Is the new retirement plan really better for career troops?

GySgt Wayne A. Ekblad — Mon, 18 May 2015 04:20:55 -0400

As a major overhaul of the military retirement system continues to gain momentum on Capitol Hill, questions remain about the core of the proposal and whether it will be better or worse than the current pension for career service members who serve 20 years or more.

http://www.marinecorpstimes.com/story/military/benefits/retirement/2015/05/17/careerist-pensions/27321321/

Response by SSG Kenneth Lanning made May 18 at 2015 4:33 AM

SSG Kenneth Lanning — Mon, 18 May 2015 04:33:46 -0400

The Army is doing about the same thing...if people are smart with their money, it could work...but if people are really smart with their money they'll invest early on rather than later down the road.

Response by Col Private RallyPoint Member made May 18 at 2015 5:55 AM

Col Private RallyPoint Member — Mon, 18 May 2015 05:55:36 -0400

As long as they give us old timers the choice to grandfather us in with the current retirement system, I don't mind, as that would be my choice.

Response by MAJ Private RallyPoint Member made May 18 at 2015 5:56 AM

MAJ Private RallyPoint Member — Mon, 18 May 2015 05:56:13 -0400

The sales pitch on this by DoD and the Commission uses unrealistic numbers for inflation, pay raises, and yields on investments, and doesn't even bother to use historic TSP data to make determinations (because TSP historically grows at a lower rate, they've not used these numbers).

The fact that there are too many unknown variables to really make an informed decision on this is irrelevant to future Servicemembers, who won't have a choice about which system they fall into; for them, this is a good deal, and if it goes through, it'll be key for them to take as much advantage of matching 401(k) contributions from the government.

For those "grandfathered" in who will have a choice about sticking to the current system or transitioning to the new system, I think the key variables are 1) how long have you already served? and 2) how long do you think you'll live? If you're near retirement--say 15 years in or more, I can't see why you'd want to switch to the new system, given that you won't have much time to pay into the 401(k). If you've got less than 10 years, maybe switching would be a good option, as you'd have a lot of opportunity to pay into the 401(k). For variable 2, if you think you're going to surpass the age expectancy and live to 85 (which is what the current government numbers are based on), and you're willing to risk a defined pension plan for something quite nebulous with multiple unknowable variables, you're probably going to be better off sticking with what we have now.

Hopefully, DoD will release some sort of decision calculator that allows you to manipulate all the variables and make an informed decision. My guess is that DoD won't do this, though, or that the calculator they release will only allow one to manipulate certain variables (after all, they are trying to sell a change that is not to the advantage of certain Servicemembers).

Response by CW4 Abdulaziz Bulling made May 18 at 2015 5:59 AM

CW4 Abdulaziz Bulling — Mon, 18 May 2015 05:59:51 -0400

I have been through several revisions of benefits programs both in the military and and out. The results never benefited the individual. Just think a moment, if it is going to save the government money, how will it benefit the individual.

Response by Sgt Aaron Kennedy, MS made May 18 at 2015 6:41 AM

Sgt Aaron Kennedy, MS — Mon, 18 May 2015 06:41:28 -0400

"It can be" however, in actuality, the take home for "most" will be less. This will because it forces the troop to do the work, and not the government.

From a strictly administrative standpoint, this is the correct way to go. I DO NOT LIKE IT. That does not mean it isn't the correct way to go however. Pensions are a real hard balancing act... and trusting the government to pay out in the future vs. giving a lump sum at specific points is probably one of the trickiest things.

Here's what it really boils down to. Can you trust yourself to invest the "retention bonuses?" That's the question. If you can, it's a better deal. If you can't it's a worse deal.

Response by MCPO Douglas Pennington made May 18 at 2015 7:29 AM

MCPO Douglas Pennington — Mon, 18 May 2015 07:29:13 -0400

I am totally against any retirement package change. Sorry but when was the last time John McCain or Paul Ryan took one in there retirement package? Why always the veteran. They have made promises that they never intended to keep and blame that on the economy. They will screw up our retirement plan for future soldiers and sailors just as they have managed to screw up Social Security. Don't borrow on the back of your Military.

Response by SGM Private RallyPoint Member made May 18 at 2015 7:59 AM

SGM Private RallyPoint Member — Mon, 18 May 2015 07:59:35 -0400

TSP is a good idea. However, what the Gov Givieth, the Gov can Taketh Away...have never seen an "improved" retirement option offered that favored soldiers in the long term. Much like "free health care" I heard all my life as an Army Brat and as a soldier. Despite being in written advertising, "it wasn't in the contract"....

Response by Capt Private RallyPoint Member made May 18 at 2015 8:06 AM

Capt Private RallyPoint Member — Mon, 18 May 2015 08:06:49 -0400

For some it will be good, perhaps very good.

