Retirement: BRS/High 3

[pourts]

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[BigRed389]

That isn't exactly how it works. You have to get a "good year" by getting enough points for that year to count towards your 20 years to qualify for the pension. Yes, reservists that fly typically drill more than non-flying reservists and therefore acquire more points which means they'll more money from the retirement. But unless you were on long-term orders and/or a combination of drills and orders for the whole year, it's not a full year towards your retirement (a full year is 360 points; Uncle Sam spots you 5 or 6 free points a year on active duty).

As one data point, I don't know of a single reservist who will be opting in to BRS.

Well...why would you? Thinking about it a bit more, seems like BRS offers nothing for Reservists.

BRS seems to rely on TSP matching contributions making up most of the shortfall of the pension payout reduction.

But if you're a Reservist and not collecting active duty pay regularly, and/or pulling in matching contributions on a separate 401k plan (401k and TSP share the contribution match limit), then BRS has no way to make up the difference.

 

[Flash]

...I talked to a reserve IP about a month ago and he told me that if you are in a flying job reserve-wise each of your years in the reserves will count as a full year towards your retirement because the flying days add up a little bit more than a regular reserve job....

That isn't exactly how it works. You have to get a "good year" by getting enough points for that year to count towards your 20 years to qualify for the pension. Yes, reservists that fly typically drill more than non-flying reservists and therefore acquire more points which means they'll more money from the retirement. But unless you were on long-term orders and/or a combination of drills and orders for the whole year, it's not a full year towards your retirement (a full year is 360 points; Uncle Sam spots you 5 or 6 free points a year on active duty).

Yeah, I didn't catch that and SlickAg is right that reservists who fly usually get more points towards retirement than a 'regular' reservist but they still get the same retirement every other reservists gets at 60 unless they do time on active duty.

As one data point, I don't know of a single reservist who will be opting in to BRS.

But if you're a Reservist and not collecting active duty pay regularly, and/or pulling in matching contributions on a separate 401k plan (401k and TSP share the contribution match limit), then BRS has no way to make up the difference.

Every reservist I know who has the option is sticking with the old system, as BigRed points out the juice just ain't worth the squeeze for us.

 

[IwannabeaPHROGdvr69]

That isn't exactly how it works. You have to get a "good year" by getting enough points for that year to count towards your 20 years to qualify for the pension. Yes, reservists that fly typically drill more than non-flying reservists and therefore acquire more points which means they'll more money from the retirement. But unless you were on long-term orders and/or a combination of drills and orders for the whole year, it's not a full year towards your retirement (a full year is 360 points; Uncle Sam spots you 5 or 6 free points a year on active duty).

As one data point, I don't know of a single reservist who will be opting in to BRS.

Any chance you could explain this a little bit more? This is kind of what I was trying to get at with the question.. I know for him it was a specific situation because he is a VT IP so has some sort of long term orders that allow him to drill for the whole year, and I am unfamiliar with the rest of the reserve flying opportunities and how you accrue points for retirement. But basically what you are saying is that if someone were to try and finish out 20 as a reservist after their MSR as a pilot they would be better served staying with the legacy system?

 

[Flash]

Any chance you could explain this a little bit more? This is kind of what I was trying to get at with the question.. I know for him it was a specific situation because he is a VT IP so has some sort of long term orders that allow him to drill for the whole year, and I am unfamiliar with the rest of the reserve flying opportunities and how you accrue points for retirement. But basically what you are saying is that if someone were to try and finish out 20 as a reservist after their MSR as a pilot they would be better served staying with the legacy system?

A reservist gets points, one for every drill (one drill weekend = 4 points) and one per day of active duty. Your retirement is figured out by dividing the number of points by 360, converting your pints into an equivalent number of years, then times 2.5 under the old system. For example, if you did 10 years on active duty (~3650 points) then did 10 years as a reservist doing your 12 drill weekends a year (48 points) and your Annual Training/'Two Weeks' (12 points) along getting 15 'free' points just for participating you would end up with 4400 points. Your retirement under the old system is them 4400/360 x 2.5 = 30.55%, under the new system it would be 4400/360 x 2.0 = 24.44%, which you would get starting at age 60.

