Posted on Jul 20, 2015
The Pentagon is backing the new retirement plan, which is similar to a 401K. What are your thoughts on the projected plan?
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Pentagon is officially backing a "blended" system that would shrink the size of the current pension by about 20 percent yet supplement that benefit by offering government contributions to individual retirement investment accounts.
The Current Retirement plan does not require Soldiers to invest their own money in order to receive a guaranteed retirement at 20 years. Under the new program Service members will have to take a portion of their pay and invest it toward their retirement with government matching up to a certain percentage.
We currently have the TSP which is an investment opportunity for Soldiers to utilize as an addition to their retirement and can be a valuable investment tool for those not wishing to make a go at the 20 years required for the current 50% pay for the rest of your life retirement.
This will be very good for government finance reduction costs, but in this Soldier's opinion not good for the Service Members who risk their lives without hesitation for their country.
http://www.militarytimes.com/story/military/benefits/retirement/2015/06/10/dod-retirement-plan-details-approved/71011882/
The Current Retirement plan does not require Soldiers to invest their own money in order to receive a guaranteed retirement at 20 years. Under the new program Service members will have to take a portion of their pay and invest it toward their retirement with government matching up to a certain percentage.
We currently have the TSP which is an investment opportunity for Soldiers to utilize as an addition to their retirement and can be a valuable investment tool for those not wishing to make a go at the 20 years required for the current 50% pay for the rest of your life retirement.
This will be very good for government finance reduction costs, but in this Soldier's opinion not good for the Service Members who risk their lives without hesitation for their country.
http://www.militarytimes.com/story/military/benefits/retirement/2015/06/10/dod-retirement-plan-details-approved/71011882/
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Military Career
Retirement Military Career
Edited >1 y ago
Posted >1 y ago
Responses: 47
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20 years in the military is not comparable to any other career. Because of this fact, I think this type of retirement plan is not comparable nor is it representative of the sacrifices service members make. If this plan does get approved, I hope all existing service members will be given the option of the traditional retirement they were promised when the entered the military.
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CW3 (Join to see)
LCDR (Join to see) Thank you for the input, that sounds much more fair to our current force.
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CW3 (Join to see)
2ndLt (Join to see) I hope that is not the case, and there is something that can be done to reward the sacrifices so many service members make. I just don't think matching a 401k contribution does justice to the demands of serving.
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SFC (Join to see)
Kind of funny how the military always suffers and the politicians continue to stuff thier wallets with annual raises.
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CW3 (Join to see)
SFC (Join to see) - I can't believe that our pay and benefits are on the chopping block before so many other things. Blows my mind!
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Suspended Profile
This is actually old news, but it's a hugely horrid mistake.
We have troops up to E7 on food stamps. The Pentagon is CUTTING Active Duty pay and allowances as we speak. These folks can IN NO WAY afford to contribute to any 401K type plan until reaching Senior Enlisted or Field Grad Officer status.
It is another cynical approach to destroying readiness, by ensuring that the best and brightest leave, rather than serving full careers.
The policy of the Obama administration and the Pentagon of putting all of the pain of Sequestration on the military personnel budgets is completely wrong, cold hearted, short sighted and ignorant. There are many other ways to cut the budget besides punishing those at the "Tip of the Spear".
#NoIncumbentsIn2016
We have troops up to E7 on food stamps. The Pentagon is CUTTING Active Duty pay and allowances as we speak. These folks can IN NO WAY afford to contribute to any 401K type plan until reaching Senior Enlisted or Field Grad Officer status.
It is another cynical approach to destroying readiness, by ensuring that the best and brightest leave, rather than serving full careers.
The policy of the Obama administration and the Pentagon of putting all of the pain of Sequestration on the military personnel budgets is completely wrong, cold hearted, short sighted and ignorant. There are many other ways to cut the budget besides punishing those at the "Tip of the Spear".
#NoIncumbentsIn2016
CW5 (Join to see)
E7 on food stamps, really? https://www.dmdc.osd.mil/fssa/
This is our answer to people who decide to have large families and be in the military.
