Posted on Sep 7, 2016
At what point does the new Blended Retirement System become advantageous for current service members to opt into it?
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Retirement
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The new system is very similar to the civil service version. The answer to your question is it all depends. The main thing is how long the SM has been in. If they are very early in their career, it is advantageous because more money gets dumped into the TSP portion. If you are on the back end of your career, it probably isn't advantageous as there wont be as much. This is not to say that the TSP is the best option out there. There are better investments for sure, but the TSP is a pretty low maintenance thing for the most part. Sure, you can make more if you manage investments responsibly and closely, but TSP in a way is designed to be fire and forget.
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LTC Stephen B.
TSP generally has the lowest fees you will find. Return rates vary by investment type, but the automatic match needs to be figured in when you run the numbers on your own situation.
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If you stay in for 20 the answer is NEVER. This is only beneficial for Soldiers who will do the minimum. Basically, enlisted who want to learn a trade or earn money for college and for the officer who wants to pay back school loans. Anyone who wants to do a full 20 is screwed under the new system. But I seriously hope this doesn't turn into a "If you like your doctor, you can keep your doctor." I like my "high-3" and want to keep it. Honestly, "high-3" was a main reason to stay in. I can get out and get a job making three times what I make now but I would miss out on a lifetime of retirement. The new generation will enlist at 18, work until 38 (20 years) then go work somewhere until they are 58 (another 20) and wait another seven years until 65 to get the benefits. What a scam.
Regarding the TSP. It has an average ROI of about 8-10%. I invest thru Edward Jones and over the last 14 years my ROI is sitting at 28%. Always a better option than letting the government tell you where to invest.
Regarding the TSP. It has an average ROI of about 8-10%. I invest thru Edward Jones and over the last 14 years my ROI is sitting at 28%. Always a better option than letting the government tell you where to invest.
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LTC Stephen B.
SFC (Join to see) - Absolutely. Same as with your investments outside TSP. There are ways to do better on the return, and ways to do worse. TSP has some of the lowest management fees around, and when you figure in the 5% match, you will be comparable over time to a much higher return from an outside investment. That's why I wouldn't say "never" - it is up to the individual to determine what's in their best interest, and to take some responsibility.
From what I see, the Department is working to do the right thing - providing an opt-in course for SMs, info course for first-line leaders and even specific training for private-sector personal financial planners/managers to be able to accurately predict outcomes based on individual circumstances.
Yes, you are correct that the TSP is not available immediately at retirement, I believe the actual age is 59 1/2, not 65, but would need to verify that again.
From what I see, the Department is working to do the right thing - providing an opt-in course for SMs, info course for first-line leaders and even specific training for private-sector personal financial planners/managers to be able to accurately predict outcomes based on individual circumstances.
Yes, you are correct that the TSP is not available immediately at retirement, I believe the actual age is 59 1/2, not 65, but would need to verify that again.
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Sgt Aaron Kennedy, MS
LTC Stephen B. - The major issue however is $0 for old system @2.5% or HEAVY investment to beat that. It shifts the burden off the government and back onto the servicemember. The amount of investment the servicemember has to do, to get a "compounded interest" return equal to 20-30 current retirement just doesn't work out.
When you shift this to an apples to apples comparison, it's not advantageous to the servicemember (choosing to stay in). It is advantageous to those choosing to get out (by a long stretch). That's from a comparative analysis removing as many variables as possible AND looking at it from the servicemember side.
If both options were available with a singular choice between them, I could not in good faith recommend the new system to GROUPS. To individuals, sure.. present t as an option, but the old system is going to end up better.
When you shift this to an apples to apples comparison, it's not advantageous to the servicemember (choosing to stay in). It is advantageous to those choosing to get out (by a long stretch). That's from a comparative analysis removing as many variables as possible AND looking at it from the servicemember side.
If both options were available with a singular choice between them, I could not in good faith recommend the new system to GROUPS. To individuals, sure.. present t as an option, but the old system is going to end up better.
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LTC Stephen B.
Correct, I would neither recommend for or against based on groups. Every situation is different and it will be an individual choice whether or not to opt-in for those eligible and how much to participate in TSP for those in the new system.
I would wager that a good number of the Air Force members RIF'd at 10-12 years of service in the last cycle would have loved to have had a retirement fund to take with them rather than a one-time separation pay that may have pushed them up a tax bracket, giving 1/4 to 1/3 right back to the government. Many of them were planning on making 20 and were left out in the cold. Just saying, you never know what the future may hold, your plans may change, the government's plans may as well.
