Does the reserve retirement program stack up against a 401k? Most reserve pensions equal to $300-700/month. Is it worth it?

SGT Private RallyPoint Member — Wed, 06 Dec 2017 21:46:09 -0500

Response by SPC Robert Coventry made Dec 6 at 2017 10:24 PM

SPC Robert Coventry — Wed, 06 Dec 2017 22:24:02 -0500

It is not just the money, it is the coverage not paying for medical insurance is a great benefit, I pay $ 1,200 a month for my health insurance

Response by SGT Private RallyPoint Member made Dec 6 at 2017 10:31 PM

SGT Private RallyPoint Member — Wed, 06 Dec 2017 22:31:59 -0500

The problem with this retirement is that nobody puts a monetary value range for doing twenty years since there are too many variables. So recruiters use this tactic to convince the less wise to stay

Response by SPC Erich Guenther made Dec 7 at 2017 5:06 AM

SPC Erich Guenther — Thu, 07 Dec 2017 05:06:23 -0500

It depends on you. If you know what your doing with a 401k and your in a good 401k with decent investment options you can retire a multi-millionaire just with the 401k and in that case you do not need an officer or enlisted pension. If your the type of person that just follows instructions with a 401k and puts the money in and hopes for the best, your results at the end of 55 years will show that and could be anywhere from decent to fairly bad. So it depends on you. How much is a learn how to invest for retirement course worth to you? Always keep in mind in our Economic system, reward is higher with risk taken and if your the type of person that is tight fisted with cash, you need to learn to get past that when it comes to investing and take some risk. Once you get a few payoffs you will be less tight fisted and generally earn more with the 401k and be in the above average category of investment growth.

I can tell you in my last Mom and Pop firm I worked for the Investment analyst was spending 30-40 mins meeting with me once a quarter. The other folks he would spend maybe 10-15 min. Finally I asked him behind closed doors why I was getting the attention. He answer was this. "Erich, there are 70 employees working here and among the ones invested in the 401k, you have more invested then all of them combined". I was shocked because back then I only had maybe 200k invested and most of the employees were older than me. Lesson: most people have not enough retirement savings or do not invest it wisely so that it grows. At your age 200k probably sounds like a lot of money but it is not and if you invest diligently and are patient once you hit 80K your investment starts to compound because the stocks you invest in pay dividends (hopefully) or are rapid growth stocks (hopefully) so at 80k your investments start to add to your annual 401k contribution yearly.

So you might invest 18k a year via payroll deduction..........then your dividends start with 5 then 10 then 15k a year and so on. Once your in your 50's your dividends or growth stocks should be far exceeding your max contribution of 18k a year by your 60's you should be able to live off of just the dividend income and annual growth percentage and if you planned right the extra income will continue to grow the 401k despite the fact your pulling money out. Now if you have a pension at this point what happens is you draw less out of the 401k and it grows that much faster after retirement. Remember the larger the overall size of the portfolio in your 401k the faster it compounds and grows.

So my advice to you is get to the 80k as fast as possible via contributions, learn how to invest and how the economy generally works (maybe two semesters in economics and 1 semester of a investing course is all you need here). Subscribe to Kiplingers Personal Finance Magazine just to review their stock picks every 2nd or 3rd issue ($20 a year maybe here) and they will train you more in how to invest. Then when you get more knowledgeable subscribe to the Motley Fool and look through their stock picks (not all of them are great in either case and you need to use your knowledge to try and figure out which ones are solid advice). Anyway.......thats what I would advise you in this area.

401k performance depends entirely on you. Not your investment advisor, just you. Your investment advisor should only be acting in the role of coach and only coaching you when it looks like your investments are not diversified enough or are all invested in high risk companies or something of that nature........thats the only role an investment advisor should be in. They should not be advising you to buy specific stocks or annuities nor should they be churning your account and buying and selling all the time (boosting their fees). You should be managing your own investments and telling your advisor what you feel comfortable with. Sometimes if the advisor is overly cautious you have to be able to figure that out and ignore them and vice versa.............that all comes with time and experience.

Response by CPO Private RallyPoint Member made Dec 7 at 2017 6:35 AM

CPO Private RallyPoint Member — Thu, 07 Dec 2017 06:35:58 -0500

In a way, your question is like asking does a car stack up against a truck and is it worth it. What kind of car? What kind of truck? What are you using it for? What is the gas mileage? How much is insurance? How many years do you expect it to last? Etc.

Which "reserve retirement program": High-3 or Blended Retirement System (BRS)? Are you investing in TSP? Which TSP fund? Any matching payments? What is your 401k invested in? How much does your 401k cost (admin fees, broker fees, maint fees, hidden fees)??? Will you remain an employ of the company providing the 401k benefit until retirement age? In general, defined benefits (mil retirement) are better than defined contributions (401k). Also, I have yet to see a civilian 401k plan that is as inexpensive as the TSP. I typically recommend you put enough in your civilian 401k to qualify for the best company matching payments and put your other savings in TSP. However, each person is different and there is no such thing as a one-size-fits-all retirement savings strategy.

CRITICAL NOTE: Former employees often lose eligibility for the company 401k account and, based on company policy or local law, their savings are transferred into a crap account within 6 months to a couple years of their last company pay check. Depending on the jurisdiction, if no activity occurs in the crap account within the next one (1) to seven (7) years, all the money in the crap account (your former 401k retirement savings) could be transferred/escheated to the state as an abandoned account/unclaimed property.

I was briefing my guys on the TSP and new BRS program a couple weeks ago and mentioned this in passing. During a break, one of my E5s came up and said he had just discovered his old 401k had been in a crap account for years and was barely earning anything. Less that 0.1% APR and inflation has been running around 2% so his account has effectively been losing money instead of making money.

https://www.tsp.gov/InvestmentFunds/FundsOverview/expenseRatio.html
https://www.wellsfargofunds.com/ind/account-services/account-inactivity.html
https://data.bls.gov/timeseries/CUUR0000SA0L1E?output_view=pct_12mths

TSP: Expense Ratio

Thrift Savings Plan

Response by SSG Private RallyPoint Member made Dec 7 at 2017 8:12 AM

SSG Private RallyPoint Member — Thu, 07 Dec 2017 08:12:56 -0500

As most have stated, does your 401k come with health insurance. That is one of the reason I stayed for 23 years. Now in the grey area, but should be able to start filing my paper work next year, with deployments I can start to draw my retirement at 58 years a 3 months, if Congress would go back before Jan 2008 I could be drawing it now. I would say do you like what you are doing in the reserves. If you have a good unit and like it. It is worth sticking around for the extra benefits.

Response by Capt Private RallyPoint Member made Dec 7 at 2017 8:44 AM

Capt Private RallyPoint Member — Thu, 07 Dec 2017 08:44:10 -0500

Do not forget that in addition to the pay for reserve retirement you get all benefits of being retired military. In my case that equates to a substantial sum for prescription drugs and medical benefits.

Response by Lt Col Jim Coe made Dec 7 at 2017 11:39 AM

Lt Col Jim Coe — Thu, 07 Dec 2017 11:39:16 -0500

One of the best benefits in military retirement isn't the paycheck, it's the medical benefits. The true value of TRICARE for Life isn't readily apparent when most people retire in their 40s or 50s. When you reach MEDICARE age (65), you understand what a good deal your have. MEDICARE pays about 80% of hospital and doctor bills and TRICARE for Life picks up the rest. All MEDICARE eligible services are covered and any medical provider or facility that accepts MEDICARE is covered. Additionally, the co-pay on drugs is not too high.