New thread--Adjusting the military retirement rules?

[Huggy Bear]

After reading it I can see where they are coming from to a certain extent.

I don't necessarily agree with it but I think I've got a much better grasp on what they're aiming for.

Nice find. There seems to be two different conversations in this thread, retirement and OP's original intent. Thread split?

As far as the retirement goes, make no mistake, the 20 year vestment period for retirement is a retention tool, no more and no less; a carrot on a stick. It's not there with your best interests in mind. I am happy and envious for those of you who did 20, you earned the pension. I just don't think it is right that at year 19 you can walk or be booted without a thing to show for it.

Those of you who did 20 can afford to be smug about it; those of you who are certain you are doing 20 better stay humble about it until you actually reach that day. There were times when I was in when I would have happily agreed to stay to 20 and would have signed on the dotted line. Shit happens, for various reasons I got out after 10 years and other than my own investments I have nought to show for it financially. As a comparison, with my current employer I am vested in the pension plan after only 3 years, and receive a significant employer match toward a 401k. It's nice to know that even after just one "tour" I'll have something to show for it.

Looking at it another way, we are all underpaid until we reach that 20 year mark. Let's say an officer entering today will earn $1.5 million over a 20 year career and then retire with the 50% pension (bear with me, then numbers are for example only, assume no inflation). That same officer lives to the life expectancy for males of 72 years old. In that 30 years retired he further earned $1.2 million from his pension. Total monetary compensation for 20 years service: $2.7 million.

Another officer gets out after 10 years. That officer earned $.6M during those ten years. Total compensation for ten years service: $.6M.

Under a more reasonable plan that officer who served at least 10 honorable years would have something small to show for it: 25% collectible at age 60 would be a start (about 15k a year). That would only bump his total compensation from $.6M to $.8M. Or, I would rather just dump the pension altogether and have a higher annual salary. Pensions are going the way of the dodo bird anyway it seems, and it won't be long until the military retirement again comes under the microscope.

 

[scoober78]

Just as a footnote to the larger discussion being had...does anyone see the military penison system being changed immediately? That is...as of x date, nobody will get a pension the day they get out...or do you see it being grandfathered in ala the Redux or Hi 3 systems....IOW...if you entered service after this date, you fall under the new system.

It seems to me that it would be politically impossible to change it in the first way...not to mention it would really piss me off.:icon_rage

 

[Brunes]

It's easy to say that military members should contribute to retirement with an officer's salary. Your enlisted guys make about half your salary with similar time in service (not including bonuses). Supporting a family and then putting a significant amount away for retirement to actually make a difference isn't exactly easy for these guys.

The math is there to prove that starting small while young is the way to go. 2 grand a year is enough to retire with nearly 1.5million dollars- and that only requires investing from age 20 to age 40 (~160 bucks a month) Between TSP (and the tax savings there) and a Regular or Roth IRA- It should may require some lifestyle changes, but it's not impossible or even excessivly difficult.

These changes would suck- and I think that the overall impact will be opposite what they are looking for. It will have a negative impact on force structure due to the "easy early out" factor. If you could get out early (like laser said) and get a higher paying job in the civilian sector- Why stay?? Bonuses from the military can't match benefits of higher overall salary.

 

[phrogdriver]

Just as a footnote to the larger discussion being had...does anyone see the military penison system being changed immediately? That is...as of x date, nobody will get a pension the day they get out...or do you see it being grandfathered in ala the Redux or Hi 3 systems....IOW...if you entered service after this date, you fall under the new system.

It seems to me that it would be politically impossible to change it in the first way...not to mention it would really piss me off.:icon_rage

I would almost guarantee some form of grandfathering. I would also imagine that they'd offer some of grandfatherees a bonus to voluntarily switch to the newer system, too.

 

[Flash]

Just as a footnote to the larger discussion being had...does anyone see the military penison system being changed immediately? That is...as of x date, nobody will get a pension the day they get out...or do you see it being grandfathered in ala the Redux or Hi 3 systems....IOW...if you entered service after this date, you fall under the new system.

It seems to me that it would be politically impossible to change it in the first way...not to mention it would really piss me off.:icon_rage

I think they will grandfather people in, but maybe not everyone. When the civil service switched from the Civil Service Retirement System to the Federal Employee Retirement System in the mid-80's, employees who had been in less than 4 years were switched but people who had been in for more than that stayed with the old system.

The Federal Employee Retirement System (FERS) is probably what the military retirement system might end up looking like if they change it, the main difference might be the time required. You have to put in 30 years (in most cases) and you get just 1% of your pay (1.7% for law enforcement) for every year served and you start receiving it at 57, all the while paying a small amount into the system. But they also match your TSP up to 5% of your salary. Except for the time requirement, I think the military one will look pretty similar.

 

[picklesuit]

The math is there to prove that starting small while young is the way to go. 2 grand a year is enough to retire with nearly 1.5million dollars- and that only requires investing from age 20 to age 40 (~160 bucks a month) Between TSP (and the tax savings there) and a Regular or Roth IRA- It should may require some lifestyle changes, but it's not impossible or even excessivly difficult.

