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Federal Employee Financial Planning: Dual Federal Employees (EP55)

Unlock the doors to unique planning opportunities for dual federal employees as Michael, John, Tommy, and Ben delve into pre- and post-retirement strategies in this episode. They explain the untapped potential for fun and financial prosperity when dual federal employees understand the lucrative nature of their benefits and work with a financial planner who specializes in their unique situation.

Listen in as they share the intricacies of health insurance for dual federal couples, exploring what sets it apart and how both partners can leverage these benefits. You will learn the unparalleled security that dual federal couples experience under this system, creating a level of financial stability that is nearly impossible to replicate. Lastly, they will explain how dual federal employees can strategically navigate survivor benefits for enhanced financial well-being.

Listen to the full episode here:

What you will learn:

  • How health insurance works as a dual federal couple. (4:00)
  • What’s unique about both members of a couple having great benefits. (10:30)
  • How survivor benefits work when both members of a couple are federal employees. (14:10)
  • Whether you need survivor benefits. (16:45)
  • How dual federal employees benefit from having survivor benefits. (20:50)
  • The importance of working with an advisor who knows your situation. (25:00)

Ideas worth sharing:

  • “The amount of security that dual federal couples have when they are both under that system is almost impossible to replicate.” - Mason & Associates
  • “Thrive, don’t survive.” - Mason & Associates
  • “Know the end in the beginning.” - Mason & Associates

Resources from this episode:


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Read the Transcript Below:

Congratulations for taking ownership of your financial plan by tuning into the Federal Employee Financial Planning Podcast, hosted by Mason & Associates, financial advisors with over three decades of experience serving you.

Michael Mason: Welcome to the Federal Employee Financial Planning Podcast, hosted by Michael Mason, I'm a certified financial planner, and across the table from me, John Mason, also certified financial planner, Tommy Blackburn, CFP, and CPA. And Ben Raikes, a certified financial planner, and IRS enrolled agent.

This episode is going to be dual federal employees. So, what we've learned, some unique planning opportunities for dual federal employees. We're going to talk about pre-retirement and then post-retirement. So, let's just jump right in.

John Mason: Mike, thanks for the intro. Again, I'd like to say hi to everybody as well. Thank you to my partners and co-hosts for helping us put on this show.

Two quick shout outs, as I'm typically the messenger guy, I think I do that part of this podcast, but if you're just tuning in for the first time, we're Mason & Associates. We have over three decades of experience doing this.

We're financial planners first, helping change our clients' lives and motivate them and empower them to do things that they wouldn't have done without us. That's what we do. That's our primary job, and we do this content creation second, the podcast, our YouTube channel.

So, if you're just here for the first time, welcome, thank you for being with us. For our loyal listeners, thank you for being on this journey with us for over a year now.

The mission, the mission, the call to action is go back to the previous episode where we talked about the military survivor benefit open season. Now, it's not necessarily the episode that we released directly before this one, but go back in time, find it. We released it in March. It's the military survivor benefit open season.

It's an awesome opportunity, that coupled with our YouTube video, you have the opportunity, our audience, to change the lives for veterans and their families throughout the country.

And it's our responsibility to do it because national media is not picking it up. This doesn't sell, but we can change the lives to together, the Mason & Associates community.

So, thank you for being here. Thank you for supporting us and thank you to our clients for empowering us to do this on this type of medium.

Michael Mason: Outstanding, thanks, John. And so, as we begin today, again, dual federal employees could be FERS/FERS, could be CSRS/FERS. There won't be many years that we still have CSRS and FERS actively working. So, let's make the assumption that it's FERS/FERS for a little bit.

John Mason: And maybe if you're okay with it this is off the cuff, maybe we can throw in FERS and any other employer that has a pension. So, maybe your FERS and military or maybe your FERS and Huntington Ingalls or FERS and Sentara with a pension.

Any other place that has a pension that kind of looks and feels like federal, I think some of those same rules are going to apply for those folks too.

Michael Mason: And we'll identify when it's slightly different. So, I wanted to start with health insurance. If two federal employees and a family, and one or more children, it seems like one of you taking family coverage makes the most sense.

John Mason: Are we talking right now about if you're actively employed?

Michael Mason: Right.

John Mason: Yeah, I think you're spot on. If you are John and Sarah and you've got seven kids or three kids or one kid, what you're going to end up doing is one of you is going to take family coverage.

There's no reason to have self plus one on one person and then the other person on self only. Family coverage would be the route to go while you're both actively employed.