This is our answer to people who decide to have large families and be in the military.
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Suspended Profile
Chief Westbrook, I know there are many issues. Still, the fact remains that those in the military are nowhere near fairly compensated for the risks we/they face day to day and on deployment, and taking in to account the extreme hours we all work/worked...
Sgt Michael Schmidlkofer
If you have E-7s on food stamps, then I seriously question their financial decision making. The military is far from underpaid these days; and receiving untaxed housing and subsistence entitlements is not a good excuse to pump out a new kid after every deployment.
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Suspended Profile
Perhaps. Still, I maintain that the military compensation, especially for enlisted personnel, has never been equal to the private sector. And consider that for junior enlisted personnel in the Navy, ship's berthing is considered the fair value housing. When their married counterparts are living ashore, they have to live on ship...
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That's all fine as long congress don't get there 2 year equals 250k a year for life deal!
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First let me say that I am not in favor of any more social re-engineering programs on the backs of the military by people who have never served or long forgotten what it is like to be in the trenches. This retirement plan is simply for those 82% who decide not to make a career of the military, no one else just as Congress states. I do not believe DoD will go broke on the pension plan for the 18% who stay and make a career as people do roll off the pension when they stop breathing.
If we look at today's retired E-9 at 20-years and without any assumptions for future pay-raises, future TSP contribution limits, tax-free contributions that not every service member can contribute during their career, and this E-9 retires at age 40 and lives until age 85 the breakdown is interesting. So, just a 20-year contribution of $18,000 per 2015 TSP basic limits. If you could save the MAX TSP of $18,000 every year for 20-years it would grow to $360,000 and it would give you a lifetime benefit of $8,000 per year (assuming you live to age 85 and the fund did not grow). That same $360,000 might grow to $500,000 or $750,000 or even more and it would give you an annual lifetime benefit of $11,111 and $16,600 respectively.
Now for that E-9 who retires today at 20-years of service with their 50% retirement pay it would be $2865 per month for life (age 40 to 85) which would pay them over a life time of $1,547,100. Don’t forget, this same E-9 can contribute to TSP and add another $360,000 or more to their life time 50% pay.
That same E-9 at 40% retirement pay would receive $2292 per month which would pay them over a lifetime $1,237,680 plus their TSP of $360,000 or more plus the matching funds.
Now here’s the kicker as the results are interesting……How many people can afford to contribute the MAX OUT the TSP each year for 20-years ($18,000) and for that E-9 today who has an annual base pay of $68,670 before taxes it might be a bit easier than that E-3 today under 2-years who makes $21,876 before taxes. That’s where the disparity is, early in your career one is not able to max out their TSP contributions and quite possibly not until they meet the 10-year career mark which places them well behind the retirement TSP curve.
Thus in the long run, that 50% retiree who can also MAX contributes to their TSP (just like the 40% retiree) will be ahead by $310,000 in lifetime earnings before the TSP is even factored into their retirement pay (see above E-9 scenario).
So, a lot to simply say this TSP retirement plan is for those 82% who move on while the 20-year retiree takes the financial retirement hit, once again!! And that’s before we start a conversation about who sacrificed more, the 82% or the 18% who made a career.
If we look at today's retired E-9 at 20-years and without any assumptions for future pay-raises, future TSP contribution limits, tax-free contributions that not every service member can contribute during their career, and this E-9 retires at age 40 and lives until age 85 the breakdown is interesting. So, just a 20-year contribution of $18,000 per 2015 TSP basic limits. If you could save the MAX TSP of $18,000 every year for 20-years it would grow to $360,000 and it would give you a lifetime benefit of $8,000 per year (assuming you live to age 85 and the fund did not grow). That same $360,000 might grow to $500,000 or $750,000 or even more and it would give you an annual lifetime benefit of $11,111 and $16,600 respectively.
Now for that E-9 who retires today at 20-years of service with their 50% retirement pay it would be $2865 per month for life (age 40 to 85) which would pay them over a life time of $1,547,100. Don’t forget, this same E-9 can contribute to TSP and add another $360,000 or more to their life time 50% pay.