I'm not advocating either way, just trying to impress on all involved to check YOUR situation rather than rely on what someone else is doing or not doing. The discussion ultimately is a healthy one.
I would wager that a good number of the Air Force members RIF'd at 10-12 years of service in the last cycle would have loved to have had a retirement fund to take with them rather than a one-time separation pay that may have pushed them up a tax bracket, giving 1/4 to 1/3 right back to the government. Many of them were planning on making 20 and were left out in the cold. Just saying, you never know what the future may hold, your plans may change, the government's plans may as well.
I'm not advocating either way, just trying to impress on all involved to check YOUR situation rather than rely on what someone else is doing or not doing. The discussion ultimately is a healthy one.
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It will vary depending on your personal situation. It will also vary depending on whether you are active duty (AC/AGR) or regular/traditional/M-Day reserve/Guard member. You will need to make your own assumptions regarding future returns and interest rates, along with your personal life expectancy.
For new enlistees, if you set aside enough to get the full match in a very basic/conservative TSP mutual fund, you will CRUSH the current 2.5% retirement. The key is being disciplined enough to start early and stay in TSP.
That being said, the further along you are in your career, the less time/opportunity you will have for TSP to make up for the lower multiplier. There is a "continuation pay" (CP) that will most likely be offered to everybody at or about the 12 year mark but again, you would have to be disciplined enough to invest it rather than spend it. Details are out on the timing and amount for CP, so DON'T LET ANYONE tell you they've "done the math" because not all the calculations are possible.
Same with taking a partial lump-sum retirement payment - the discount rates have not been set, nor has the impact to disability pay (could be a game changer). If you stay in the old system, lump-sum is off the table.
DoD will be putting out a calculator late December or early January, once the final policy details are approved. You will then be able see if it makes sense for you.
Currently there is a leader briefing for NCOs/Officers to get up to speed and be able to provide basic info to their troops. It is on JKO, course number J3OP-US1330.
Edit
For new enlistees, if you set aside enough to get the full match in a very basic/conservative TSP mutual fund, you will CRUSH the current 2.5% retirement. The key is being disciplined enough to start early and stay in TSP.
That being said, the further along you are in your career, the less time/opportunity you will have for TSP to make up for the lower multiplier. There is a "continuation pay" (CP) that will most likely be offered to everybody at or about the 12 year mark but again, you would have to be disciplined enough to invest it rather than spend it. Details are out on the timing and amount for CP, so DON'T LET ANYONE tell you they've "done the math" because not all the calculations are possible.
Same with taking a partial lump-sum retirement payment - the discount rates have not been set, nor has the impact to disability pay (could be a game changer). If you stay in the old system, lump-sum is off the table.
DoD will be putting out a calculator late December or early January, once the final policy details are approved. You will then be able see if it makes sense for you.
Currently there is a leader briefing for NCOs/Officers to get up to speed and be able to provide basic info to their troops. It is on JKO, course number J3OP-US1330.
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Maj (Join to see)
Sir, I have done the math for myself, and in my personal circumstances, there is virtually no way that the contributions could balance out the lost retirement pay unless I died before collecting 5 years of retirement pay. I'm not saying that it's not beneficial for others, just not myself.
The DoD has published the basic facts on the BRS. They are available at:
http://militarypay.defense.gov/Portals/107/Documents/BlendedRetirementDocuments/BlendedRetirementSystemInfographic_12.9.15_FINAL3_508.pdf
The DoD has published the basic facts on the BRS. They are available at:
http://militarypay.defense.gov/Portals/107/Documents/BlendedRetirementDocuments/BlendedRetirementSystemInfographic_12.9.15_FINAL3_508.pdf
BlendedRetirementSystemInfographic_12.9.15_FINAL3_508.pdf
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Sgt Aaron Kennedy, MS
"There is a "continuation pay" (CP) that will most likely be offered to everybody at or about the 12 year mark but again, you would have to be disciplined enough to invest it rather than spend it." This is the key piece here. You call it Continuation Pay, but for most enlisted this REPLACES the standard "Reenlistment Bonus" and likely will NOT go into the TSP. "If" (huge if) it were put in TSP, it has the potential of working to the troops advantage, but without it, there is no possible way. The math doesn't jive without these large payments adding in.
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