Posted on Feb 3, 2016
What do you think of the improved DoD TSP matching program?
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Retirement
Military Pay
TSP
Posted >1 y ago
Responses: 19
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The only good thing about it is if you leave before 20 years are up, you can take it with you. In my experience, if someone has a new way of doing something that wasn't broken, it only benefits them.
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Don't do it! Keep with the old system if you can. Ask a finance professional, in the long term the new system only benefits the gov't and those that don't stay for 20yrs.
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Yeah, only improved if you're sure, and I mean certain, you won't stay 20. I was committed to leave at the 7 year point, and then again at 12 years. And then I stayed for 26. SOOO happy to have the 20 year retirement instead of this new system.
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Col Joseph Lenertz
Agree, and I think it will harm retention, especially of those in hot career fields.
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I never liked TSP as a retirement instrument. Without a match (since changed by recent legislation), it was basically a tax-deferred IRA. And one that underperformed the market in several of the fund choices.
The best thing about it was that it has a very low expense ratio. This is real good for the investor who uses the Index (I Fund) or Government (G Fund) in particular. Similar commercial investments will underperform those two over time.
The match is a game-changer, though. A guaranteed initial return of 100% thanks to the matching funds make this a good choice for most Soldiers.
The best thing about it was that it has a very low expense ratio. This is real good for the investor who uses the Index (I Fund) or Government (G Fund) in particular. Similar commercial investments will underperform those two over time.
The match is a game-changer, though. A guaranteed initial return of 100% thanks to the matching funds make this a good choice for most Soldiers.
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CW5 (Join to see)
It wouldn't have been feasible for us to have a free pension (deferred payment) for life plus matching TSP. Yes, TSP was a poor vehicle to start with but at least it got people saving some money. Sort of like the savings bonds that were pushed during my basic training.
With the new system you can only come out ahead if you contribute the max from day one and stay as long as you can. It would be nice if there was a max amount for everyone and not based upon your basic rate. That allows those who have other means of income to invest more into their future and take advantage of the matching.
With the new system you can only come out ahead if you contribute the max from day one and stay as long as you can. It would be nice if there was a max amount for everyone and not based upon your basic rate. That allows those who have other means of income to invest more into their future and take advantage of the matching.
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I think it's great that people who don't serve 20 years will have some form of retirement savings to show for it. It finally brings the military into the 21st century.
One of the best benefits I see is improved overall quality retention and morale. At first, it appears that retention would go down as people "don't have to stick around for 20 years." However, do we really want people serving in leadership positions in the military if the main reason they are there is to "wait it out till 20"? No, if somebody is no longer motivated to just serve, let them exit and let them take their partial retirement pay. This will improve overall morale for two reasons: 1) People who don't really want to be there will get out and 2) Those serving under them will see an improvement. It will also create more advancement opportunities for those are actually want to continue to serve because they just want to lead in the military... and that's exactly who we should be retaining.
There is no reason to "lock in" leaders by dangling retirement in front of them. The military should promote leaders who desire to serve first and foremost, not those "sticking around" for retirement. This will have great long term benefit for morale and for the institution as a whole.
One of the best benefits I see is improved overall quality retention and morale. At first, it appears that retention would go down as people "don't have to stick around for 20 years." However, do we really want people serving in leadership positions in the military if the main reason they are there is to "wait it out till 20"? No, if somebody is no longer motivated to just serve, let them exit and let them take their partial retirement pay. This will improve overall morale for two reasons: 1) People who don't really want to be there will get out and 2) Those serving under them will see an improvement. It will also create more advancement opportunities for those are actually want to continue to serve because they just want to lead in the military... and that's exactly who we should be retaining.
There is no reason to "lock in" leaders by dangling retirement in front of them. The military should promote leaders who desire to serve first and foremost, not those "sticking around" for retirement. This will have great long term benefit for morale and for the institution as a whole.
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LTC (Join to see)
It also provides a benefit for servicemembers who are RIFd or 'fail to promote', which was badly needed. Overall the old system is much better. This is just a way for congress to squeeze more cash out of the 1% of the nation who serves.
