Posted on Jan 1, 2017

Does anyone know of any resources to advise active service members on the new retirement system?

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I thought because of my prior service I was automatically enrolled under the old system, but I got a letter recently saying otherwise. I think it may be a mistake, but it's hard to tell with all of the Reserve years and my break in service included. With some good investing I might be able to make more money under the new system.

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Posted 8 y ago

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CAPT Kevin B.

Edited 8 y ago

Posted 8 y ago

OK, there's a lot of presumptive whining out there on how screwed you'll be under the new system. However, if you are prepared to invest in yourself, the numbers can work out better. The before picture is 50% of base for 20 years. The after is 40% of base for 20 years. But that's not the whole story. The real number crunching is with TSP. You have to figure out where your TSP and any matching will put you when you punch out. Running some rough numbers, it hinges on how much you're willing to invest in yourself. You're looking to make up or do better than the 10% of your base delta pay when you hit retirement. For the most part, if you don't invest in yourself, the old way is probably better. However, consider drooling over the new where you can (should) take 5% of your pay which gets 100% profit each payday you put in, tax free. Then it grows larger continually as you build it up with a return based on how much risk you choose. It really is a great time to get with a reputable financial adviser and start crunching your opportunity numbers. The new system will be much like the CS FERS system. I had to go that route when I came in CS. It was a no brainer for me to buy 10 years of retirement credit for my active up to that point and I always went 10% with the first 5% matched.

When you talk to a financial advisor, you better recognize that you'll want more than either result, which means a career after your career. So if you have two decent retirements and the TSP, that's a good place to be. Let's put it this way. If you pay yourself forward, you'll wind up in my position. When you turn 60, you can have a monthly pay raise by simply quitting everything. Not a bad deal. Don't settle for the "pay off your loans and plan to live off 40%" dinosaur rhetoric of the past. You'll live longer and healthier and will want to cash to enjoy it. Results will vary. That's why you must crunch the numbers to see what gets you to your goal.

Oh, BTW you'll want the heck out of TSP when you hit 59 1/2. TSP has around 35 mix/match options and commercial sector has thousands. Same risk, more earning. I tracked my delta since 2013 and have been doing about 2-3% better than the TSP outputs with little to no risk.

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8 y

I'm been crunching the numbers this evening and I think you're right, I could come out better under the new plan. I'm planning on putting away at least 5% of my pay to a retirement account regardless. I'm also going into a career field (physical therapy) that projects 34% career growth in the next 10 years and also makes a decent salary. I think I might make enough from my future civilian job to throw the majority of my military retirement right back into the market as well until I get ready to retire for good way down the line. My wife is a dietitian so my diet is pretty good and with my background in exercise I should be in for a long life barring something crazy happening. I definitely don't want to worry about money too much in my golden years like my parents currently do.

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