And kind of just a side note, which is kind of crazy with insurance, and I don't think it's not the same, I don't think in the private sector always, but one kid or seven kids, family's family, and the premium's a premium, so the more kids you have, the better deal it is.

Michael Mason: And as I look at this before, most people take the Blue Cross Blue Shield and self plus one is like $20 a month less than family, so you're really getting hammered there for that plus one versus family.

Tommy Blackburn: Absolutely. I think I've had the same thought process. It's like, so somebody could be paying the same premium who has a family of three, spouse and a child with somebody who's had like seven kids.

And I think the private sector probably depends plan by plan. But sometimes it's the same there too. And it has kind of baffled my mind. It's like, this doesn't seem right, but-

John Mason: The math doesn't seem to work. And so, Mike, do we want to go to that same couple that's now retired. So, while you were both working, it made sense but now let's say one of you is retired and the person that retired was the one that historically was carrying the health insurance.

Michael Mason: Now it's just each of us. We don't have a family to take care of, but we both in our own right have the option to have our own coverage, is what you're setting up, right?

John Mason: Well, I guess it could be twofold. So, maybe I retired from DEA, maybe I was a special agent and retired under those new provisions early while my other spouse or my spouse is working until 62, if I was carrying the health insurance, it was pre-tax while I was working and maybe now, I'm retired, and those health insurance premiums aren't pre-tax anymore.

So, I'd want to switch back to the actively employed person, have them be the one secure the health insurance, get that tax deduction and flip it back to them for the family coverage.

Michael Mason: Absolutely. When we're talking family, you're 100% accurate once the family falls off. I don't know that pre-tax self, self-self or self plus one pre-tax with the one that's working, I don't know that that's better than self-self once we don't have the family involved.

John Mason: Self-self would almost always be the way to go. I don't think we've ever seen it in any other scenario.

Michael Mason: And Tommy, I just wanted to say, I mean, the timing's not as good now after that question John asked me.

But I thought we had a conversation a couple years ago when you joined Mason & Associates and our financial planning with federal employees that when something like this, if you tried to make federal benefits actuarial, it makes sense-

Tommy Blackburn: It's not actuarial adjusted. I think that was specifically about survivor benefit premiums and that was 10% no matter what your situation was. Same, you're right. It doesn't always make sense.

Michael Mason: We’ve wondered forever how a FERS benefit could be generated at 40% of your high three at 0.8% cost. So, that's just a funny, just a funny.

Tommy Blackburn: Yeah, you're right. And just to give it a little bit more justice, the original comment was that I know when John and I were working on a plan, and it was like, so you could be … and go listen to the military SVP one that we just released or should have released well before this, as well as the survivor benefit one, episode two that we did.

But you could be 90 and your spouse could be 50, and the cost is 10% per year. So, there's no actuarial math behind how that's figured out.

Michael Mason: There you go. And also, and I don't know if you've pulled them up Tommy, if you haven’t, we can give them these episodes as we talk about in-service survivor benefits, for again, dual federal employees, make sure that whoever you're working with, and if it's yourself, then listen to our other podcast.

But if you're working with a financial planner, make sure they understand what happens if you die in service as a FERS employee or as a CSRS employee. Because some of these income streams, all of it's like life insurance.

An income stream for the rest of your life is like life insurance, lump sum for in-service, first death benefits is like life insurance. So, you should understand it all.

Tommy Blackburn: And it looks like Mike, so episode two was survivor benefits. Episode three through seven was where we covered CSRS in three and four, and five through seven was where we covered FERS.

And it looks like in particular, I think episode six was where we talked about — or maybe that's episode seven, one of those I know we specifically talked about death benefits on FERS, but if you listen to all those episodes, you should get all the information you want on those topics.

Michael Mason: Right. And then Ben, there's an episode on federal employees group life insurance, you guys can find that on the podcast. But just a statement there is that FEGLI option B gets really expensive.

So, don't get it young and forget that it gets expensive as you get to 40 and 45. And then we also like to manage our TSP contributions, Ben.

Ben Raikes: Absolutely. We need to take a look at those TSP contributions. You can either do traditional, which are going to be deducted from your income or Roth, which are not going to be deducted from your income.

What you could look for if you're doing those traditional TSP contributions is keeping your adjusted gross income below those Roth contribution thresholds. So, that way, “Hey, I'm doing a little bit of pre-tax into my TSP, but I'm keeping my income low enough that I'm still able to put money into a Roth IRA through normal contributions.”