These changes would suck- and I think that the overall impact will be opposite what they are looking for. It will have a negative impact on force structure due to the "easy early out" factor. If you could get out early (like laser said) and get a higher paying job in the civilian sector- Why stay?? Bonuses from the military can't match benefits of higher overall salary.

As an E-3 with a wife, I was putting $2K a year into TSP...I never saw the money so it was nothing to miss. It is completely doable...It was a set percentage of my pay, so everytime I got a payraise it meant more went in. I just upped it when I made LTJG from 6% to 8% of my pay...hoping to buy more at this nice lower rate...

 

[nittany03]

Bonuses from the military can't match benefits of higher overall salary.

Two words. Medical Benefits. Just had two grandparents pass away at age 90+. Believe me. Lifetime free medical is HUGE. Want to see your kids' inheritance vanish? Come down with some new and interesting terminal disease as your way to kick the can.

 

[phrogdriver]

Not to segue into investment advice, but the TSP isn't the best vehicle unless you've already maxed out your Roth IRA. It's generally better to get the tax benefit on withdrawal (Roth), then on deposit(TSP). This advice is different if you have bonus money to stash, or if you're already in a big-league tax bracket. If they start doing any matching to TSP, the story would obviously change.

 

[insanebikerboy]

Will Uncle still love me if the system changes?

There was an article about this a few years ago in the Navy Times, talking about almost everything this thread is talking about.

Anyways, they specifically addressed the grandfathering thing, and while I can't remember who they interviewed for the article, they said all new incoming would be under the new system. For everyone already in, the option would be there that if they wanted to get out at 10, 12, or whatever, they could take advantage of the partial and wait till later or stay till 20 and get the old system.

 

[JIMC5499]

Two words. Medical Benefits. Just had two grandparents pass away at age 90+. Believe me. Lifetime free medical is HUGE. Want to see your kids' inheritance vanish? Come down with some new and interesting terminal disease as your way to kick the can.

Uhh! What free medical? You need to take a closer look at that. There have been so many restrictions placed on veteran's medical care that it isn't even funny anymore. I know of one case where it took 3 months to get something done about a broken tooth. He kept going to the VA and they kept placing him on a waiting list and handing him a bottle of Vicodan and sending him home. Now that the tooth is fixed, we have to get him off a Vicodan addiction.

After the dealings that I have had with the VA, I'm ready to shoot anyone in favor of National Health Care, because the VA is an example of what it will be like.

The people I have delt with at the VA Medical Centers and Hospitals, the ones who actually work with the patients are fantastic. My criticism is purely for the paper pushers and management.

As far as the 10 year retirement bit goes, the Government will never go for it. If they do they can't have any more purges like they did in the late 80's to save money.

 

[stalk]

Uhh! What free medical? You need to take a closer look at that. There have been so many restrictions placed on veteran's medical care that it isn't even funny anymore...

There are two systems and they should not be confused. The retiree lifetime medical in discussion here is Tricare and Tricare For Life (TFL). The VA medical system is a separate entity. As a disabled retiree I've dealt with both systems and agree with your frustrations and observations wrt the VA. On the other hand, I've used both Tricare Prime and Standard after retiring with good results. There are minor issues here and there but no worse than dealing with United Healthcare at my previous employer.

At the risk of a minor thread-jack...IMO, MOAA (www.moaa.org) is doing a great job supporting active duty and retirees by addressing issues like these. This legislative update http://www.moaa.org/lac/lac_issues/l...003.htm#issue1
summarizes the latest VA funding bill approved by Congress.

 

[The Chief]

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Happy customers are few and far between, but good on you if you are happy with TFL. After you turn 65 you must buy Medicare Part B in order to receive TFL.

I am not unhappy but nonplused that the Govt promised me medical care for life if I would stay in the Navy at least 20 years. Now they tell me, yes, but I must pay three time as much for that care as other retired Govt employees, total near $3,000 pre tax dollars per year.

Very optimistic folk here-in. Grandfather all into any new system? Well, they are not doing that with social security. Social security is migrating to a means-tested system. More to come after the election, IMHO.

 

[Machine]

Not to segue into investment advice, but the TSP isn't the best vehicle unless you've already maxed out your Roth IRA. It's generally better to get the tax benefit on withdrawal (Roth), then on deposit(TSP). This advice is different if you have bonus money to stash, or if you're already in a big-league tax bracket. If they start doing any matching to TSP, the story would obviously change.

That's based on the assumption that Congress won't change the rules in the future.

 

[Flash]

Unfortunately with medical costs soaring even the military's retirees will likely have to shoulder more of the cost in the future. It is just simply too expensive without some co-pays.

 

[stalk]

Master Chief and Flash both make great points. The military promise of free medical coverage for life did not include buying into Medicare Part B. That result was of course a compromise when Uncle Sam lost its court case with veterans. MOAA and other veterans lobby groups are fighting hard to keep costs down but it is unfortunately an uphill battle.

For clarity sake, my experience has not been with TFL but (as stated in my previous post) Tricare Prime and Standard. Military retirees and eligible dependents may use those programs just like active duty dependents. Those programs are contractor run, similar to Blue Cross or UHC. When I hit 65 I can give you my opinion on TFL