It's about saving money without losing votes. We are 1% so they really don't view us a organized constituency base they have to worry about. In many ways they are right. Most soldiers blindly vote republican... In fact most people blindly vote for the party that they think represents them. Unfortunately the the parties really only represent their own selfish interests. Their propeganda has nothing to do with reality. The old retirement system was much better
It's about saving money without losing votes. We are 1% so they really don't view us a organized constituency base they have to worry about. In many ways they are right. Most soldiers blindly vote republican... In fact most people blindly vote for the party that they think represents them. Unfortunately the the parties really only represent their own selfish interests. Their propeganda has nothing to do with reality. The old retirement system was much better
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Suspended Profile
It's nice to see people finally have an option rather than "sticking" it our to the end.
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Just my thoughts. I'm still AD and have Final Pay as my retirement type. EVERY new retirement plan that comes along has not been in favor of the retiree. When the High-3 came out, in order to benefit from it one had to stay in for at least 3-years to qualify for their Final Pay equivalent. The they modified with High-3 Redux, well that didn't go over very well so they relaxed that back to High-3...hopefully few were sucked into the Redux portion.
Now with TSP its a new gamble on one's retirement with the ever fluctuating stock market and TSP Plans that seem to me to under perform.
TSP has been a part of our retirement for a few years now, just not a matching portion unlike the federal civil servants. The federal civil servants did not give up any of their retirement options when matching TSP was introduced to them. I would venture to say, the federal civil service workforce still working and retired is massively larger than the military; as an example HHS has a larger budget and workforce than DoD (military members).
As mentioned TSP has been an investment option for the military for some time now. I find it hard to believe that every member can contribute the max amount each month allowed by law, any under funding would lead to less growth potential. Most young troops and officers simply can not afford to contribute the max amount each month, I use my own experiences and close friends TSP investment discussions.
Those members who decide NOT to make the military a career had the TSP before and the TSP now, only difference is the POTENTIAL for matching funds based on their dollar amount contribution. The matching funds most likely will not be a real incentive for this 82% unless they stay longer than possibly 10-years...then why get out when your half way to retirement.
All this to say, it was never intended to benefit any one group since TSP was already in place. This is simply a measure to reduce the retirement pay for DoD since a matching TSP was introduced and the traditional pension portion was reduced and put the retiree in a place where they are now gambling a portion of their retirement in the stock market.
So, in all complete fairness, why didn't the federal civil servants across all federal departments also take a pension hit when they received matching TSP? You gotta ask yourselves about "fairness" which is mantra for this administration.
I think its just another poke in the eye from a civilian minded administration that does not and will not ever understand the sacrifices a member and family makes over a 20-year hard earned retirement. They can never understand the sacrifices you make, the fears your loved ones have every time you deploy, the stresses the children live under, the frequent moves, lack of setting down and paying off a house mortgage...and much more.
Simply, future retirees got the shaft!
Now with TSP its a new gamble on one's retirement with the ever fluctuating stock market and TSP Plans that seem to me to under perform.
TSP has been a part of our retirement for a few years now, just not a matching portion unlike the federal civil servants. The federal civil servants did not give up any of their retirement options when matching TSP was introduced to them. I would venture to say, the federal civil service workforce still working and retired is massively larger than the military; as an example HHS has a larger budget and workforce than DoD (military members).
As mentioned TSP has been an investment option for the military for some time now. I find it hard to believe that every member can contribute the max amount each month allowed by law, any under funding would lead to less growth potential. Most young troops and officers simply can not afford to contribute the max amount each month, I use my own experiences and close friends TSP investment discussions.
Those members who decide NOT to make the military a career had the TSP before and the TSP now, only difference is the POTENTIAL for matching funds based on their dollar amount contribution. The matching funds most likely will not be a real incentive for this 82% unless they stay longer than possibly 10-years...then why get out when your half way to retirement.