John Mason: Maybe guys, I want to take this a different direction. And as we think about dual federal, there's obviously, that just means in my mind the initial, and I'm sure our audience too. It's like, okay, so we both have great benefits. Like what's unique about both having great benefits?

Well, we both have a pension. Awesome. We both have Social Security. Awesome. We both have TSP. Awesome. Everything's the same.

Now, there are some nuances like self-self and who carries the insurance and whatnot. But as we think about the dual federal employee, one of the things that pops into my mind that makes them very unique is maybe they never as a couple need to save 10% because they both have great guaranteed income. So, maybe the required savings rate's actually a little bit lower.

But more specifically what enters my mind is the benefit structure around federal employees is so great. They have sick leave; they have annual leave. They both have these pensions.

They have consistent income where they don't maybe have to have the same level of emergency fund. How much more fun can dual federal employees have in their 30s, 40s, and 50s when they realize how lucrative these benefits are? And then they can share.

Imagine you and your spouse both have 240 hours of annual leave every year, and you can go on vacations with your family and you can do all of that compared to somebody that's married to maybe a public school teacher that doesn't get any time off for 10 months or married to another employer where maybe they only get two weeks of vacation a year or has to work on Christmas.

And just think about how much more fun your financial plan can be when you're operating under that same kind of like infrastructure or safety net. We've never talked about that before. That's so much fun for so much longer.

Michael Mason: And I think we've touched on, and I think I'm going the right direction with you, that we've touched on this before and figuring out what that FERS income's going to be. And you'll make as much money after a 30 to 35-year career, as much money in retirement for the rest of your life as you are making.

But if you don't find that out until five years before retirement, it's not that much fun, is it? If you know, if you're 10 years into this, married to another FERS, and you know that if you can afford to retire, you can afford to die. And you know, you only need to save 10% into TSP.

And maybe you think about doing high deductible and saving into some HSA to get you some tax free, but if you know it and it's on paper there, you avoid so many mistakes over that 20-year period.

You avoid whole life insurance that is ridiculous thing to do when survivor benefits is the thing to do. So, I'm 100% on board. You're not worried about your children's college because you know retirement's taken care of so you can set some money aside for college. So, it's tremendous point you make.

John Mason: Just dual federal employees in general, it's just that security of … and it's different. I don't know because I'm not married to a federal employee, but I just envision and we've seen it in the financial plans when we work with those folks, the amount of security that they have, having both people under that same system is almost impossible to replicate.

And if we transition that now, that conversation into survivor benefits, the last thing we want to do right now on this episode is talk about survivor benefits again, but we have to.

Because survivor benefits for dual federal employees is one of those things Mike, where it's like, “Well, I have a pension and he or she has a pension. So, if we both have our pensions, we should both just take that and both decline survivor benefits.” What do you think about that logic?

Michael Mason: Well, I think let's go down that path. So, when I die, I'm married to Bobbi, Bobbi's a federal employee, and when I die, my pension's going to die with me, my Social Security check's going to die.

And what if I said, yeah, and TSP goes to zero the minute I die. Well, you'd be up in arms if TSP went to zero. So, you want Bobbi to get TSP, but you're okay with your two guaranteed income sources going away.

Social security is going to go away, whether it's my social security or hers, only one social security check comes in. So, I would say, you make a decision on one source of income, and Uncle Sam's already made the decision on the other.

John Mason: So, to be clear, you think that that's a bad decision.

Michael Mason: It's not a good decision.

John Mason: So, to be clear, so Mike Mason's opinion is, if you're dual federal employees, you should both have survivor benefits. Because what makes this unique is dual federal employees, especially if you're FERS, is you both have a first pension and you both have social security.

And assuming you married somebody that's in a similar status as you, you're making similar pay. I mean, it's not uncommon for us to see two GS-14 step 10s married to each other, which means their social security’s identical, their first pensions identical.

So, your example of both income streams going away is highly accurate compared to survivor social security for a non-federal employee spouse. So, I think that your statement was amazing. We said this on a previous episode, thrive not survive.

Why all of a sudden, just because we can, do we decline survivor benefits, so now our surviving spouses in survival mode instead of thriving mode, it just doesn't make sense to us.

And people ask us guys, and maybe Tommy and Ben, you can hop in here. Do I need to have it? Do I need to have survivor benefits? Do we both need to have it? I cannot stand the word need.

Tommy Blackburn: Oh, yeah. Because honestly, even though I know you may not need it, I want to respond, yes you need it because you've built a lifestyle and a psychology around these income streams that is pretty freeing.

