart comes out and it gives you a summary of benefits. And certainly, the most important part are the premiums that are going to be associated with that health plan. So you need to do your homework. You should spend time doing this because health benefits is a very expensive part of your budget during the year, and you need to evaluate that seriously.

Tom Temin And if you are contemplating retirement, in say six months, you’re deep into that window of you better know what the heck is going on financially for when you do retire. What are some of the questions to have at this point?

Abe Grungold Well, retirement is something that you really need to think, is this the right year for me to retire? And also, can I afford to retire? Are you going to have the sufficient amount of income stream to pay your monthly bills, to pay your health insurance, and also be able to go on a vacation or spoil your grandchildren or buy a motorcycle what ever that little extra is. You need to understand can your monthly retirement income stream handle those expenses.

Tom Temin And what about life insurance? That requirement changes at each stage of life, too. And sometimes people carry on with these long term policies, long after all that economically beneficial.

Abe Grungold Well, from a personal standpoint, I had a 20 year term life insurance policy for myself and my wife. And when I reached age 62, I was thinking about retirement. I realized I didn’t have any more debt, so I decided to terminate my life insurance. But if you need to make some sort of a change so you got divorced or married, you need to fill out the SF 2823 designation of beneficiary. You don’t want your ex-spouse becoming the beneficiary of your life insurance if that is something you don’t want to happen. So you better update that form.

Tom Temin And that spouse is going to be on the lookout for that, you can be sure of that. So you got to make sure you’re a step ahead.

Abe Grungold Well, there’s another interesting thing about that, Tom, and that is Social Security. A lot of times when a person passes on, their ex-spouse is entitled to their Social Security benefits. That’s something that somewhat can’t be stopped. But a lot of people don’t realize that. Sometimes they have this feeling that they don’t want their ex-spouse to get any more than the money that they settled with them at the time of divorce. So a lot of these issues come into play.

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Tom Temin Sure. And I guess if you, yourself have gone to the great beyond, then maybe you won’t care so much for your Social Security benefits get distributed. The other issue is your thrift savings plan strategy. Again, mid-summer, the stock market is a little better than it was, well, it’s way better than it was a year or a year and a half ago. And I think there was a recent story in one of the papers nationally, about how many people that are boomers that is either retired or getting set to retire, are getting aggressive in their investment strategies, maybe to make up for lost time. What’s your thought there?

Abe Grungold Well, I think every participant in the TSP should be somewhat aggressive in order to keep up with inflation and to keep up with the withdrawals from their TSP, if they’re going to make monthly withdrawals. Now, personally, I had my account drop, I believe it was about 25 to 27% since last year. And it has now come back 17%, and it’s still about 8% away from the all time high. But you need to be somewhat aggressive and also you need to review your TSP three Thrift Savings Plan Designation of Beneficiary. Now the website, the TSP website does allow you to make a change electronically online with your beneficiaries. You should have a primary, and at least a contingent in the event something happens to your primary beneficiary. I recently updated mine. I had my parents listed, and unfortunately I had to remove my parents and then make sure that my spouse and my daughter were added. So yes, it’s very important to review this every year.

Tom Temin And if you are retired now and you still have to think about health insurance, your TSP, what you’re withdrawing from it, etc.. Any particular advice now? Again, this kind of mid-year housekeeping check.

Abe Grungold If you’re thinking about retirement, and you really should, I hate to say update the death benefits form. SF 3104 in the event that you do pass away, there is a beneficiary for your benefits if you’re a federal employee. Now, if you are thinking about retirement, you’re going to have to develop an account on the [Office of Personnel Management (OPM)] retirement services online website. And you really need to think about making sure that you have a will and some sort of plan to, I hate to say, what is going to happen in the event you do pass away. What are your wishes when that comes, when that day happens? Don’t leave that to to be the decision of a family member who will have to make that decision for you.

Tom Temin And probably it’s a good idea not to download a will form from the internet and fill it out, but shell out what you need to get a competent estate attorney to handle that for you.

Abe Grungold Yes. So a simple will is not that expensive to do. And you should also have a power of attorney form and also health care proxy in the event something happens to you, and you are unable to make medical decisions on your own. Your bills still have to get paid if you can’t make your medical decisions on your own. So yes, a will, power of attorney and health care proxies, very important.

Tom Temin Sounds like if you do all of that review now, then this way when you hit vacation, you’ll really be able to enjoy that margarita by the beach, and not have any worries about your financial planning.

Abe Grungold Financial planning is not just about the numbers. It’s about retirement decisions, life decisions. Have you thought of everything? And these decisions have to be made. It’s best to make them before something happens in your life. You don’t want someone else to be making this decision for you, and you don’t want to have these decisions made for by a judge in court or something along that line to settle the estate of your affairs. So try to do your homework and try to prepare. Proper planning prevents poor performance. And if you have a checklist and run through these things, and get these things done before you retire, retirement will be pretty, pretty straightforward and you can spend more time vacationing and fishing, etc..

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