FERS Pension & Health Benefits in Retirement

[Beach_Stache]

Hi MMM Community,
I'm a ways off from my Pension years and I know the benefits of the pension pretty well, know my MRA, etc.  I don't hear much about medical in retirement though and what most people do?  My MRA is age 57 and age 58 I'll have 30 years, at age 62 I'll be in 34 years, so that'll be the absolute latest I work.  I want to try to get to at least 30 years but who knows, I may want to retire early at 50 if that's an option.  I have a DW and 3 children, who will be grown and hopefully out of the house by the time I retire.  We have BCBS b/c I didn't want to risk high deductible w/3 young boys.  DW is 1.5 years older than me but keeps in great shape, and will hopefully outlast me by at least a day!

For those who are on a FERS pension, do you elect for 25% survival, 50% survival or no survival?  Then I assume everyone carry's their medical into retirement, but what do you do at age 65 when you reach medicare?  Do you drop insurance or keep both insurance and sign up for medicare?  Do your premium's drop for normal insurance?

DW and I keep healthy, eat well and exercise, but I have no idea what the future decades will hold, and really the only unknowns that I don't have much information on is the medical part into retirement and past age 65, and then what most people do with their pension and if they elect survivor benefits (and if so at what percentage)?

I know there are a lot of FERS gov't employees in here, so hopefully you big brains have the answers!

[Rosy]

I don't hear much about medical in retirement though and what most people do?

Well, speaking as the surviving widow - I can tell you that
having government employee health insurance - which is guaranteed for life - unless you cancel it
is beyond awesome and a major relief.

I was 48 and he was 50 when he died. So initially the health insurance seened less important since I had always been in good health.
I'll be forever grateful to the lady who handled my paperwork who advised me to simply pick the cheapest insurance option but always keep it, that I could always choose a better plan later on, but once I canceled it would be lost to me forever.

Twenty years later I can afford to pick the best PPO at higher premiums paid automatically out of survivors annuity pension from FERS.
This turned out to be a financial lifesaver.

Medicare
I am glad I took the time to research how that would interact - I almost canceled my GEHA insurance.

I found out that GEHA can take the place of Part D of Medicare insurance, so I kept my insurance which is about as good as it gets for medical coverage. (Medicare Part A is free to all and I pay for Part B - you can choose not to, but given the low premium I would be a fool not to. (deducted before I ever see my SS).
You will receive a letter once a year from GEHA confirming that your GEHA insurance coverage functions as Part D coverage.

I never knew until then that even if I have Medicare - medications are not included - what kind of f*** ins coverage is that?
I'm lucky that at 71 I'm not dependent on meds like my DIL whose meds are $6K a month.
All I have is high blood pressure - which costs me $15 in med co-pay a month.

The way Medicare works is that they become the primary insurer, whatever they do not pay is paid by GEHA. You provide your doctor with your two insurance cards, that's it.
It is a thing of beauty - I haven't even had to pay any co-insurance except for some meds because between the two everything is covered.
The only thing I pay for is the $20-25 doctor visits and sometimes a co-pay on meds and of course PPO lets me pick any doctor I want.

FERS Pension
The choice of how you financially protect your wife after you are gone is yours - no survivor pension - 25% or 50%.
I can't help you with that.

Calling @Nords - he is the specialist when it comes to all things military and I believe FERS as well.

[Beach_Stache]

Thanks Rosy, this is great information and very helpful!

[Catbert]

Rosy provided you great information.  FEHB is great!  Just be sure that you keep it for 5 years before you retire.  I remember many years ago when someone was doing his retirement planning a couple of years before he planned to retire only to find that he couldn't take FEHB into retirement bc he had dropped it in favor of his wife's cheaper insurance.  He ended up working longer than he wanted to get back to 5 years.

I opted to keep my FEHB Kaiser HMO and not take any Medicare beyond the free Part A.  That saves us a bunch of money on Medicare.  We've been doing significant Roth conversions that raises family income enough that we would pay an extra surcharge if we took Part B.

