THINKING OF RETIRING?
QUESTIONS TO PONDER?
1. Know the facts. Avoid costly mistakes. Protect the economic value of your family’s life style.
Assets can evaporate very quickly!
2. Formulate a plan with a budget.
3. Make sure you retire for the right reasons. Know the Four Ws of Retirement Planning!
a. Why? b. When? c. Where? d. What?
4 Consider your 3 top priorities.
a. Self. b. Family – Get them involved. c. Your obligation to the job.
You were smart enough to get yourself into a Good steady Civil Service job with many benefits. Did you ever question what happens to these benefits when you retire or how your family will be effected.
What is a pension? How is it guaranteed? What is a pension tier?
What happens to that pension when you retire or die off the job?
Do you know the economic value of your pension?
Do you understand the effects of Options, Maximization, Cola, Variable Supplement, and the death gamble?
What is a vested employee?
How will your pension be taxed by NY State? If you move to another state, like New Jersey? Should you be concerned about inflation?
2. Health, dental, and drug plan.
What happens to these plans when you retire?
What happens to your coverage if you move out of state?
Why are your drug benefits dramatically reduced when you retire and need them the most?
How has the PBA been able to upgrade their retiree drug plan so dramatically?
What is Medicare? When should you go into it? How will your wife and family be effected?
3. Group insurance plan?
Is it really low cost? What happens to your coverage when you retire? At age 65?
4. Mandatory Insurance?
What is it? What was the original purpose? Why was that purpose changed?
What does it cost?
Why is your coverage reduced from, $7800.00 to $5700.00 when you retire?
The best way to answer these questions and obtain accurate updated information is to talk to knowledgeable retirees. Join, support and become active in your local retiree group!
THINK, Before you retire!
Henry Demchak – SCARF/NASSAU Insurance Liaison
ATTENTION – 9/11 RETIREES
Consider the 4 Ws Prior to Retiring!
Many retirees begin to wonder shortly after retiring, if they made the right decision. They were so excited at being able to retire that they never gave the details enough consideration. Before retiring, discuss with your spouse four key questions.
1. Why am I Retiring? Many people feel much better working. They are task driven! If you are in this category, continue working. You’ll be much happier and healthier. If you are bored and dissatisfied with your current job, consider your interests, hobbies and talents. This might be an opportunity to widen your horizons and to increase your income.
The decision becomes more complicated if you are in ill health and are being forced into retirement. Update your skills. Give yourself the option and opportunity to return to the work place in some other capacity.
2. When Should I Retire? Don’t wait too long! You should retire when you still have the health and energy to enjoy some of the things you’ve always wanted to do. Just be sure that you don’t run out of money. Formulate a financial plan using an income statement and a budget. Are you close to receiving social security benefits? Be aware that diminished earnings prior to receiving Medicare could diminish your total Social Security benefits! Have your children completed their education? Could inflation become a problem? Will you or your spouse be able to generate extra income? Be aware that your spouse and dependents can loose their health, dental and supplemental benefits if you predecease them. Know that the mandatory life insurance and your group term life insurance will automatically be reduced when you retire.
Consider life insurance supplementation for the protection of your spouse and dependents.
3. Where Should I Live? When you spend a vacation in Florida it might appear to be the perfect location. Don’t put your old house up for sale until you’ve spent a summer blistering in 102 degree temperatures. Do your children share your dreams of a new location? Will they move with you? Are there grandchildren that you will lose touch with? Will your state income taxes be dramatically increased if you move out of state? What will be the effect on your health and dental plans?
4. What Am I Going To Do With My Time? The workplace provides social support and structure and a sense of accomplishment. When you don’t have this anymore, you may feel out of place and useless. Before you make any final, unilateral decisions, sit down with your spouse and have a very serious discussion. You might be very surprised to find you are not in harmony.
Retirement should be a very rewarding time in your life. If you have the knowledge and the proper information, you can assure that it will be. You do not need or want any unexpected surprises.
THINK, Before you retire!