You worked a career to get it and to then just let it go puff, that's going to affect that household. Even if they can survive on just what they had it's no way it doesn't affect them.

Now, the true 100% answer there is maybe you don't need it. Maybe you tell us what you're spending, what your needs are, and we can say, yeah, you can do it on one pension income and one social security income and your investments. But why is that what we're planning for when we can have such a better picture at a very reasonable cost?

Ben Raikes: I want to go back to something you said earlier John, when you mentioned the great benefits that these folks have, dual federal employees, great health benefits, they have great pensions. TSP is great as well.

Maybe you're someone who doesn't need to max out your TSP every year because you know ahead of time how valuable those pensions are going to be in your retirement.

It's something that we say here, I think we even have a podcast episode titled, they're not talking to you. If you're a dual federal employee and you're seeing a financial planner or a financial advisor and he's saying, “I really need you to max out that TSP each and every single year, that's the only way that you're going to make it in retirement.”

You need to look at that guy upside down and I would say leave that office immediately.

If they don't know that dual federal pensions are going to be worth millions of dollars to you in your retirement, then they clearly don't know anything about the retirement system that you are in. And you really need to see someone who gives this kind of advice professionally, who knows the benefits that you have.

Michael Mason: John will tell you I mean, we've had clients come to us that have visited other financial planners that the plaintiff says, “You can't retire. You're not putting enough in 401(k)/TSP,” because they didn't factor in exactly what Ben was just talking about.

They didn't factor in the FERS pension. They had no idea. They thought FERS meant federal employee with a thrift savings plan. They had no idea that there was a pension involved. So, that’s scary.

John Mason: Oh, by the way, that family, they're both retired now, and he just retired in February, and he couldn't be happier. And they couldn't be happier.

Tommy Blackburn: Probably living the retirement dream everybody wants to live too, they're not scrapping. They didn't need that extra million. They've got an awesome retirement.

Ben Raikes: And to keep going down that path, they've got to be thrilled that they're retired now because they know they can retire because they've talked to us.

But also think if they would've gotten in touch with us 10 years prior and we said, “You know what, instead of saving money into TSP aggressively, instead of saving into all these other accounts, why don't you take that vacation? Why don't you take your kids to Disney World? Why don't you do that thing that you've been dreaming of.”

If you're not considering all of these things, particularly looking at two federal employees, you're really doing a disservice to them.

Tommy Blackburn: It almost sounds like another episode we recorded called know the end in the beginning, where if you knew the end in the beginning, you probably would've lived life a little differently. Or if you'd talked to a qualified advisor, you could have made different decisions and enjoyed the ride a little more.

John Mason: Or even something just as simple guys as we can both retire at 57 and we both have health insurance easy peasy, and we don't have to think about it. We don't have to worry about waiting until Medicare.

I mean, the list goes on and on about how dual federal employees just win big time. And I wrote this down, which I think is always something important to remind our audience, and Mike, maybe you want to speak to this, need to.

Well, no, you probably don't need it, but just because you don't need it doesn't mean you shouldn't have it. And just because you don't need it doesn't mean it's not a good deal.

So, sometimes, you just go get it and you pay for it, and you buy it, and you smile because it was a great investment and it was a good use of your time and your money, whether you needed it or not.

There's a lot of things in our life that we have that we didn't need that we get great enjoyment out of. And survivor benefits provide you great enjoyment. Share with our audience why, if we both take survivor benefits, how do we get great enjoyment out of that?

Michael Mason: I've been itching to jump in and say this, so survivor benefits, dual federal employees or federal and military, how many times over the years have we heard if we both take it, it's going to be 10% for a husband to take survivor benefits, 10% for wife, are we really giving up 20% of our income?

And the answer is, well, no, you're not giving up 20%, you're giving up 10%. It's, if I have a 50,000 in retirement, John has a 50,000 retirement, and we turn those into $45,000 retirements, it costs us 10% of a hundred grand.

John Mason: It's not cumulative. It's just 10%.

Michael Mason: So, here's another point that I'm going to answer that question. One of our favorite statements, Tommy, is and you did the need, maybe you don't need to, but if you can't live and thrive on 90% of your combined pay, you reduced it by 10, then how is that surviving spouse going to thrive on 50%?

So, just an example, both FERS employees have a $50,000 retirement, both FERS employees have 40,000 of social security. It's a reasonable assumption. So, each retiree is going to have 90,000 of retirement together, that's a buck 80.