You'll pay the same for FEHB when retired as you do when working.  If you option of Medicare you'll pay whatever Medicare premiums as due.  Your FEHB premiums will stay the same.

Deciding how much surviver benefit to opt for is a very individual decision.  The basic question is sorta like life insurance:  How would my spouse life financially if I died? 

[Nords]

Thanks, Rosy, and I regret to share that my circle of competence at military personal finances (and the TSP and the federal pension) does not expand to FERS.  I'm only familiar with buying a FERS military service credit deposit, or being eligible for both a Reserve pension and a FERS pension.

Beach_Stache, a pension's survivor option is a multiple-choice problem. 

First, for any FERS pension, I'd recommend the book "The Golden Albatross: How To Determine If Your Pension Is Worth It."  (I wrote the foreword.)  Grumpus is the nom de plume of a legit U.S. military retiree who lived on Oahu during his final tour, and we used to get together for coffee talks about pensions & writing.  He'll help you decide whether your career is enough challenge & fulfillment to make it worth sticking around for the pension.  He wrote the book (and the blog, and the Facebook group) in general terms about any pension, not just military or FERS. 

I gutted it out on active duty to the military pension, and in retrospect that was a career mistake.  By the 12-year point we were on track for FI, and I should've left a high-stress job for a Reserve career (with or without a civilian career).  Grumpus went through the same thought process and decided that the best solution for his health & family would be staying to 20.  He made a great choice for his situation. 

If you stick around for a pension then a survivor annuity can be combined with term life insurance to pick the best mix for your situation.  If you're saving for financial independence then you might not want either of them-- you might already have enough assets (with or without the pension) and you'd prefer to have all of your pension to spend on each other while you're both still alive.

Term life insurance is good for a lump sum to finish paying for college (you, your kids, or student loans) or to pay off a mortgage.  It's relatively cheap, you can buy it for only as long as you need it, and if you abruptly no longer need it then you can just stop paying the premiums to let the policy lapse.  For some people, the "problem" with term life insurance is that you end up having to manage a lump sum.

A survivor annuity might have a cost-of-living adjustment (like Social Security) and that's extremely valuable longevity insurance. (I'm not even sure that insurers still sell inflation-fighting annuities.)  However Social Security might be all of the annuity (longevity insurance) you need, especially if you've already reached financial independence on your own assets.  If you can't get term life insurance (for whatever reason, especially health) then a survivor annuity might be the only option as you pursue financial independence.  However you might not be able to cancel the annuity if you no longer need it, and your pension might be permanently reduced to pay for the annuity's cost.

A survivor annuity is also valuable to those who don't want to (or can't) manage a lump sum.  No matter how much you screw up your finances, next month another annuity deposit arrives in your checking account.

When I retired from active duty my spouse and I were already financially independent.  We didn't need life insurance for any debts or anybody, so we canceled our cheap military term policies.  We declined the military's survivor annuity.  A few years later when she retired from the Reserves, we still declined her survivor annuity.  We have enough of our own assets and we'd rather have the money for each other. 

[six-car-habit]

 From what i have read about the FERS program, if you want to carry the subsidized FEHB health coverage foward, and you have a spouse who you would also want be covered after you retire and/or outlives you , then you-- Have To Get-- the pension annuity with a survivor component.

It also bears saying that i've read that if there is a spouse upon retirement, the spouse has to sign a notarized form agreeing with the retirees decision, if the retiree requests an unreduced annuity [receive 100%]

 These are both statements i've found on FERS / OPM websites or in their written publications, but don't take them as gospel, as it is from memory.

[Catbert]

Nords gave you a good discussion of survivor pension/insurance/stache options for taking care of the survivor.  Let me throw in one more consideration.  As we get older there is cognitive decline in all of us.  I say that as someone in my late-60s with a spouse in his early 70s.  I'm not talking dementia, just a general less sharp mentally.    In our case, my DH has never been interested or very involved in making portfolio decisions.  I opted for the largest survivor benefit when I retired (CSRA) to keep it simple for both of us.