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Old 02-04-2017, 06:32 PM
 
Location: New Mexico U.S.A.
26,527 posts, read 51,633,004 times
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New Military Retirement System Has Big Changes
Ralph R. Smith, February 4, 2017

Significant changes are underway in the retirement system for military personnel. The Fiscal Year 2016 Nation Defense Authorization Act authorized creation of a new retirement system. It is similar to the FERS system for federal employees. The new military retirement plan has a smaller pension but has added a defined contribution to the Thrift Savings Plan (TSP) account. This new system will go into effect on January 1, 2018.

Military personnel will have some decisions to make about their future retirement. Existing service members will not be forced into a new retirement plan. Military personnel serving as of December 31, 2017, will be “grandfathered” under the current retirement plan. But, while no one currently-serving will be automatically switched to the new system, many will have a choice. Active service members with fewer than 12 years since their Pay Entry Base Date, and some Reserve Component Service members will have an option to join the new retirement plan. The new retirement plan is called the Blended Retirement System (BRS). The opt-in period for the BRS begins January 1, 2018. It ends on December 31, 2018. Those who enter the military on or after January 1, 2018 will be automatically enrolled in the BRS.

- See more at: http://www.fedsmith.com/2017/02/04/n....ReaYCpN3.dpuf

I retired 20+ years ago. It does not appear to affect me. Lets hope it works out well for others.
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Old 02-05-2017, 10:35 PM
 
Location: San Antonio
3,536 posts, read 12,303,232 times
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The calculators make it look awesome, IF you contribute. My fear is the young new military members will not contribute as they need to in order to make their retirement full. Glad I'm grandfathered!!
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Old 02-06-2017, 05:33 AM
 
Location: SW OK (AZ Native)
24,234 posts, read 13,082,046 times
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Quote:
Originally Posted by dmarie123 View Post
The calculators make it look awesome, IF you contribute. My fear is the young new military members will not contribute as they need to in order to make their retirement full. Glad I'm grandfathered!!

Agreed. When you're 19 years old you're not thinking about the future, you're thinking about a new or reasonably new car, a stereo system or LCD TV, or maybe are taking care of a young spouse and kid or two. They don't see what a few thousand tax-deferred dollars can do over time, and which can then be continued after retirement. Long-term plus retirement, it could, with proper management, be a better deal at age 60 than the current plan.
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Old 02-06-2017, 05:52 AM
 
Location: Forests of Maine
37,331 posts, read 61,161,924 times
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Quote:
Originally Posted by SluggoF16 View Post
Agreed. When you're 19 years old you're not thinking about the future, you're thinking about a new or reasonably new car, a stereo system or LCD TV, or maybe are taking care of a young spouse and kid or two. They don't see what a few thousand tax-deferred dollars can do over time, and which can then be continued after retirement. Long-term plus retirement, it could, with proper management, be a better deal at age 60 than the current plan.
At age 60 I will have been retired living on my pension for 18 years.
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Old 02-06-2017, 11:59 AM
 
1,991 posts, read 895,537 times
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Of course this was years ago, but up until I made E5, every dollar I made went towards just paying the basics for me and my wife and newborn. Food, rent (which was the biggest cost), and utilities. It was no exaggeration to say we were barely getting by. I can't imagine it is much different nowadays. How would a career minded enlisted soldier would ever be able to contribute to his/her retirement in the important early stage of investing is beyond me.
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Old 02-06-2017, 12:03 PM
 
28,624 posts, read 18,677,825 times
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Quote:
Originally Posted by TomC23 View Post
Of course this was years ago, but up until I made E5, every dollar I made went towards just paying the basics for me and my wife and newborn. Food, rent (which was the biggest cost), and utilities. It was no exaggeration to say we were barely getting by. I can't imagine it is much different nowadays. How would a career minded enlisted soldier would ever be able to contribute to his/her retirement in the important early stage of investing is beyond me.
That, yes, plus the fact that most will not make the "retirement" decision until their 8th or 12th year. I decided pretty much by my second year that I'd be a lifer, but that was mostly because I came from a military family anyway, and anyplace with a BX, a Commissary, and a theater where you had to stand for the national anthem already felt like home.
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Old 02-06-2017, 12:31 PM
 