Always consider your top three priorities. They are:
1. Your self.
2. Your family.
3. Your obligation to your job and the people you work with.
In the priority order we must always put ourselves first. We work at our job to provide an income for our family. If we break down or become incapacitated, we become useless to our family and to our coworkers. We owe them an obligation to keep ourselves strong, healthy and focused on our well being. This is not being selfish, but good common sense.
A time will come, when you are mentally, emotionally and physically ready to retire. You feel that your retirement pension and income will be adequate. You have put your time in. You have paid your dues. Perhaps you have other interests and just want a change. Before you make a final determination about retiring, discuss it first with your wife and your family. Try to consider all the ramifications together! You and your wife are a team. You should communicate, coordinate and work together. If you don’t, you are exposing yourself to unnecessary conflict.
When you retire after 20 years as a firefighter you will be well positioned. You and your dependents will have your pension, health plan, dental plan etc. If something should happen to you, be aware that your dependents will probably lose all their benefits. Of course, if something happens to you, while you are still on the job, (non-line of duty), they will still lose these benefits anyway. It is just more obvious and happens more often when you are older and retired. There is one sure easy way, when you are young and healthy, to give your family maximum protection at a minimum of cost. The only problem is, very few of us have the foresight or the knowledge or desire to implement a plan.
One of the hardest things to do, is to maintain a successful balance between your family and your job. You owe them both an obligation, and hopefully you will make the right decisions. Keep in mind that once you retire you will hopefully be in constant contact with your family, but you will probably lose contact with your buddies.
THINK, Before you retire!
HOW MUCH INSURANCE COVERAGE?
When you are young and healthy, who bothers to think about retirement or a pension plan? Every employee when he is ready to retire quickly learns that his pension plan has a “kink.” The pension system is designed to just cover his life span. When he dies, his pension dies! He has to make a decision! If his family is dependent on his pension check, should he?
1. Take a pension option. This will ensure his surviving spouse an income for her life span, but his current monthly income will be dramatically reduced. An option can be very costly!
*** There is a federal law that gives the spouse of a worker veto power over the way retirement benefits from the worker’s job are divided up. The Employment Retirement Income Security Act of 1974 provided that the normal form of retirement payment for married couples would be a joint and survivor annuity, which pays pension benefits to a retired worker’s surviving spouse.
2. Consider additional insurance coverage. If his wife should inherit a large chunk of cash, she can then set up her own annuity. She will also have control of the principal. She can use it to suit her needs or to pass it on as an inheritance for your children. The principal will not revert back to the pension system. She will not have to depend on a monthly dole that will stop with her demise.
3. Do nothing! Perhaps the job or his friends will step up. Perhaps his wife can seek employment. If his wife is working now and needs more income, maybe she can get a second job?
If you decide on #2, the big question is: HOW MUCH insurance coverage will you need?
This can be a very difficult question. You can use a financial tool called, “A Needs Analysis.” You would first list negative costs such as current mortgages, educational expenses for your children, last expenses, future debts, and other possible contingencies. Then you would try to factor in all the positives such as savings, current insurance, income from Social Security, possible scholarships for your children, your wife’s ability to seek, find and maintain employment, etc. When you evaluate these figures you should be able to compute your family’s income need. You would then have to figure how much extra insurance coverage you would require to fill this need.
Or this can be a very easy question. Most retirees want to be fair and make sure that their wife will get an equitable portion of their pension. A criteria that is commonly used is a plan based on half of your annual pension income for her expected life span.
Example: What coverage is needed, if your pension is $50,000 annually, and you want your wife to generate at least $25,000, (comparable to a half pay option). In the current market a safe, conservative and secure return would be 5%. You would then need $500,000 of coverage.
The minimum insurance coverage you should have then is ten times your pension or salary to match 50% of a $50,000 pension based on a 5% return.
TERM OR PERMANENT INSURANCE?
If you asked a Stock Broker this question last year, he would probably have told you to buy cheap term insurance and invest the difference in mutual funds. Today you would probably get a different answer! The stock and mutual fund market is very depressed now and continuously losing money, whereas good permanent, flexible insurance plans are still paying a cash value build up.
