How to Pick The Best FEHB and Medicare Plan as a Federal Retiree

ladies and gentlemen federal employees today we're talking about how you pick an FB plan when you are close to retirement or in retirement as a First Federal employee how do you pick an FB plan how does Medicare come into play what are the things you need to be thinking about to get the most out of your health insurance almost retired or retired age 65 these are the sort of things we're going to dive into today and if you are new here so good to have you my name is D hos I'm a financial planner who serves a federal employees and federal retirees all day long and I absolutely love it so let's Dive Right In long story short let's start here when you retire we have to understand a few changes that happen to your health insurance when you retire when you're an active federal employee it works one way and when you retire it works similar but there are a few key changes you have to understand number one is taxes when you pay for your FB again your federal employee health insurance when you pay for that while you're working you get a tax deduction for those premiums so for example if your salary is let's say $100,000 and you pay $5,000 a year in health insurance premiums then you actually get a tax deduction for those premiums and you only get taxed as if your salary was $95,000 okay but that benefit of those of those premiums coming out taxfree that benefit actually goes away when you retire so when you retire the premiums you have access to are the same premiums that that active federal employees have access to but the one big difference is your premiums as a as a retiree are not tax deductible okay do they do not come out pre-tax so that is one change that happens also when you are retired you can no longer use an FSA and when you're on Medicare you can't use an HSA you can't put new money into an HSA and all three of these things help you save taxes okay so in retirement there are fewer things you can do with your health insurance to save taxes so while again the premiums you have access to are technically at the same price as normal active feder employees after taxes you're probably going to be paying a little bit extra it's going to be okay you're going to be all right but just know you'll pay a little extra because of these changes now one thing I want to I want to make sure I clarify we're going to be talking about Medicare A Lot in this video and just so you know I'm not talking about Medicaid we have to understand there's a big difference between Medicare and Medicaid Medicaid are for those in the United States who are on poverty or in poverty that are very very poor Medicaid is what kicks in for them Medicare is what we're going to be talking about today when it comes to federal employees and most Americans have Medicare starting at age 65 okay so let me walk you through how regardless of when you retire let's say you are a firefighter for the federal government you may retire at age 45 and you won't be on Medicare for 20 years and that's very normal so let me talk you through when Medicare does come into play and or when it doesn't come into play Okay so let's say you retire and you're before age 65 if you retire and you and your spouse are under age 65 you can just stay on your normal Feb plan you don't have to worry or think about MediCare at all until you start approaching 65 so if you retire at 57 at 50 regardless what age you retire as long as you have that FP you're good to go your FP is is still the same it doesn't change except for of course these changes you you can keep it normally until age 65 when Medicare comes into play now when one spouse turn 65 cuz normally spouses aren't born on the exact same day so there's normally a gap where one spouse is 65 while the other person isn't 65 so generally speaking during this Gap when only one spouse is 65 um and we'll get we're going to get to this basically what you're going to want to do is one of you is probably going to be on Medicare the other isn't so what you want to do during that time it's going to be a hybrid time where the FB plan you end up picking needs to work well for again the spouse that is on Medicare but also for the spouse that doesn't have Medicare and just has that FB plan it's kind of a hybrid approach you need to take during this time we're going to get to what you need to think about when picking an fhb plan during this time but just so you know that's is kind of a hybrid time now when you're bull 65 it becomes a little simpler again where you pick a plan because you're both on Medicare the plan's got to um can work both for you because you're both on Medicare okay so those are the some some of the things to think about now again while you are under 65 while you're under 65 um I've actually got a video that I made for active federal employees on how to pick an FB plan I'm going to link it up when you're under 65 a lot of those same rules apply where Medicare hasn't come into play yet so I'm going to link that up below if you want to see all the things they should be thinking about when picking a plan and you're under 65 for some time in retirement I would definitely go check that out those are going to be more relevant for you as you approach Medicare and age 65 these next things that I'm going to talk about are going to really be important so you can come back watch that watch this video when you approach okay so when talking about Medicare and FB we have to understand a couple things we have to understand that Medicare is a big program there's a lot of pieces to it but the most important pieces for federal employees are Medicare part A and Medicare Part B now when you approach age 65 you are going to get absolutely bombarded by Medicare supplement um companies where they they want to sell you Medicare plans and as a federal employee let me tell you you want to basically ignore all of them okay because you have FB because you already have fbb that's going to be your quote unquote supplement to Medicare you don't need to buy any other plan so please feel free take the weight off your shoulders you can ignore all those phone calls all those mailers don't just ignore all of those okay you the most important part is our Medicare A and B which no one is going to sell you that just happens the government offers those okay you don't have to listen listen to any