All this to say, it was never intended to benefit any one group since TSP was already in place. This is simply a measure to reduce the retirement pay for DoD since a matching TSP was introduced and the traditional pension portion was reduced and put the retiree in a place where they are now gambling a portion of their retirement in the stock market.
So, in all complete fairness, why didn't the federal civil servants across all federal departments also take a pension hit when they received matching TSP? You gotta ask yourselves about "fairness" which is mantra for this administration.
I think its just another poke in the eye from a civilian minded administration that does not and will not ever understand the sacrifices a member and family makes over a 20-year hard earned retirement. They can never understand the sacrifices you make, the fears your loved ones have every time you deploy, the stresses the children live under, the frequent moves, lack of setting down and paying off a house mortgage...and much more.
Simply, future retirees got the shaft!
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MAJ Daniel Buchholz
Sir,
"The federal civil servants did not give up any of their retirement options when matching TSP was introduced to them." Not true. When TSP came about it the part of a package that included matching that was paired with mandatory enrollment into the FERS system, which pared fixed benefits down significantly (either 1% (age 62) or 1.1% per year of service times your average of your High 3 years of salary) vs CSRS for those under the old system (which after 10 years (there was a 1.5 for the first 5, a 1.75 for the second 5 year) gave you 2% times you high-3 salary).
Newer federal employees pay even more of their own salary to fund that FERS fixed retirement (I am lucky and am under the old system, which means I pay .8% of my paycheck. New Feds are pay 4%).
"The federal civil servants did not give up any of their retirement options when matching TSP was introduced to them." Not true. When TSP came about it the part of a package that included matching that was paired with mandatory enrollment into the FERS system, which pared fixed benefits down significantly (either 1% (age 62) or 1.1% per year of service times your average of your High 3 years of salary) vs CSRS for those under the old system (which after 10 years (there was a 1.5 for the first 5, a 1.75 for the second 5 year) gave you 2% times you high-3 salary).
Newer federal employees pay even more of their own salary to fund that FERS fixed retirement (I am lucky and am under the old system, which means I pay .8% of my paycheck. New Feds are pay 4%).
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CDR Terry Boles
CPT Daniel Buchholz
Thank you for your comment, your statement is correct as well as I think mine is too. The federal civil servant didn’t give up any additional retirement options when matching TSP was introduced with the FERS Act of 1986, there was not an introduction to TSP and then later let’s now do a matching TSP and reduce your retirement benefits more. I understand the difference between CSRS and FERs as I too was a CSRS FAA employee as an air traffic controller early 1980s. I suppose we could split hairs about retirement types and benefits, but since 1986 there has not been any additional retirement sacrifices made by the federal civil service. I defer to your Sir.
The point I was trying to make is that the military continues to give more and more with every changing retirement plan that is supposed to be better “fairer” than the one before, and now we are on our 4th while the federal civil service is still on their 2nd. Each retirement plan change does not benefit the military member and the excuse this helps those 82% who walk away from making a career by giving them something, well that something already existed, TSP.
My second point I was trying to make is the DoD budget is not the largest federal departmental budget or employee census when compared to the totality of the federal government or the single largest department employer, HHS. Under this administration the federal workforce has been larger than the succeeding administration, which means payrolls have been higher…where are the calls to correct that for the other federal departments? For what its worth: “The number of federal employees has risen under President Obama. There were 2,790,000 federal workers in January 2009 when the president took office, and now there are 2,804,000 workers. The fact is that there is no month during President Obama’s term when the federal workforce was smaller than it was in the first month of Mr. Obama’s presidency. The president took over in January 2009. Every month after January 2009 has seen more federal workers than were employed in January 2009. Moreover, there are more federal workers under President Obama than there were under President Bush.” https://www.aei.org/publication/has-government-employment-really-increased-under-obama/
Ultimately I believe this administration simply does not appreciate the military member, their sacrifices and their family’s sacrifices, and have tried to align the military retirement plan to the federal civil service retirement plan without regards to the stark differences in careers. Don’t forget the recent conversations about delayed retirement, extending number of years eligible for retirement etc. and had it not been for a huge outcry from veterans organizations and others who knows where it might have taken us. I think all those that have worn the uniform know the stark differences in a civilian career and a military career, and those who stick around for 20…well it’s a ride of mixed emotions but one of great relief come retirement time as we feel such a relief that we survived and life begins anew.
