Linda: So tell me a little bit, Jeff, about what your basic FEGLI is.
Jeff: So like I said earlier, every eligible employee is automatically enrolled into the basic unless you waived it when you were hired on or if you've canceled it since.
The cost of it is very cheap. The government actually pays for a third of it for you while you're working. So, you know, 15¢ per $1,000 is pretty cheap. It is free for postal employees, it's a pretty nice benefit there. And what they do, they take your annual salary, they round it up to the nearest $1,000 and add $2,000 to it so that's why it reflects a little bit higher than your actual salary.
You also have an extra benefit if you're age 35 and younger. The coverage basically doubles for. Once you do turn 36, it starts to reduce 10% each year and then it will bottom down after ten years.
If we look at the chart on the extra benefit, and like I said, it doubles and it will reduce 10% a year. There's no extra cost for that, that's actually built in for free. It's a pretty good deal on that.
After the reduction does take place, then this is what your basic insurance will look like.
Jeff: After the extra benefit goes away, this is what your basic life insurance will look like, the cost of it, for the rest of your working career.
Linda: So, one of our questions was, what is it going to do at retirement?
Jeff: And that's a great question. At retirement, basically you have three different options. You have a 75% Reduction Option, which that's the default setting so if you don't choose anything at retirement that's what will take place. That's also known as the "Free Option."
Jeff: You have a 50% Reduction where you basically keep half of your coverage. And you have a No Reduction where you maintain your full coverage. Let's take this column by column, because they're each totally different.
The 75% reduction, we like to call that the free option. If you retire before 65, the cost remains the same. While you're working you keep your coverage. Once you turn 65 or when you retire, whichever comes later, then it's free; but that's when the reduction starts to take place. It has a little formula, it'll reduce 2% a month. After 50 months or four years and two months, it will have then reduced a total of 75%.
Linda: Okay. So I get to keep 25% of my coverage.
Jeff: For free, forever.
Jeff: If that's all you need in life insurance, then you have that.
Now, the 50% reduction, if you retire before 65, this price will jump up now to $90.05. Once you do turn 65 or whenever you retire, whichever's later, the price will drop a little bit to $61.77, then you maintain 50% of your coverage.
Jeff: The No Reduction Option: keep your full coverage. If you retire before 65, the cost is $213.59 per month. It's a pretty dramatic increase. Once you do turn 65 or when you retire, the price is a little cheaper. It drops down to $185.31, then you maintain your full $87,000 in life insurance for the rest of your life for that same cost.
Linda: Okay, Jeff. Now, you have two boxes there where it shows me a free coverage of $21,750.
Jeff: That's right. You notice in each example once you do turn 65, the price drops a little bit. Because that's that free portion that kicks in.
Linda: So, you're telling me I'm paying $61.77 for only $21,750 in coverage.
Jeff: That's correct, because you're getting the other $21,750 for free.
Linda: As a federal employee, if I select the 75% reduction and realize that $21,750 is not enough life insurance for me, what are my options? How can I supplement that while I'm working?
Jeff: Well, the best thing to do is do something about it now before you retire. Because once you retire, it is hard to get life insurance.
That's where we come in and help on that. Basically, what we recommend in lieu of that… Now, this is an example of keeping your No Reduction, your full coverage, for the rest of your life. This is paying for it for 40 years here because we got life expectancy at 85. You see while you're working it's very cheap, but we're going to retire and the price is going to change. Over a 40 year period and you're now paying over $62,000. This is how we can help.
This is just an example, everyone's different. But while you're working, you have your basic life insurance, and you keep the free option when you retire. Now, the United Benefits option: when you lock in an $87,000 policy, and we just did that to compare it to what you have through the government, the price will never change. That $78 a month, and your coverage never changes.
While you're working, we can double your coverage and when you retire, you have a lot more coverage and you've only paid just over $44,000 for it. You literally have a savings of over $18,000.
Linda: So Jeff, you're telling me my option now is to get coverage. And I can get double the coverage while I'm working, keep coverage when I retire, and still save $18,000?
Jeff: You can. I mean, that's a pretty significant savings: increasing your coverage, and saving money?
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