Posted on Jun 11, 2016
The Pentagon created this 3-minute overview of its new military retirement plan
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The Defense Department has released a three-minute explainer video providing a basic, broad overview of the military's new retirement system, which is scheduled to take effect in 2018.
The video is part of a what the Pentagon promises will be a thorough financial literacy campaign as officials prepare troops and their families for the change, which will scale back the military's traditional pension plan while introducing new individual investment accounts. Similar to 401(k) retirement plans offered in the private sector, these new accounts will include matching cash contributions from the federal government.
More details about the coming changes can be found here:
Starting in January 2018, military personnel with fewer than 12 years of service must choose whether to opt into the new "blended" system or stay enrolled in the traditional pension plan. Officials estimate that group includes 1.6 million people.
Those with more than 12 years in uniform will remain enrolled in the traditional pension plan.
"We're keeping up with what the force of the future will look like," Army Sgt. Maj. Michael Schultz, a senior enlisted adviser at the Pentagon, says in the video. "We need to keep up with our civilian counterparts out there, being sure, as leadership, we answer every question for them, we educate them on the choices. ... But at the end of the day, it's going to be their personal decision to make."
Everyone who joins the military in 2018 and beyond will automatically be enroll in the new system.
In approving the new system, officials both in the Pentagon and on Capitol Hill have championed the fact that this new system will, for the first time, ensure service members who don't stay in uniform for a full 20-year career will receive at least some retirement benefit upon leaving.
The move is not without controversy, however.
Notably, officials have yet to resolve one of the plan's key components: its lump-sum payout option. The American Academy of Actuaries issued a warning to the Pentagon in May, saying it risks shortchanging enlisted personnel specifically.
Much more that on that here:
MILITARYTIMES
The new military retirement system has major flaw, financial experts warn
The Pentagon says its working to address the issue.
Meanwhile, officials have introduced the first of four courses that will help the force prepare for decision time. They're targeting the military's leaders now, individuals expected to be on the receiving end of questions from rank-and-file personnel, but the course is open to anyone. It's accessible via the department's Joint Knowledge Online portal.
It'll be December before a course is introduced that's tailored specifically for the troops who'll have to choose whether they want to opt in, officials say.
More on the training plan here:
Retirement reform is a centerpiece of Washington's broad effort to overhaul key parts of the military's personnel expenditures, a series of moves — some ongoing — that have touched everything from healthcare to housing allowance.
The Pentagon views these ballooning costs as a threat to its ability to maintain a modern military.
Organizations that advocate on behalf of the nation's military personnel, by contrast, view these efforts as an attack on the quality-of-life-programs that were designed to offset the unique hardships troops and their families must endure.
The explainer video calls the new retirement plan a matter of "financial security."
The video is part of a what the Pentagon promises will be a thorough financial literacy campaign as officials prepare troops and their families for the change, which will scale back the military's traditional pension plan while introducing new individual investment accounts. Similar to 401(k) retirement plans offered in the private sector, these new accounts will include matching cash contributions from the federal government.
More details about the coming changes can be found here:
Starting in January 2018, military personnel with fewer than 12 years of service must choose whether to opt into the new "blended" system or stay enrolled in the traditional pension plan. Officials estimate that group includes 1.6 million people.
Those with more than 12 years in uniform will remain enrolled in the traditional pension plan.
"We're keeping up with what the force of the future will look like," Army Sgt. Maj. Michael Schultz, a senior enlisted adviser at the Pentagon, says in the video. "We need to keep up with our civilian counterparts out there, being sure, as leadership, we answer every question for them, we educate them on the choices. ... But at the end of the day, it's going to be their personal decision to make."
Everyone who joins the military in 2018 and beyond will automatically be enroll in the new system.
In approving the new system, officials both in the Pentagon and on Capitol Hill have championed the fact that this new system will, for the first time, ensure service members who don't stay in uniform for a full 20-year career will receive at least some retirement benefit upon leaving.
The move is not without controversy, however.
Notably, officials have yet to resolve one of the plan's key components: its lump-sum payout option. The American Academy of Actuaries issued a warning to the Pentagon in May, saying it risks shortchanging enlisted personnel specifically.
Much more that on that here:
MILITARYTIMES
The new military retirement system has major flaw, financial experts warn
The Pentagon says its working to address the issue.
Meanwhile, officials have introduced the first of four courses that will help the force prepare for decision time. They're targeting the military's leaders now, individuals expected to be on the receiving end of questions from rank-and-file personnel, but the course is open to anyone. It's accessible via the department's Joint Knowledge Online portal.
It'll be December before a course is introduced that's tailored specifically for the troops who'll have to choose whether they want to opt in, officials say.
More on the training plan here:
Retirement reform is a centerpiece of Washington's broad effort to overhaul key parts of the military's personnel expenditures, a series of moves — some ongoing — that have touched everything from healthcare to housing allowance.
The Pentagon views these ballooning costs as a threat to its ability to maintain a modern military.
Organizations that advocate on behalf of the nation's military personnel, by contrast, view these efforts as an attack on the quality-of-life-programs that were designed to offset the unique hardships troops and their families must endure.
The explainer video calls the new retirement plan a matter of "financial security."
The Pentagon created this 3-minute overview of its new military retirement plan
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Thanks for letting us know SFC Joe S. Davis Jr., MSM, DSL that DoD created a 3 minute overview of the new blended military retirement plan. I hope they didn't title it The Blended Military Retirement Plan for Dummies :-)
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SFC Joe S. Davis Jr., MSM, DSL
LTC Stephen F. well said, that title might be coming out next. I am glad I retired when I did.