That same E-9 at 40% retirement pay would receive $2292 per month which would pay them over a lifetime $1,237,680 plus their TSP of $360,000 or more plus the matching funds.
Now here’s the kicker as the results are interesting……How many people can afford to contribute the MAX OUT the TSP each year for 20-years ($18,000) and for that E-9 today who has an annual base pay of $68,670 before taxes it might be a bit easier than that E-3 today under 2-years who makes $21,876 before taxes. That’s where the disparity is, early in your career one is not able to max out their TSP contributions and quite possibly not until they meet the 10-year career mark which places them well behind the retirement TSP curve.
Thus in the long run, that 50% retiree who can also MAX contributes to their TSP (just like the 40% retiree) will be ahead by $310,000 in lifetime earnings before the TSP is even factored into their retirement pay (see above E-9 scenario).
So, a lot to simply say this TSP retirement plan is for those 82% who move on while the 20-year retiree takes the financial retirement hit, once again!! And that’s before we start a conversation about who sacrificed more, the 82% or the 18% who made a career.
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MCPO (Join to see)
The military cannot be responsible for choices made by service members. An E3 with <2 years is provided quarters to reside and meals at the galley in addition to base pay. If they choose to live out in town or choose to get married or choose to have children that choice is on them and they must figure it out. They are adults and must be treated and held responsible like adults. When I was an E4 I chose to live off the ship. I had to pay out of pocket as only E5 and up got BAH. I was so broke sometimes I stayed on the ship through dinner for the free meal. My priority was to live out in town, others maybe a new car, others starting a family, for some saving as much as they can for the future.
To make a long story longer: if you can't survive on the pay and allowances you receive it is due to choices you made.
To make a long story longer: if you can't survive on the pay and allowances you receive it is due to choices you made.
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CDR Terry Boles
2nd LT Matthew Johnson, I hear your concern however in my paragraph two I simplified the argument of projected growth. The reality is you cannot predict growth and as such the discussion makes the point that junior service members cannot make a significant contribution to the TSP without truly making the maximum contribution by law. Anything less than the max contribution will amount to minimum TSP money when it's all said and done.
It is easy for economist to suggest growth potential based on the history of the stock market, but we are talking about which segment of the military population that does not retire, the junior service members. Those who leave after 4,8, and maybe 12 years of service who more than likely were not able to make any significant contributions to the TSP. That's the reality of life and I would suggest that if exit interviews were done now, it would bear me out they are leaving with few TSP dollars. Remember, they can contribute now, they have been able to for several years.
The real hit goes to the career service member who will retire under the new TSP Redux (I just coined this and should get it copy righted). These are the people who have the opportunity to make significant long term TSP contributions, but they may have lost those gains with the 10% retirement hit for the 82% who chose to walk. And dont forget to make REAL money you have to invest real money, meaning max contributions over the long haul.
Thank you for your comments.
It is easy for economist to suggest growth potential based on the history of the stock market, but we are talking about which segment of the military population that does not retire, the junior service members. Those who leave after 4,8, and maybe 12 years of service who more than likely were not able to make any significant contributions to the TSP. That's the reality of life and I would suggest that if exit interviews were done now, it would bear me out they are leaving with few TSP dollars. Remember, they can contribute now, they have been able to for several years.
The real hit goes to the career service member who will retire under the new TSP Redux (I just coined this and should get it copy righted). These are the people who have the opportunity to make significant long term TSP contributions, but they may have lost those gains with the 10% retirement hit for the 82% who chose to walk. And dont forget to make REAL money you have to invest real money, meaning max contributions over the long haul.
Thank you for your comments.
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CDR Terry Boles
Master Chief Phillip Rockwell, well said. Life gets in the way and only a very disciplined person will make those tough decisions when it comes to having this now or a healthy retirement later.