of these phone calls or things you get in the mail okay so Medicare A and B are the most important ones for most federal employes so let's ask ask this question when does the normal a normal Federal retiree when do they enroll in Medicare okay so let's go over a couple different scenarios number one if you retire before 65 then when you turn 65 you you're able and you should jump on Medicare in most cases we'll talk about the case when it doesn't make sense but in most cases when you turn 5 and you're retired you jump on Medicare A and B at the same time you're good to go okay if you are still working at 65 okay if you're still working 65 and Beyond what most people do is they jump on Medicare A at 65 okay because Medicare A is free right it doesn't cost you anything so that's what most people to jump on Medicare A when they're 65 and still working but they delays on Part B because that costs extra and while they're working there really isn't a need there's no penalty while you're working working for delaying Part B there's nothing like that so most people while they're still working they jump on a And Delay Part B now the only time I'd say not to do a when you're still working is if you have an HSA because the moment you jump on Medicare you can no longer put new money into an HSA so that is the one exception to this rule to this rule of jumping on Medicare A when you're 65 even if you're still working okay now once you then retire let's say now you retire at 68 that is when people then normally jump on Medicare B as well okay that's normally how it goes okay so that is how when to enroll and normally the enrollment window happens where you have the 3 months before you turn 65 the month of your 65th birthday and the 3 months after to enroll in Medicare that's normally the window of enrollment okay so keep that in mind so again this is what most federal employees do is they jump on Medicare A&B and they also have their federal employee health plan we'll talk about some other um Solutions as well if you don't want to do that that but again most federal employees that's the combination they use Medicare A and B and keep their federal employee health benefits okay so that is when to enroll now let's talk about this Medicare friendly FB okay so some people might ask okay well I know Medicare Part B cost extra and you're right it does okay and if you don't know what that cost it does change yearby year um in 2023 when I'm recording this is about $170 per person per month um so but if you want to find the price for you if you just type into Google Medicare Part B premiums and and then the year you're watching this you'll po you'll find it it'll pop right up and it's actually a chart that's based on your income the higher your income the higher the premium so keep that in mind I'll talk on that a little bit um in just a second okay but long story short people ask okay if I'm paying for my fhb premiums and I got to pay extra for Part B that's going to add up those premiums are going to be quite High well that's true if if you don't find an FB plan that is Medicare friendly so the idea is that yes we got a Medicare A and B but we also have an FB plan that is friendly to Medicare and it's going to give you lots of perks and benefits for being on Medicare so a good Medicare friendly plan is going to do a couple things okay um either they're going to have very low premiums because they know if you're a Medicare A and B Medicare becomes primary and your FB plan loves that cuz Medicare picks up most things and then your fhb plan would pick up everything after that okay so they love it so normally a good Medicare friendly FB plan will actually give you a reimbursement every year for being on Medicare parb they're going to pay you money to help pay those premiums they don't normally don't cover all of Medicare Part B premiums but they cover a good chunk depending on what plan you have they'll pay you different amounts and that varies okay so for example I know Etna direct historically at least has has um been a plan that does that Blue Cross basic is a plan that is Medicare friendly generally speaking there's other plans that are more friendly but generally speaking and the reason I bring up Blue Cross basic is we know that Blue Cross basic is the cheaper of the two most popular bluec cross plans there's Blue Cross standard and blue Blue Cross basic Blue Cross standard is not designed to work with Medicare at all really they don't give you any reimbursement um there it's designed to be a standard alone plan Blue Cross standard is and so when you're on Medicare and blue cross standard you're going to pay out the woo in premiums because Blue Cross standard has high premiums and you'd have to pay for Medicare Part B premiums and they're not going to give you any reimbursement so the reason I bring that up is not to say bluec cross standard never makes sense but to say if you find a plan that is designed a little bit more to merge with Medicare then premiums come down okay premiums come down it's a lot more affordable okay and if you have a good fhb plan that's designed to merge with Medicare you got um A and Medicare A and B what often happens is is Medicare picks up the first 80% roughly okay and then your FB tends to pick up everything else and your FB plan often waves basically all out of pocket cost because again they're secondary now they've got they've got perks for you right they're going to wave copays they're going to wave deductibles they're going to wave a bunch of things because you have Medicare so what often happens with this combination is federal retirees go into 65 plus retirement with a great combination of insurance where they have very little out of pocket cost if any and it just is a great setup for going life they tend to have lots of healthcare expenses so keep that in mind okay you want to find a Medicare friendly plan now you don't know if your plan is friendly to Medicare you could look at the plan brochure you can call up your plan um and say hey you know what are the plans that you offer that are Medicare friendly they' be able to walk you through um but there is actually a new type of plan that is coming out in FB that is a Medicare Advantage plan and these plans are specifically designed for just those people that are on Medicare A and B and these plans can be extremely costeffective generally