You turn down survivor benefits, Uncle Sam turned down social security for you, 180 goes to 90. Really, is that 10,000 after tax seven grand, is that really going to affect your retirement and your enjoyment more than a $90,000 cut and pay?

John Mason: The answer is no. And if you don't mind, I'd love to hear the answer to the question I asked you, which is when-

Michael Mason: I'm like a politician, I answer the questions I want to answer. So, here's how-

John Mason: I didn't think we're on like a debate stage where you just got to pick and choose.

Michael Mason: Everything goes so much smoother. Here's how. Once you have survivor benefits, you're not asking for TSP to be your life insurance. You're asking for TSP to be your fund money.

You’re not worried when the market in 2020 is down 20% because your pay just went up 7%. So, it just makes every — it takes a monkey off your back, I guarantee you, you retire.

This is what happened to me on an airline, our airplane, going to see my little brother get married the first time, that was a disaster. That's an entirely other story. But we're on this airplane and I just got a half a million dollars of life insurance approved, and the airplane drops like 500 feet in a second.

And after my wife and my sister spilled their drinks on me instead of themselves, the first thought was, “I'm sure glad I have that life insurance in place.” And there will be many of those thoughts through your retirement years when you have it in place.

John Mason: You're going to enjoy your retirement infinitely more. Everything will be more fun knowing that your surviving spouse is going to thrive in any possible situation rather than just survive. Maybe we just add one more interesting fact about SPP and like there's a pop-up feature.

Tommy Blackburn: Oh, yeah, it's awesome.

John Mason: So, again, we'll just say two people are married. You're both paying for survivor benefits and one of you dies day one in retirement. Well, the surviving spouse does not have to pay for survivor benefits anymore if the person they're protecting dies first.

So, for dual federal employees, one of you is going to die first and the other person's pension will get popped back up to the full amount, like they never took SVP to begin with.

Of course, there's no refunded premiums. That's okay, we're not going to miss those over your lifetime. But that's different than two people retiring from Huntington Ingalls, they make their decisions-

Tommy Blackburn: That’s a lifetime survivor benefit decision, you get no pop back up for it changed. That was the insurance decision made at that moment. So, I'm not aware of pop-up available anywhere outside of government pension plans.

John Mason: So, and if you were to compare that to two people retiring from a private sector pension Tommy, now all of a sudden, our team Mason & Associates looking at this family, maybe we don't encourage both people to take survivor benefits on their pension from Huntington Ingalls.

Maybe we're looking at a life insurance policy, or maybe we're looking at something different in that scenario because they don't have the popup. But it's really easy to recommend two survivor benefits when you know one person's getting stepped back up.

Tommy Blackburn: Brings us back to the point we've all made, which is working with an advisor who specializes in federal and knows it, because they could be working. Maybe it's somebody who specializes with just Huntington Ingalls, and they don't understand how the federal system differs from what they know.

So, work with somebody who knows your system or at least has the motivation to learn the system if they're going to work with you.

Michael Mason: From my end, I think I've hit everything I wanted to cover or anything else on dual?

Tommy Blackburn: Well, Mike, I think another interesting fact or scenario for us to maybe share with the audience there is how would it work if we have self plus one and we're going into retirement, we're in retirement right now. How could that situation? What are some interesting nuances there?

Michael Mason: It's frustrating because OPM doesn't tell you this. So, let's say your last child just left the house. You're both retired, you were family, or you were self plus one, however you got there. We know that self-self is cheaper.

So, you could spend all year in a self plus one environment thinking that at open season, you'll just fix this. Can't fix it at open season. And it's a three to five-month fix when you're retired because you just have to contact OPM and say, “I need to switch to self-self.”

And everyone we've had do that, it's taken multiple phone calls, three to six months, you get refunded the excess premiums. But just don't wait till an open season. As soon as you know you only need self-self and you both have earned the right to have the government subsidize your health insurance, you need to contact OPM and get it changed.

John Mason: I love it. Guys who knew, about 27 minutes in, we thought this was going to be on the shorter end, but another great episode on Federal Employee Financial Planning Podcast, dual federal employees, thank you to our audience. Thank you to the co-host.

Couple final thoughts here as we close this down. We'd love to hear from you, Mason FP at That’s Maso FP like financial planning, at .

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The topics discussed on this podcast represent our best understanding of federal benefits and are for informational and educational purposes only, and should not be construed as investment, financial planning, or other professional advice.

We encourage you to consult with the office of personnel management and one or more professional advisors before taking any action based on the information presented.