To say that the TSP retirement plan is better than existing retirement plans is pure bunk and future retirees will not realize their retirement potential unless they maximize their TSP contributions and the stock market is kind to them. Gotta keep the politicians out of the DoD business when members have no voice, and simply say "Aye Aye Sir" and implement grudgingly.
Thank you for your comment, your statement is correct as well as I think mine is too. The federal civil servant didn’t give up any additional retirement options when matching TSP was introduced with the FERS Act of 1986, there was not an introduction to TSP and then later let’s now do a matching TSP and reduce your retirement benefits more. I understand the difference between CSRS and FERs as I too was a CSRS FAA employee as an air traffic controller early 1980s. I suppose we could split hairs about retirement types and benefits, but since 1986 there has not been any additional retirement sacrifices made by the federal civil service. I defer to your Sir.
The point I was trying to make is that the military continues to give more and more with every changing retirement plan that is supposed to be better “fairer” than the one before, and now we are on our 4th while the federal civil service is still on their 2nd. Each retirement plan change does not benefit the military member and the excuse this helps those 82% who walk away from making a career by giving them something, well that something already existed, TSP.
My second point I was trying to make is the DoD budget is not the largest federal departmental budget or employee census when compared to the totality of the federal government or the single largest department employer, HHS. Under this administration the federal workforce has been larger than the succeeding administration, which means payrolls have been higher…where are the calls to correct that for the other federal departments? For what its worth: “The number of federal employees has risen under President Obama. There were 2,790,000 federal workers in January 2009 when the president took office, and now there are 2,804,000 workers. The fact is that there is no month during President Obama’s term when the federal workforce was smaller than it was in the first month of Mr. Obama’s presidency. The president took over in January 2009. Every month after January 2009 has seen more federal workers than were employed in January 2009. Moreover, there are more federal workers under President Obama than there were under President Bush.” https://www.aei.org/publication/has-government-employment-really-increased-under-obama/
Ultimately I believe this administration simply does not appreciate the military member, their sacrifices and their family’s sacrifices, and have tried to align the military retirement plan to the federal civil service retirement plan without regards to the stark differences in careers. Don’t forget the recent conversations about delayed retirement, extending number of years eligible for retirement etc. and had it not been for a huge outcry from veterans organizations and others who knows where it might have taken us. I think all those that have worn the uniform know the stark differences in a civilian career and a military career, and those who stick around for 20…well it’s a ride of mixed emotions but one of great relief come retirement time as we feel such a relief that we survived and life begins anew.
To say that the TSP retirement plan is better than existing retirement plans is pure bunk and future retirees will not realize their retirement potential unless they maximize their TSP contributions and the stock market is kind to them. Gotta keep the politicians out of the DoD business when members have no voice, and simply say "Aye Aye Sir" and implement grudgingly.
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MAJ Daniel Buchholz
Sir,
There has been one rather substantive change that occurred in 2013. As a longer term federal employee I pay .8% to get the retirement benefit under FERS, new employees are paying 4.4%, 5.5 times my rate. Just like the above change for military, this didn't affect any current employee, but future employees are now paying substantively more out of their paycheck for the same benefit that I pay less than 20% for.
http://www.fedsmith.com/2014/04/07/fers-fers-rae-fers-frae-what-does-all-this-mean/
And respectfully, politicians have every right to be in DoD business, that is their job as the leaders of the government. Service members do have a voice, the same one that every citizen of the U.S. has, voting to select those leaders (that is not even factoring in various lobbying groups like MOAA, AUSA, and others). There are more than a few of those politicians who are also veterans (The most recent data from the 2010 Census shows that only seven percent of Americans have served in the military, while veterans make up 20 percent of the current Congress). This is a fundamental part of a vibrant democracy, that the military remains tightly integrated with society and is actively managed/controlled by the civilian government.