Your two primary considerations before buying any insurance should be:
1. Needs! Pension maximization, mortgage protection, educational expenses, last expenses, etc. After you establish your needs, factor in a time frame based on your age. Then consider your:
2. Ability or desire to pay premiums. How much can you comfortably afford to spend?
Remember your premiums are always determined by:
1. Your age
2. Your health.
Put a good insurance plan in place when you are relatively young and in good health. If you are thinking of retiring, put your insurance in place before the medical. After a thorough medical examination, problems can show up that would cause an insurance rating or prevent coverage.
Considerations for insurance coverage are: your health, do you smoke, your age, your wife’s age, your family’s needs, the amount of coverage currently needed, your ability and desire to pay premiums:
1. A good flexible permanent plan.
2. A good term plan. This is a prime consideration when you are young, healthy, need a lot of coverage, and have many current expenses with a limited cash flow. You want the most short term coverage at the lowest cost and the ability to lock in your good health. When your term coverage ends, you can maintain your good health rating and do a simple conversion to a permanent plan. No medical examination will be required.
The problem is, many companies that have cheap term insurance, do not have competitive premiums on their permanent plans. Know what your conversion options are! Remember that your premium costs will be based on your age at the time of the conversion.
3. A good term plan combined with a good flexible permanent plan.
TIME & BALANCE IN INSURANCE COVERAGE ?
If you choose to buy insurance instead of picking an option:
1. Update your estate plan.
2. Put your insurance in place before taking a complete thorough medical exam.
3. Make sure that your insurance is in place before selecting, “Maximum.”
A valuable trait to develop is timeliness. As we blunder through life we often pay the price for not doing things in a timely manner. Time is a limited resource and we often lack the interest, insight or knowledge to use it properly. Many of us prior to retiring, never consider the real value of our pension and the way to maximize it. Remember that one of your most valuable assets is your pension and that it is an employee benefit that will die with you.
Your primary focus prior to retiring, should be to:
1. Maximize your income and
2. Protect your family in the event of your early demise.
Will your wife be able to generate enough income? Will she be able to pay off the mortgage, pay the taxes, maintain the car, provide food and essential necessities? Will your children be able to finish their education? Will they have adequate medical coverage?
The time a widow will need the most protection is the early years during her black period. This is the period prior to social security and Medicare benefits. If there are young children and monthly social security survivor benefits, this should be factored in. In the early stages of retirement, it is usually used best to maximize coverage at the lowest premium with a good term program based on age and health classification that extends into the black period. The program should then be periodically reviewed when needs and income change. The program can then easily be balanced by converting a percentage of the term to a permanent plan without a medical examination. This will ensure that you will get the best value when you extend coverage beyond the most critical financial period. It is here that timing is critical to maintain the best balance in term and permanent insurance to get the best value.
If you utilize term insurance, your primary concern should not be just premium costs. It should be:
1. Your health classification.
2. Company underwriting.
3. What your conversion options are.
Plan ahead to make sure that you get the best value, with the most coverage, and with a premium that you feel comfortable with.
Now go out and enjoy your retirement!
If there are questions on this article, types of insurance plans, possible combinations of plans or the best values in insurance, contact:
Henry Demchak – SCARF/NASSAU Insurance Liaison @ (631) 585-6047
Many wives do not realize that there are two separate unions in the New York City Fire Dept.
A- The UFA (Firefighters)- The Security Benefit Fund @ (212) 683-4723,
204 East 23 Street, 3rd Floor, NY, 10010-4611.
The Union Delegates Office is at (212) 683-4832.
UFA BENEFITS ELIGIBILITY:
For Widows and their eligible dependents, including duly registered domestic partners and their eligible dependents. For firefighters and Fire Marshals, who retired on or after January 1, 1971, (July 9, 1993 for Wipers).
B-The UFOA (Fire Officers)- The Family Protection Plan @ (212) 376-8400,
225 Broadway, Suite 401, NY, NY, 10007.
The UFOA Office is at (212) 293-9300.