Some will lose and perhaps have little or no benefit.

For you - "Only the shadow knows"

Response by PO1 John Miller made May 18 at 2015 9:59 AM

PO1 John Miller — Mon, 18 May 2015 09:59:29 -0400

Let's see. I get 50% of my base pay for the rest of my life and I didn't have to contribute anything (financially speaking) to qualify for that, so NO.

Response by MSgt Private RallyPoint Member made May 18 at 2015 12:25 PM

MSgt Private RallyPoint Member — Mon, 18 May 2015 12:25:05 -0400

This will be an awesome change for folks. It will eliminate the "trapped" feeling folks get when they approach the ten year mark.....do I stay or go.....if I re-up i'm stuck for 10 more ....etc. This truly will put the freedom of choice back in the hands of the soldiers. Additionally since are rapidly approaching a point in time where the majority of our forces have only served in war time it's nice to see that should they choose to cut bait they are not leaving empty handed. I hope it gets approved.....have had many a friend or troop get out after 2,3,4, or more deployments because they "can't take another one" and they leave with nothing but a hand shake....have also seen folks break themselves trying to stay in regs and again get a hardy handshake and an administrative discharge instead of retirement.....for the old times they will gripe....but thats what old timers do it part of the privilege of getting old....long as they grandfather this in and education people on it all will be good.

Response by CDR Terry Boles made May 18 at 2015 5:20 PM

CDR Terry Boles — Mon, 18 May 2015 17:20:02 -0400

First let me say that I am not in favor of any more social re-engineering programs on the backs of the military by people who have never served or long forgotten what it is like to be in the trenches. This retirement plan is simply for those 83% who decide not to make a career of the military, no one else just as Congress states. I do not believe DoD will go broke on the pension plan for the 17% who stay and make a career as people do roll off the pension when they stop breathing.

If we look at today's retired E-9 at 20-years and without any assumptions for future pay-raises, future TSP contribution limits, tax-free contributions that not every service member can contribute during their career, and this E-9 retires at age 40 and lives until age 85 the breakdown is interesting. So, just a 20-year contribution of $18,000 per 2015 TSP basic limits. If you could save the max TSP of $18,000 every year for 20-years it would grow to $360,000 and it would give you a lifetime benefit of $8,000 per year (assuming you live to age 85 and the fund did not grow). That same $360,000 might grow to $500,000 or $750,000 or even more and it would give you an annual lifetime benefit of $11,111 and $16,600 respectively.

Now for that E-9 who retires today at 20-years of service with their 50% retirement pay it would be $2865 per month for life (age 40 to 85) which would pay them over a life time of $1,547,100. Don’t forget, this same E-9 can contribute to TSP and add another $360,000 or more to their life time 50% pay.

That same E-9 at 40% retirement pay would receive $2292 per month which would pay them over a lifetime $1,237,680 plus their TSP of $360,000 or more plus the matching funds.

Now here’s the kicker as the results are interesting. How many people can afford to contribute the max TSP each year for 20-years ($18,000) and for that E-9 today who has an annual base pay of $68,670 before taxes it might be a bit easier than that E-3 today under 2-years who makes $21,876 before taxes. That’s where the disparity is, early in your career one is not able to max out their TSP contributions and quite possibly not until they meet the 10-year career mark which places them well behind the retirement TSP curve.

Thus in the long run, that 50% retiree who also contributes what they can to their TSP (just like the 40% retiree) will be ahead by $310,000 in lifetime earnings before the TSP is even factored into their retirement pay (see above E-9 scenario).

So, a lot to simply say this TSP retirement plan is for those 83% who move on while the 20-year retiree takes the financial retirement hit, once again!!

Response by LTC John Shaw made Oct 24 at 2015 8:33 AM

LTC John Shaw — Sat, 24 Oct 2015 08:33:44 -0400

It appears to be better for those with less than 20; however, if it did not save money it would not need to be changed, so the person who served 20 and got out will get less of a benefit.
Before this goes through, I want to see every politician, take a cut in their pensions as well.
Don't they all agree, WE the people, can't afford it.

Response by PO3 Private RallyPoint Member made Oct 26 at 2015 7:51 AM

PO3 Private RallyPoint Member — Mon, 26 Oct 2015 07:51:09 -0400

Well ... it is worse off for career troops, but that is the trade off. Why can't they just add on ... instead of modifying ... oh right ... saving ...

Response by GySgt Moses Lozano made Jan 23 at 2016 5:56 PM

GySgt Moses Lozano — Sat, 23 Jan 2016 17:56:08 -0500

While we are talking about military retirement pensions, why not also talk about legislator retirement plans as well. I bet that would be a short conversation for Congress!