The Pentagon is backing the new retirement plan, which is similar to a 401K. What are your thoughts on the projected plan?

As an ad hoc financial planner I'm not so sure this is a good deal as I see the equity market getting stressed down the road. As a majority of the 76 million baby boomers have grossly under funded their retirement plans and the ever growing unfunded liabilities it might not be wise to lock up you investments into a vehicle that imposes a 10% penalty plus taxes on money until your 59.5 years of age. Publicly traded companies are legally required to account for “explicit” and “implicit” future obligations such as employee pensions and retirement benefits. However the federal budget, which is the “federal government’s primary financial planning and control tool,” is not bound by this rule. In fact if the federal government were to actually balance the books we are indeed a bit more in the red than the stated 17.3 trillion that we had to borrowed - its really 75.94 trillion ($6.5 trillion for federal employee retirement and veterans’ benefits, $18.5 trillion short in the Social Security program, $33.5 trillion in projected shortfalls in the Medicare program, $140 billion in projected shortfalls in other “social insurance” programs, and then the 17.3 trillion that was due). What does this all have to do with the Thrift Saving Plan? Many of the baby boomers are going to need to "cash in" their investments - 401ks, stock and bonds to cover their shortages. We are talking a lot of people - 10,000 a day until around 2030. On top of this as I stated earlier the under funded problem will manifest its self in a decrease in benefits. One example is social security. In 2024 social security is only 75% funded - this will results in a 25% drop in benefits paid. This means baby boomers will not only need to sell their investments they will more than likely also need to keep working into their 80's and or adjust their standard of living. This trading in of stocks and bonds will decrease their value - no demand equals low price. So imagine an individual squirrelling away their money into a 401k plan that they can't pull out of without losing 10% plus taxes and the stock market starts to take a nose dive due to all the selling of stocks. While this is only a part of the aggregate (mutual funds, bonds and money market accounts) of the 401k it still matters as you will need to lose a good chunk in value of the 401k before it makes sense to take the hit and seek better performing investments. However this makes complete sense to the federal government as it helps to reduce the unfunded entitlements as well helps push money into the stock market - however the outflow is a torrent and the inflow will be a trickle. If your retiring in 15 years the TSP might backfire on you - investments that can be transferred into other markets with little cost might be a better approach. Also with 73 million people leaving the work force the economy will contract and our GDP will drop - making it harder to borrow to cover our debt. When the federal government starts to welch on its obligations our credit rating will also be affected. Not to be a downer just that one needs to have a balanced portfolio. Putting all your eggs in the TSP basket is not a good investment strategy regardless of the potential risk of the equity market.

1SG (Join to see)
The first question I would like to ask of the Pentagon (who will most likely retire from the military once their Pentagon tour is up) and all members of Congress who are currently receiving a military pension is: "Are you willing to put your money where your mouth is? I'm sure a person of your experience and contacts has made some very good investments over the years and your stock portfolio, 401(k) and IRA's are doing very well. So are you willing to give up your military pensions and TRICARE benefits to set the example?"

Surely there will be investment training-NOT!

There's the plus. Members that spend 4 years in will still have a retirement plan from the 401K. If you leave before 20, there's nothing for your service. The negative is that for people who retire, they are guaranteed less money. 20 years in the military is equivalent to 30+ years elsewhere

Not a chance. If they are suggesting it, it means it will save them money in the long run. Many are not able to save as is, especially since we are funds low and benefit rich. I would rather keep my 50% when I retire, you know, what was promised to me for 20 years of service. We are expected to have integrity and keep out word, it's time they do the same.

Unless the payroll increases greatly there should NOT be any plan that forces the military person to contribute. It simply would not be affordable. Doing the TSP by choice is good and shoujld be encouraged but not forced.

Good for people who do less than 20, bad for those who do 20...the only way it works is if you max all the contributions the whole time. I feel like there's more bad than good.

This change saves the government money in the long run by reducing the lifetime payments of those who do make it to 20 years service while also offering a safety net to those who don't make it to that cliff for whatever reason. This is a great plan that forces SM's to take charge of their own retirement in the way that civilians do and allows some to walk away with more than a DD-214 when their careers are cut short.

You are exactly right soldier, some are wanting active duty members to take all the risk for their own retirement, you could end up with nothing! If current active duty don't voice fowl on this program they are sadly mistaken. For the pentagon to even seriously consider this new program is a slap in the face to their people! It's going to seriously degrade recruitment as well even when recruiters sugar coat it and only tell you the maximum it could benefit and not the minimum.

I think it would be great to have a plan that a service member put into and is matched based on task so if deployed in combat you perhaps receive 3x or if deployed in support you receive 2x etc. if you take an overseas assignment you receive 1.25 times. This type of flexibility could all w someone to walk away after 4 deployments over 10 years with a significant savings. The current plan does nothing for one or two hitch folks and I believe would give more flexibility for manpower adjustments when needed. Can you imagine receiving a letter requesting you to return to active duty and you would receive 3x matching and if deployed would receive 4x matching? I'm not sure the all in at 20 years is the right way to go in the future