the premiums are very low okay very low and they're designed perfectly to work with Medicare that is exactly what they're designed to do so if you are thinking about this I would definitely look at these Advantage Plans whatever fbb Advantage plans are um in your area um I would definitely be looking into these because these can be super super cost effective as just merging with Medicare and saving you lots of money in premiums okay again this is a relatively new thing where within fhb to have Advantage plans but they're coming out now most plans are coming out with them so you're going to want to look at this just to see okay what how does this work what does it cover it's going to be something really really important to keep an eye on okay so again this is the most common combination that Federal retirees have is they jump on Medicare A and B and they have their FB plan okay now let me add one more note to this one of the big reasons that people do this is for a couple reasons but first if you don't enroll in Medicare B right when you're able to so basically at 65 if you're retired or let's say at 68 when you finally retire if you if you work past 65 it's whatever age you actually stop working for the government is if you don't enroll in Medicare Part B right at that time then they there's penalties if you ever want to come back in So basically there's a 10% per year penalty so if you wait five years if you come back into Medicare Part B later let's say at 70 and and you didn't enroll at 65 when you're were supposed to then there's a 50% penalty because 10% per year for every year you delay a 50% penalty for waiting so most people say look I don't want to have to deal with that I don't know if I'm going to want to use Medicare later I'm just going to jump in now find a good Medicare friendly plan and things work that's why most people get in okay but let me talk about one of the big reasons when it may not make sense to be on Medicare cuz as a federal employee at least as of today you're not forced to be on Medicare Part B that may change in the future but you're not forced to be on Medicare Part B um so the one time I recommend maybe not doing Medicare Part B is if you have very high income okay again like I said before Part B the premium amounts are based on your income the higher your income the more that your premium are so if your income is very high hundreds of thousands of dollars right then what you pay for Medicare starts getting very expensive again if you want to find the chart for whatever year you're watching this just type in um medicare parb premiums 2024 2025 whatever year you're watching this and you'll find the chart and you'll find the different brackets of income and you'll see okay my my income is about you know 200 Grand okay what would I pay for Medicare okay and you could find and once people get to the higher parts of this chart it becomes extremely expensive I to be on Medicare and it may not make sense to me a Medicare Part be in those situations but again most federal employees aren't there most are just the normal um where they're in the lowest bracket for Medicare Part B and they pay the normal amount so most people don't have to worry about it but I wanted to bring it up for those that might be okay so last two things I know there's a lot here but hang with me last two things so Medicare has Part D okay and traditionally Part D covers prescription drugs okay prescription drugs however up up to this point it's been very rare that it has made sense for federal employees to actually use Part D because fhb plans actually already have drug coverage however with a new law that passed in 2022 it changed how Part D Works where I'm going to bring this up if you have very high drug costs on a regular basis where there's just drugs you have to take and they're very very costly and you're paying for them on a regular basis I would look into this okay I'm not going to dive into this super deep on this video because it's a big topic here but I've actually written a a whole article and there's a whole section on Part D on how it works so I'm going to link up the article below about all of this and there's going to be a whole section on Part D okay so we'll find that section if you have very very high drug costs and and medication cost I'd go check that out because that is a beast of a topic um but there's going to be more information there okay now last but not least if you are on Tri care for those military retirees that you have Tri care basically with tri care they don't give you a choice so with Tricare you have to be on Medicare A and B they don't give you a choice okay there's no decision there's no opting out regardless of what Irma is if you if you want to keep your Tri care you've got to be on Medicare part A and B 65 plus okay so it it does take the decision way but it does simplify your decision-making process okay so here is the deal I know there's a lot here again there is there's a ton to think about if there's any questions or things that um I didn't address what I would recommend is there is again the article I wrote a whole article on this and there's more details in there I'm not going to cover all the details in the article in this video because there's so much go check out that article read through that that'll help you really solidify your knowledge of these topics and if you don't have more questions there there's actually going to be another link below to actually submit questions to our firm and we we take those questions and we and we base our future content on the questions so if you if you like this stuff you want to learn more about fbp and Medicare and how it works together then definitely check it out and if you want more information about how Medicare and what Medicare covers the different parts again the article I mentioned below um is going to cover more of that okay so I hope that's helpful go I I I hope this gives you the confidence and the clarity and information you need as a federal employee to make decisions to educate yourself and to be the best version of you and have the best retirement possible so I hope it will have a great rest of your day I'll see you guys next time

Channel: Haws Federal Advisors

Views: 25,526

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Id: 8rYmQryz7Lk

Length: 18min 0sec (1080 seconds)

Published: Fri Oct 13 2023