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NEW Military Retirement Plan - Simplified:
1. Those with less than 12 years of service by January 1st, 2018 will be eligible to "opt in" to the new retirement system or remain "grandfathered" under the current system. Those with more than 12 years will remain under the current system. Those who enter the service after December 31st, 2017 will fall under the new system.
2. The new system automatically contributes an additional 1% pay (in relation to paygrade) into the service members TSP. The military will match up to 5% (4% match + 1% auto) of the service members (base pay) TSP contribution.
3. Service members who serve 20 years under the new retirement system will receive a retirement check of 40% of their base pay. Service members who serve 30 years will receive a retirement check of 60% of their base pay (the cap). This is a loss of 10-15% when compared to the current system.
4. A bonus equal to 2.5 months base pay will be paid to service members at their 12 year mark *assuming they agree to remain on active duty for 4 more years). This bonus comes out to be about $9,500 - $12,500 for enlisted (E7 - E9) and $15,000 for Officers (O4).
5. If a service member is planning on separating from the military prior to retirement, the new system is a fantastic option. Essentially, service members receive up to a 5% bonus a year (base on their paygrade/rank at the time) which may gain interest and can be transferred into a civilian retirement account.
6. If a service member is planning on serving through retirement, the new retirement system may not be the best choice. Though 5% more pay a year sounds enticing at first, there are many factors to consider.
.....6.1 - The 5% bonus is applied to the service member's current paygrade/rank. This must be taken into consideration as it is not the same when compared to 5% of a service member's "highest 3".
.....6.2 - The 5% bonus goes directly into TSP. The stock market is unpredictable and alone has many factors in and of itself.
..........6.2.1 - What is the total amount of money in the account? (Big difference in growing interest between $1,000 and $10,000).
..........6.2.2 - What funds are contributions being placed in? (G fund at a safe 2% growth or C fund at a risk 10%-30% growth).
..........6.2.3 - What happens if the market crashes as seen in 2008 & 2013? (The 5% contributed over a career can be lost overnight.)
..........6.2.4 - How much are you currently contributing? (5% + 5% is not a very large contribution - a low TSP account will not see the same type of growth seen with larger contributions).
.....6.3 - Does the 5% a year bonus (which is based on fluctuating paygrade/rank and stock market factors) make up for a loss of 10-15% in retirement pay which is based on the service members "highest paid 3"?
**In my opinion, the military isn't just going to give everyone in the service an additional 5% pay for the heck of it...they are doing it because they have figured it will SAVE the military money in the long run... paying an up front 5% a year to everyone now will save billions when you realize you don't have to pay the 10-15% more applied to a retiree's highest 3.
What are your opinions? Am I wrong? Did I miss anything? Let me know.
1. Those with less than 12 years of service by January 1st, 2018 will be eligible to "opt in" to the new retirement system or remain "grandfathered" under the current system. Those with more than 12 years will remain under the current system. Those who enter the service after December 31st, 2017 will fall under the new system.
2. The new system automatically contributes an additional 1% pay (in relation to paygrade) into the service members TSP. The military will match up to 5% (4% match + 1% auto) of the service members (base pay) TSP contribution.
3. Service members who serve 20 years under the new retirement system will receive a retirement check of 40% of their base pay. Service members who serve 30 years will receive a retirement check of 60% of their base pay (the cap). This is a loss of 10-15% when compared to the current system.
4. A bonus equal to 2.5 months base pay will be paid to service members at their 12 year mark *assuming they agree to remain on active duty for 4 more years). This bonus comes out to be about $9,500 - $12,500 for enlisted (E7 - E9) and $15,000 for Officers (O4).
5. If a service member is planning on separating from the military prior to retirement, the new system is a fantastic option. Essentially, service members receive up to a 5% bonus a year (base on their paygrade/rank at the time) which may gain interest and can be transferred into a civilian retirement account.
6. If a service member is planning on serving through retirement, the new retirement system may not be the best choice. Though 5% more pay a year sounds enticing at first, there are many factors to consider.
.....6.1 - The 5% bonus is applied to the service member's current paygrade/rank. This must be taken into consideration as it is not the same when compared to 5% of a service member's "highest 3".
.....6.2 - The 5% bonus goes directly into TSP. The stock market is unpredictable and alone has many factors in and of itself.
..........6.2.1 - What is the total amount of money in the account? (Big difference in growing interest between $1,000 and $10,000).
..........6.2.2 - What funds are contributions being placed in? (G fund at a safe 2% growth or C fund at a risk 10%-30% growth).
..........6.2.3 - What happens if the market crashes as seen in 2008 & 2013? (The 5% contributed over a career can be lost overnight.)
..........6.2.4 - How much are you currently contributing? (5% + 5% is not a very large contribution - a low TSP account will not see the same type of growth seen with larger contributions).
.....6.3 - Does the 5% a year bonus (which is based on fluctuating paygrade/rank and stock market factors) make up for a loss of 10-15% in retirement pay which is based on the service members "highest paid 3"?
**In my opinion, the military isn't just going to give everyone in the service an additional 5% pay for the heck of it...they are doing it because they have figured it will SAVE the military money in the long run... paying an up front 5% a year to everyone now will save billions when you realize you don't have to pay the 10-15% more applied to a retiree's highest 3.
What are your opinions? Am I wrong? Did I miss anything? Let me know.
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