There has been one rather substantive change that occurred in 2013. As a longer term federal employee I pay .8% to get the retirement benefit under FERS, new employees are paying 4.4%, 5.5 times my rate. Just like the above change for military, this didn't affect any current employee, but future employees are now paying substantively more out of their paycheck for the same benefit that I pay less than 20% for.
http://www.fedsmith.com/2014/04/07/fers-fers-rae-fers-frae-what-does-all-this-mean/
And respectfully, politicians have every right to be in DoD business, that is their job as the leaders of the government. Service members do have a voice, the same one that every citizen of the U.S. has, voting to select those leaders (that is not even factoring in various lobbying groups like MOAA, AUSA, and others). There are more than a few of those politicians who are also veterans (The most recent data from the 2010 Census shows that only seven percent of Americans have served in the military, while veterans make up 20 percent of the current Congress). This is a fundamental part of a vibrant democracy, that the military remains tightly integrated with society and is actively managed/controlled by the civilian government.
FERS, FERS-RAE, FERS-FRAE… What Does All This Mean? : FedSmith.com
FedSmith.com is a digital news service for current and former federal employees.
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SFC (Join to see) I like the changes and the direction it has taken. The Roth TSP and matching contributions especially.
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Here is the thing, of course this seems like a bad deal to a small number of people (those that aim at and attain the 20 year retirement goal). However that number, those who make it to retirement, represents a small fraction of the service members who have served. This is a pretty good deal to the 83% of Service Members who never make it to retirement, who under the old plan left with exactly zero dollars from the government for their retirement. At the very least every new service member (at least those that serve at least 3 years) will leave service with something (at a minimum the 1% automatic contribution).
Since this has happened every leader should advise their new service members to put in 5%, otherwise they are leaving free money on the table (for current SM's, there are a lot of individual calculations to determine if this is a good deal or not, there is no blanket answer for that since each person has their own priorities).
Since this has happened every leader should advise their new service members to put in 5%, otherwise they are leaving free money on the table (for current SM's, there are a lot of individual calculations to determine if this is a good deal or not, there is no blanket answer for that since each person has their own priorities).
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It needs to be improved. The TSP matching is primarily designed to replace the lost pension benefit of 10% or 0.5% per year of service. However, the matching amount is not enough to actually offset this loss. Ironically, the Military Retirement Modernization Commission actually based their findings off a 10% TSP contribution, which overlooks that half of this contribution, the service members elective amount, applies just as much under the old system as the new. Additionally, they used an outrageous calculated return to come to their conclusions. So, while it is beneficial to those who get out early since previously they received nothing, it still falls short of its intended purpose.
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LTC Yinon Weiss
I look at it the other way. I think it's the best thing possible for retention. Those that don't want to serve anymore and are just "sticking it out" for the retirement benefit will get out sooner. Those that want to continue to serve will see improved morale and greater advancement opportunities. It will sharpen the military into a force of people who only love their jobs, and that is always better for the institution and hence great for retention. The military will retain more of its best people, which creates a virtuous cycle that gets more people to stay in for the right reasons.
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SMSgt (Join to see)
LTC Yinon Weiss - while not a completely bad thought line, I have to disagree a little. When we went through the force drawdown two years ago and people were given the "early-out" option, the ones that left the service were the ones with something to offer. I watched the guys with the degrees, the ones that had served in unique leadership positions/units walk out the door into quality jobs that paid them well. On the other hand, the ones that didn't possess a degree and have lurked around in the shadows of the career field chose to stay because they didn't have anything to offer in the outside world. Of course there was a large group in the middle as well.
I joke from time to time that the only reason I made E-8 is because a lot of great SNCOs decided to hang it up to clear room for me...there probably is some truth to that honestly. So while I agree that we don't want people purely sticking around for the retirement offered them at 20 years, I fear this will only enhance that problem. Those that get out early and take their retirement with them will be the ones that not only are tired of the military but they are also the ones that have best prepared themselves to be leaders. We will (IMO) be stuck with a large group that rose to the top purely because the cream was scraped off ahead of them.