BTW I applaud your rank, it was a dream of mine to obtain MCPO when I was Navy enlisted. I made PO1 prior to my commission and actually went to the chiefs board right before my commission; asked my Seabee battalion commander to put in a weak package not to take anything away from a deserving PO1, he wasn't happy. My best friend retired as EQCM, we go back to our shipboard days before we both cross decked to the Seabees. Anyway, sorry for the digression on RP but any MCPO I come across makes my chest swell with pride.
BTW I applaud your rank, it was a dream of mine to obtain MCPO when I was Navy enlisted. I made PO1 prior to my commission and actually went to the chiefs board right before my commission; asked my Seabee battalion commander to put in a weak package not to take anything away from a deserving PO1, he wasn't happy. My best friend retired as EQCM, we go back to our shipboard days before we both cross decked to the Seabees. Anyway, sorry for the digression on RP but any MCPO I come across makes my chest swell with pride.
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I believe this is a horrible idea. Starting with the fact that we can't even educate our members enough to stop people from taking the REDUX, how will we give them a better look at the future outside of the military. Most lower level enlisted members will not be putting much, if anything into this retirement plan. They are young, full of life, and want to enjoy it.
Furthermore, given how Wall Street currently acts, this seems like a backhanded way to put more money into their hands from the government. The plans require people to maintain them and look for emerging opportunities, and we have seen how well this goes over. I know the TSP has been managed well over time, but this will increase the numbers big. That might lead to somebody trying to do something out of line with other people's money, mainly our SM's money.
Furthermore, given how Wall Street currently acts, this seems like a backhanded way to put more money into their hands from the government. The plans require people to maintain them and look for emerging opportunities, and we have seen how well this goes over. I know the TSP has been managed well over time, but this will increase the numbers big. That might lead to somebody trying to do something out of line with other people's money, mainly our SM's money.
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Suspended Profile
Retirement should stay the same. Please tell me what soldier can save money when you and your spouse PCS every 2 1/2 to 3 years and they keep losing their jobs each time. Starting over each time. You are crazy if you think this will work. People on the outside complain about our benefits let them do what we go through and see if they think anything should be cut.
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1SG (Join to see) All I can say is that I am glad I am retired now and yes I know that people in now are supposed to be grandfathered in for the 20 year plan. Congress seems to want to keep taking away from the 1% that actually defends the country.
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1SG (Join to see)
Thanks for your comments. I just wish that people would sit down an look at this more thoroughly. If they just could get through the glitter they would see how bad this really is for the Military.
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SGM Steve Wettstein
1SG (Join to see) most don't care because we are a small voice and easy pickings. IMO
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CDR Terry Boles
Very unfortunate we do not have a loud booming voice in congress. Every other interested party does when it comes to their benefits, look no further than the federal civil servants who also receive a pension and matching TSP funds. Their unions go to battle for their members.
When the TSP was introduced to the military I was shocked that the matching funds were not extended to us, what we are not good enough?
I would love to know just how much the federal civil service retirees cost this government vs the military, and the mean average of both. Could be eye opening and put a stake in this TSP Redux retirement plan.
Glad I fall under Final Pay for retirement, DIEMS of 1974, yeah I'm an old timer and heading to the barn soon, but the fight has not left me for my fellow service members.
When the TSP was introduced to the military I was shocked that the matching funds were not extended to us, what we are not good enough?
I would love to know just how much the federal civil service retirees cost this government vs the military, and the mean average of both. Could be eye opening and put a stake in this TSP Redux retirement plan.
Glad I fall under Final Pay for retirement, DIEMS of 1974, yeah I'm an old timer and heading to the barn soon, but the fight has not left me for my fellow service members.
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I decided to run some numbers so that I could have a more educated response:
To start with I took the Army's average times per pay grade (easiest to find and usually more round numbers) so this would be different by service. Next I took the pay scale and included time in service to calculate pay at each month in a 20 year career. I then took the amount contributed at 1% (zero service member contribution), 3%(1% and matching), 5%, 7%, 9%, and 11%(max matching). I compounded interest monthly at 1%, 2%, 3%, 4%, and 5%. Sure interest could be much higher but it could also be lower. The results are summarized below for the amount saved for a retired enlisted soldier who promoted at the average rate for the army as of 2015 and based on 2015 pay scales with no inflation. In parenthesis next to each amount is what that same amount would be 20 years later (age 60 if retiring at 40) with no more contributions after retirement and sustaining the same interest rate.