1. Required Notification (A.S.A.P.) to the Pension Desk at (718) 999 2320, or /2319, or /2318. Final retirement check(s) received after a members death should be returned to the Pension Fund. The deceased’s name will be placed on a Department Order. The required agencies will then follow up and mail beneficiary life insurance claim forms, and medical health forms. After all applications have been completed, notarized and approved by the Board Of Trustees, the Article 1-B Pension Fund will disburse payments.
2. HEALTH BENEFITS: Many have found that purchasing health benefits on an individual basis can be very expensive. Contact the UFA or the UFOA by telephone to request information on group health benefits. Do this within 31 days to be eligible for the extended health coverage.
Be aware that Retiree Organizations have passed Chapter Law 436 for deceased firefighters and police officers. It was signed by Governor Pataki on November 13, 2001. It is designed to protect the spouse /domestic partner and dependent children, of a deceased member, with extended Health Coverage. It supersedes the federal COBRA law or (Consolidated Omnibus Budget Reconciliation Act). Application should be made within one year of demise. Notification should be by certified mail (use return receipt requested).
Surviving Spouses of U.F.A. members, (Firefighters) who retired after July 1, 1973, are currently entitled to a continuation of their coverage for one full year, at no cost to them. Surviving spouses of U.F.O.A. members (Fire Officers) are stunned when they are told that they have only a limited time to purchase their own health and welfare benefits.
If a member retired for Service Incurred Disability (3/4) and dies as a result of the disability that caused his or her retirement, the surviving spouse is entitled to continuation of health insurance coverage. This benefits is provided by the U.F.A. and U.F.O.A., respectively.
3. SUPPLEMENTARY BENEFITS: Cover 1. Drugs, 2. Dental, 3. Eye Glasses, & 4. Hearing Aides. Request Information on cost and availability!
4. Partial Medicare Part B Reimbursement: If either spouse or both are on Medicare, they might be an eligible for a partial reimbursement. The reimbursement checks are sent out about the second week in August for the previous year.
Call NY Employee Benefits at (212) 513-0470, between 10 AM and 4 PM, to check eligibility, and to request an affidavit form for a Medicare Part B Reimbursement. Talk to a Representative!
Example 1: If the death certificate is dated 10/15/03, we estimate that each recipient is entitled to 10 months of reimbursement for the year 2002, at the rate of $58.70 per month.
Example 2: If the death certificate is dated 6/15/03, we estimate that the beneficiary is entitled to 12 full months of reimbursement for the year 2002 at the rate of $58.70, and 6 months of partial reimbursement for the year 2003, at $66.67 per month.
For 2005 there will be a 17% increase to $78.20 per month for Medicare part B.
The address is:
NY Employee Benefits Section
Part B Reimbursements
40 Rector St., NY, NY 10006
5. If the deceased was receiving a Social Security check, that Agency should be notified. The undertaker is mandated to do this but the family should follow up to see that it is done. For survivor benefits, call Social Security at 1 800 772-1213.
6. NOTE For Deceased Veterans: The V.A. may supply a gravestone, a flag plus $250.00 for burial and benefits for dependent children. Check with the undertaker and call your local office.
7. Contact your local State Motor Vehicle Bureau: For automobile ownership transfer.
8. Contact claims departments of all involved insurance companies with the Policy Numbers.
9. If the deceased had Catastrophic Insurance, call 1 800 503-9230 for a refund.
10. Contact the NY State Star Program for help with taxes, if dwelling is the owners primary residence.
For seniors over 65 with expensive drug costs call EPIC at 1-800-332-3742. Also contact a Senior
Advocate at the County Office For The Aged for many additional benefits.
In Suffolk call: (631) 853-4000.
11. If the deceased was involved in any Business, Religious, Trade or Fraternal Organizations as (SCARF), Veterans of Foreign Wars, American Legion, notify and inquire about possible benefits.
REQUIRED INFORMATION THAT YOU WILL NEED FOR BENEFITS:
1. Death Certificate – Order extra copies from the undertaker or the Department of Health.
2. A Paid Funeral Bill.
3. Marriage Certificate with a seal.
4. Social Security Number.
5. Birth Certificates of Minor Children.
6. Surrogate Certificate – (Required if a will is probated).
Henry Demchak – SCARF Insurance Liaison @ (631) 585-6047