I joke from time to time that the only reason I made E-8 is because a lot of great SNCOs decided to hang it up to clear room for me...there probably is some truth to that honestly. So while I agree that we don't want people purely sticking around for the retirement offered them at 20 years, I fear this will only enhance that problem. Those that get out early and take their retirement with them will be the ones that not only are tired of the military but they are also the ones that have best prepared themselves to be leaders. We will (IMO) be stuck with a large group that rose to the top purely because the cream was scraped off ahead of them.
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LTC Yinon Weiss
SMSgt (Join to see) - You make some good and sound points. My only counter to that is... do we want the US military to be the kind of organization that retains people basically by coercion, or by motivation? We probably both agree that it should clearly be the latter. The challenges you describe are very real, but they are not the problems, they sound more like the symptoms. If we address the root problems then the symptoms will be alleviated.
Some of the root problems are we have leaders in place that really shouldn't be there. We also have top performers who's careers stagnate because they can't rise up fast enough, so of course they get out where private organizations value them more. We need to fix this first. We need to ask why some of the top performers with an education get out... not find financial tricks to keep them in place.
By no longer forcing people to stay in the military for financial retirement gain past the time they really wanted to continue to serve, I believe we will create a better command climate. Short term retention may appear to suffer, but long term retention will benefit. This is one of the steps to address the "demand" problem of good people wanting to leave, rather than trying to manipulate the "supply" problem of good people wanting to leave by changing eligibility.
I think we're on the same page overall. We want great people to serve and we want them to have great opportunities when they ultimately transition. I think we're just looking at this particular subject from different time horizons, and when these changes will really have benefit to the military.
Some of the root problems are we have leaders in place that really shouldn't be there. We also have top performers who's careers stagnate because they can't rise up fast enough, so of course they get out where private organizations value them more. We need to fix this first. We need to ask why some of the top performers with an education get out... not find financial tricks to keep them in place.
By no longer forcing people to stay in the military for financial retirement gain past the time they really wanted to continue to serve, I believe we will create a better command climate. Short term retention may appear to suffer, but long term retention will benefit. This is one of the steps to address the "demand" problem of good people wanting to leave, rather than trying to manipulate the "supply" problem of good people wanting to leave by changing eligibility.
I think we're on the same page overall. We want great people to serve and we want them to have great opportunities when they ultimately transition. I think we're just looking at this particular subject from different time horizons, and when these changes will really have benefit to the military.
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Contribution matching is long overdue for the military, the new system is great for Soldiers who do not plan on making the military a career. But I don't see it as a better retirement option when compared to the current retirement system.
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Ensure when you retire that you check your first pay check. Took me 4 months to get mine corrected as someone had marked redux (something I never did) and I was loosing over 250 dollars a month. I have to agree if you have no plans to stay 20 then it may work for you.
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Before I joined the military, I worked for a company called Stryker Medical. This was back in the late 90's and the company was matching stock for stock and adding 1/1 by what ever the employee decided to put in their retirement fund. Back than this was a great plan for young individuals to build a fast retirement fund. The program the army is going to, doesn't help Soldiers with over 10 years of service. A 20 year retirement is probably one the best programs that army has used to help Soldiers move on after service. I don't think I know of any other company that pays a retirement after 20 years besides for other federal jobs. I say no to TSP and the matching. I'm too far in my career to start over with a new program that only helps those that are enlisting right now.
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LTC Yinon Weiss
Thanks. I updated the original post. This is actually the best chart I have seen so far explaining it. Good resource.
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If you got in before 2006 it doesn't really matter. I got all excited until I read that and then I put the posting back where it was. It's only for people who got in the last 10 years. Seems legit. The last round of bonuses were too. 20k for new recruits to instagram how snazzy they look in uniform at BCT and AIT. TY Uncle Sam.
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If you never plan for a 20 years? then it will be an awesome deal.
The good thing is ... if something preventing you to get to 20 years ... you will glad you got the match TSP.
The good thing is ... if something preventing you to get to 20 years ... you will glad you got the match TSP.
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