Location: Forests of Maine
37,331 posts, read 61,161,924 times
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In 1987 I was an E5, on that level of income I bought a 5-unit apartment complex. Everyone's finances are different.
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Old 02-06-2017, 01:48 PM
 
Location: New Mexico U.S.A.
26,527 posts, read 51,633,004 times
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Quote:
Originally Posted by TomC23 View Post
Of course this was years ago, but up until I made E5, every dollar I made went towards just paying the basics for me and my wife and newborn. Food, rent (which was the biggest cost), and utilities. It was no exaggeration to say we were barely getting by. I can't imagine it is much different nowadays. How would a career minded enlisted soldier would ever be able to contribute to his/her retirement in the important early stage of investing is beyond me.
My basic pay as an E-1 when I was drafted in 1968 was $95 per month...

Currently, A married E-5 living on the economy by Kirtland Air Force Base, New Mexico will draw the following monthly compensations:
Basic Pay E-5 2 years or less: $2278.20
BAS: 368.22
Housing $1275.00

That is $3921.00 per month or $47,000 per year... BAS and Housing is not taxed...

An E-1 with 4 months starts at $1,600 per month basic pay.
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Old 02-06-2017, 02:15 PM
 
Location: SW OK (AZ Native)
24,234 posts, read 13,082,046 times
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Quote:
Originally Posted by Submariner View Post
At age 60 I will have been retired living on my pension for 18 years.
Understood, and I see why my point wasn't because I didn't explain from the perspective of someone now working for the DoD as a civilian. That TSP 401K can be rolled into yet another 401K if the person is interested in and hired as a GS/WG/SES/etc civilian. It continues to grow tax-deferred, if managed properly, and provides yet another source of income down the line. Now, someone who truly retires after 20+ and doesn't work again, private or public sector, I can see where it won't be that appealing; depending on the pay grade it could be as much as $1000 per month difference in retired pay, though more likely about $500. Flip side: work another 20 and don't mess with the TSP, it could, depending on time and contribution, be a quarter of a million or more after 40 years.

The one issue we have with TSP, as with any 401K, is volatility. I lost a fair chunk of change 8 years ago and have recovered it, nicely the past three months in fact, but I am neither conservative nor aggressive with my distribution and when I truly call it a day in 5 years it will be an extra $1500 or so monthly. One can accept the G fund at ~5% annual rate of return, or go aggressive and toss it all into C, I and S funds... those folks are smiling right now, with respective past 12 months yields of 20.09%, 11.31% and 30.22%, but it can crash suddenly with those numbers ending up in parentheses on ledgers and spreadsheets.


Ralph_Kirk brings up an excellent point about retirement planning and commitment, as TSP is an account that remains available whether they are lifers or one-termers. I have known pilots who, because the airlines were hiring, separated at 15 years. That's 15 years of retired pay credit they won't get unless they get a Reserve or Guard job and get 5 years worth of points by 28. Now, they may have had a large paycheck coming to them at American or Delta, but many were laid off in 2002.

Last edited by SluggoF16; 02-06-2017 at 02:25 PM..
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Old 02-06-2017, 04:23 PM
 
Location: Forests of Maine
37,331 posts, read 61,161,924 times
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If you paid a percentage of your income into TSP during your career, whenever you get out, whether at 8 years, 12 or 20 your investment in TSP would remain intact and could still be used later.

The same exact thing could be said of any portfolio you invest in.

If a servicemember wants to invest in something, he/she may do so. Servicemembers have always been allowed to invest, and those portfolios would be available for whenever they are needed.

It is nice to see TSP being offered to servicemembers. Through most of my Active Duty career, I wore the hat of 'Command Financial Specialist' trying to convince servicemembers to budget and invest. Honestly very few did. Those who did benefited from doing so.
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