1% (Government automatic contribution)
1% interest - $8,616.42 ($10,523.24)
2% interest - $9,413.50 ($14,038.61)
3% interest - $10,315.94 ($18,782.80)
4% interest - $11,339.91 ($25,203.88)
5% interest - $12,504.27 ($33,919.59)
3% (1% individual contribution)
1% interest - $25,849.25 ($31,569.71)
2% interest - $28,240.49 ($42,115.84)
3% interest - $30,947.82 ($56,348.39)
4% interest - $34,019.73 ($75,611.64)
5% interest - $37,512.81 ($101,758.80)
5% (2% member contribution)
1% interest - $43,082.08 ($52,616.19)
2% interest - $47,067.49 ($70,193.07)
3% interest - $51,579.69 ($93,913.99)
4% interest - $56,699.55 ($126,019.40)
5% interest - $62,521.35 ($169,597.90)
7% (3% member contribution)
1% interest - $60,314.91 ($73,662.66)
2% interest - $65,894.49 ($98,270.30)
3% interest - $72,211.57 ($131,479.60)
4% interest - $79,379.37 ($176,427.20)
5% interest - $87,529.89 ($237,437.10)
9% (4% member contribution)
1% interest - $77,547.74 ($94,709.14)
2% interest - $84,721.48 ($126,347.50)
3% interest - $92,843.45 ($169,045.20)
4% interest - $102,059.20 ($226,834.90)
5% interest - $112,538.40 ($305,276.30)
11% (5% member contribution (max matched))
1% interest - $94,780.57 ($115,755.60)
2% interest - $103,548.50 ($154,424.80)
3% interest - $113,475.30 ($206,610.80)
4% interest - $124,739 ($277,242.70)
5% interest - $137,547 ($373,115.4)
These amounts may seem absurdly high at first (especially those after 20 more years of interest) but keep in mind that compounding interest does wondrous things and the earlier an investment is made the better. Forcing a 3% contribution until counseling is done would hopefully keep most members at or above the 7% margin.
For added comparison, the money lost per year for an E8 retiring at 20 years under the same scenario (40% down from 50%) would be $5,675.76 (this is giving him credit for all 3 years as an E8 as well, 1 year at the 16-18 pay rate and 2 at the 18-20) .
When you look at it that way it's really not bad. The plus side that isn't even considered is it forces our service members to save. We are a lot less likely to pay a penalty to take money out of TSP early than we are to NOT save some of our retirement check.
I personally 100% endorse this plan the way I understand it. I could be wrong but things look good to me.
To start with I took the Army's average times per pay grade (easiest to find and usually more round numbers) so this would be different by service. Next I took the pay scale and included time in service to calculate pay at each month in a 20 year career. I then took the amount contributed at 1% (zero service member contribution), 3%(1% and matching), 5%, 7%, 9%, and 11%(max matching). I compounded interest monthly at 1%, 2%, 3%, 4%, and 5%. Sure interest could be much higher but it could also be lower. The results are summarized below for the amount saved for a retired enlisted soldier who promoted at the average rate for the army as of 2015 and based on 2015 pay scales with no inflation. In parenthesis next to each amount is what that same amount would be 20 years later (age 60 if retiring at 40) with no more contributions after retirement and sustaining the same interest rate.
