5 Questions You Need to Ask Yourself Right Now
Federal employees need to be financially ready in case they’re affected by the coronavirus pandemic.
This week the National Institutes of Health announced that a phase three trial had begun to test a potential COVID-19 vaccine developed by biotechnology company Moderna Inc. and NIH. Moderna said it is on track to deliver as many as 1 billion doses annually starting in 2021. This potentially promising development is most welcome, because otherwise the COVID-19 news has been grim of late.
According to the CDC, more than 4.4 million Americans have tested positive for the coronavirus since the outbreak began. Since the onset of the pandemic, nearly 1 percent of federal employees have tested positive. Almost 19,000 civilian employees have contracted COVID-19, in addition to more than 20,000 military members. As of June 16, the Division of Federal Employees' Compensation had received 2,866 COVID-19 claims, including 48 death claims.
We can all hope that an end to the pandemic isn’t too far off. In the meantime, it’s a good idea to assess your readiness in the event you are impacted by COVID-19. Here are five questions every federal employee should be able to answer “yes” to. If your response to any of them is “no,” then you have some homework to do. I’ve included links to resources to help you do that.
Do you know how long you could continue to remain financially secure if you were diagnosed with a serious illness?
Federal employees accrue 104 hours of sick leave every year. Over 10 years, that adds up to six months of paid time off. Of course, you may have used some of that leave for your own illness or to care for a family member. How long would your current sick leave (and annual leave) balance last if you weren’t able to work for an extended period?
The handy Geico Leave Record is a good way to plot out how long your leave will last. (Don’t forget to include the leave you will earn while using your leave.) You can contact your human resources office to learn if your agency has a leave transfer program or a voluntary leave bank to assist you if your leave runs out.
How much do you have available in cash? Cash reserves can sustain you if you need to go on a period of leave without pay. The CARES Act passed in March has made federal employees’ Thrift Savings Plan funds more accessible through liberalized loan and withdrawal programs for those affected by COVID-19. Separated employees who are subject to required minimum distributions do not have to take them in 2020, and can return money already received this year by Aug. 31.
Do you know what your dependents would be entitled to if something happened to you?
Are your designation of beneficiary forms up to date?
- Designation of Beneficiary: Federal Employees Retirement System
- Designation of Beneficiary: Civil Service Retirement System
- Designation of Beneficiary: Thrift Savings Plan
- Designation of Beneficiary: Unpaid Compensation
- Designation of Beneficiary: Federal Employees Group Life Insurance
The Office of Personnel Management has information regarding death in service benefits for CSRS and FERS employees. Your spouse and your dependent children may be entitled to recurring survivor annuity benefits. Social Security provides benefits to your dependent children, your spouse aged 60 or older, or your spouse at any age if caring for your dependent children.
If your illness or death was work-related, then benefits are payable to your family through the Division of Federal Employee’s Compensation in the Labor Department’s Office of Worker’s Compensation. In order to claim compensation benefits related to COVID-19, the office says, federal employees “are required to have in-person and close proximity interactions with the public on a frequent basis—such as members of law enforcement, first responders, and front-line medical and public health personnel.”
Did you stay the course with your retirement savings despite the stock market volatility this year?
It’s been an unprecedented year for the market—to say the least. After one of the worst first quarters in history for U.S. stocks, the second quarter was one of the best in decades. At the end of March, the C Fund was down 19.65%, the S Fund was down 28.14%, and the I Fund was down 22.7%. If you had $500,000 invested on Dec. 31, 2019 in the TSP at 50% in the C Fund, 30% in the S Fund and 20% in the I Fund, your balance by March 31 would have fallen by $114,043 to $385,957.
If you then moved everything to the G Fund, by June 30, your balance would have grown to $388,740. But if you had left your investments alone, by June 30, your balance would have recovered all but $27,730 of its losses, and would be at $472,270.
Do you have an investment strategy for retirement?
To develop a good strategy for your retirement savings, it’s important to understand your ability to withstand volatility in the market and how you manage risk. This is generally determined by several factors, including your age, income, and how long you have until you retire. Generally, the younger you are, the more risk you can take on.
One way to easily manage your retirement savings is to let someone else do it for you. Some federal employees work with a qualified financial advisor. And many others simply let the TSP’s 10 lifecycle funds do the diversification and rebalancing for them.
Do you know the current value of your life insurance?
OPM has an online FEGLI calculator that makes it easy to figure the premiums for the various combinations of coverage. The calculator will also allow you to see how life insurance carried into retirement will change over time. You may want to look at your pay stub or the FEGLI code on a Notification of Personnel Action (SF 50) form to find out the actual amount of FEGLI coverage you currently have.
FEGLI also offers a living benefit that applies if you’re diagnosed as terminally ill with a life expectancy of nine months or less, and you have not assigned your insurance. The FEGLI Handbook has details about this and other important insurance information.
If you need additional life insurance and you are insurable, you may wish to consider a private term insurance policy with level payments that could be less expensive than FEGLI Option B. Option B provides insurance amounts valued in multiples of your basic salary rate, but the premiums increase every five years as you get older. Be sure to consider the fact that FEGLI will pay your beneficiary regardless of the cause of your death—unless your beneficiary intentionally caused your death.
It’s generally a good idea to maintain Basic FEGLI coverage while you’re a federal employee because you receive a government contribution to the premium and the insurance amount increases with every salary increase during your career.