1% (Government automatic contribution)
1% interest - $8,616.42 ($10,523.24)
2% interest - $9,413.50 ($14,038.61)
3% interest - $10,315.94 ($18,782.80)
4% interest - $11,339.91 ($25,203.88)
5% interest - $12,504.27 ($33,919.59)
3% (1% individual contribution)
1% interest - $25,849.25 ($31,569.71)
2% interest - $28,240.49 ($42,115.84)
3% interest - $30,947.82 ($56,348.39)
4% interest - $34,019.73 ($75,611.64)
5% interest - $37,512.81 ($101,758.80)
5% (2% member contribution)
1% interest - $43,082.08 ($52,616.19)
2% interest - $47,067.49 ($70,193.07)
3% interest - $51,579.69 ($93,913.99)
4% interest - $56,699.55 ($126,019.40)
5% interest - $62,521.35 ($169,597.90)
7% (3% member contribution)
1% interest - $60,314.91 ($73,662.66)
2% interest - $65,894.49 ($98,270.30)
3% interest - $72,211.57 ($131,479.60)
4% interest - $79,379.37 ($176,427.20)
5% interest - $87,529.89 ($237,437.10)
9% (4% member contribution)
1% interest - $77,547.74 ($94,709.14)
2% interest - $84,721.48 ($126,347.50)
3% interest - $92,843.45 ($169,045.20)
4% interest - $102,059.20 ($226,834.90)
5% interest - $112,538.40 ($305,276.30)
11% (5% member contribution (max matched))
1% interest - $94,780.57 ($115,755.60)
2% interest - $103,548.50 ($154,424.80)
3% interest - $113,475.30 ($206,610.80)
4% interest - $124,739 ($277,242.70)
5% interest - $137,547 ($373,115.4)
These amounts may seem absurdly high at first (especially those after 20 more years of interest) but keep in mind that compounding interest does wondrous things and the earlier an investment is made the better. Forcing a 3% contribution until counseling is done would hopefully keep most members at or above the 7% margin.
For added comparison, the money lost per year for an E8 retiring at 20 years under the same scenario (40% down from 50%) would be $5,675.76 (this is giving him credit for all 3 years as an E8 as well, 1 year at the 16-18 pay rate and 2 at the 18-20) .
When you look at it that way it's really not bad. The plus side that isn't even considered is it forces our service members to save. We are a lot less likely to pay a penalty to take money out of TSP early than we are to NOT save some of our retirement check.
I personally 100% endorse this plan the way I understand it. I could be wrong but things look good to me.
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LCDR (Join to see)
I remember when I was E-1 - E-5 and could barely put food on the table with a wife and a kid. 1-3% may not seem like much unless you're struggling. Most enlisted families struggle.
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LCDR (Join to see)
LCDR (Join to see) I definitely understand what you're saying but I have to point out that 1-3% is base pay, which does a make a different. If invested in certain ways it's also tax deductible. I'm not saying it will be easy, but think about it this way: If you get a 2% raise in January, is that money you were planning on getting and already had budgeted? Not usually. If that 2% is then changed to immediately going into savings or TSP in this case, you won't notice it's gone. 1-3% is a very small amount when you're talking about how much it is now to spend, but it's a huge amount when you talk about what it could be doing for you over 20-40 years.
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LCDR (Join to see)
CDR Terry Boles I agree that the purpose of this was probably to save money and I can't blame the government for that. What I will say is the pentagon stepped up in their comments on it and said that they wouldn't approve of it unless it kept benefits the same overall for those who do retire.
I'm hoping our senior leaders aren't falling under the same political sways that could lead to what you're talking about.
But then again I've been told that hope isn't a sound strategy!
I'm hoping our senior leaders aren't falling under the same political sways that could lead to what you're talking about.
But then again I've been told that hope isn't a sound strategy!
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CDR Terry Boles
Amen, I hope someone also slows this roller coaster down and use some good ole fashion common sense.
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I came back into the military in 2007. I immediately started the TSP. I recently changed over to the ROTH. The good thing about this but I might be wrong is that for example, SM comes into the service and immediately started the investment programs. Let's say he or she is chaptered of the military on the 10th year of their career. With proper investing, they don't need to restart their path to retirement and the government can not take it away unless there is some crazy loop hole for the government to do so.
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LCDR (Join to see)
The government can't take your TSP when you get out. I'm sure if you do something bad enough that your assets would be seized otherwise, TSP would be included, but I hope we aren't trying to make things easier for those people!
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