Nowadays as a reservist you will likely do at least one mobilization, getting one point per day on active duty, and for every 90 days you serve on active duty you get your retirement 90 earlier (not including medical). I know quite a few folks who will get over 50% in reserve retirement but they usually did 4-7 years on active duty as a reservist after completing their active duty stint, more often than not they were furloughed airline pilots who took long-term MOB's or ADSW jobs that no longer exist.

The only possible scenario that I think your VT IP guy is on active duty right now is through something called ADSW but I don't think that is common in the training command and not something to depend on. Either that or something got lost in the translation between him and you.

 

[Jim123]

Nowadays as a reservist you will likely do at least one mobilization, getting one point per day on active duty, and for every 90 days you serve on active duty you get your retirement 90 earlier...

**

Unless they sneak the phrase "Title 10 of the U.S. Code, Section 12304b" into your mobilization orders, in which case your retirement date might remain unchanged. It's sort of the mobilization shop sneaking one past the goalie (you).

So watch out for that one. Or other sneaky tricks like it in the future.

 

[Flash]

Unless they sneak the phrase "Title 10 of the U.S. Code, Section 12304b" into your mobilization orders, in which case your retirement date might remain unchanged. It's sort of the mobilization shop sneaking one past the goalie (you).

So watch out for that one. Or other sneaky tricks like it in the future.

I don't know a single reservist that has happened to, while the Navy Reserve may not be the most well-run organization they haven't gone out of their way to screw people over like that. If that has happened I would guess it was an honest mistake and would have been corrected once noticed.

 

[Spekkio]

Lets talk about 46: I can get you an extra $20,000 per year in long term capital gains (taxed at 15%) in a taxable account from the money you didn't spend paying off your house early. Or you can withdraw it penalty free from Roth principal. Or I can get you rental properties that cash flow $20,000 annually. That's because I was making 5 or 6% (I think a reasonable assumption) compared to the 3.5% loan you paid off. Granted, my strategy has slightly more risk, but its very prudent risk, and that's why I am beating this dead horse so the young guys out there consider it. A 3% difference may not seem like much in 1 year, but it will make a HUGE difference in the long run.

With $300,000 invested in the stock market, you can make $20,000 in dividends. You can also lose $100,000 in a year, which happened in 2008. You can also lose $200,000 over the course of three years, which would have happened from 2000-2003. You can also only make 1-4%, which happened in 2011 and 2015.

So what is your strategy for those years to pay the mortgage? "Sorry Mr. Banker, the stock market crashed, I'll pay you in a few years once I get my money back though."

There's a reason that financial advisors tell people to move their funds away from the stock market post retirement. One bad year and your income will be cut drastically.

However, there is a problem with your model on page 4. Let me first say, we all know the stock market doesn't go up smoothly at exactly 7% forever. That is a simplification, but its necessary. In your model, the TSP contributions don't "appear" until the end of the year in a lump sum, and they make zero interest all year. This is reminiscent of the comment @villanelle made earlier about dollar-cost averaging, except its even worse-- the money isn't being "invested" until the end of the year.

Yes, annual lump sum investing is an assumption in the model, but really it's not very significant - maybe like $20,000 off after 40 years at your 8% margin rate and really the final difference in numbers are an order of magnitude higher. I assumed end of year investing because as a brand-new 0-1 you haven't been paid yet. The amount of time it would take to build a monthly model vice an annual one isn't really worth the squeeze- that spreadsheet took me 15 minutes and a monthly one would take me at least an hour.

The bigger problem with it is that 100 * 1.07 * 1.07 =/= 100 * .93 * 1.14. A true model would be stochastic and choose a random variable with a mean of 7%, adjusted for the percent invested in the stock market, and then average 30 or so trials. This is actually easier to do than calculating a monthly model.

But you can smooth all of that out by just lowering your overall assumption of average compounding, which is why I keep telling you that your 7-8% average is a pipe dream. I can nearly guarantee you that sometime in the next 20 years the stock market is going to lose nearly half its value again.

 

[nukon]

Earlier in the thread, it was asked if the government match counted towards the 18.5k contribution limit, and if there was any way to have the match go towards the Roth TSP. From a TSP.gov representative, here are the concrete answers:

You asked if Service Matching Contributions will count toward the elective deferral limit.

The 2018 elective deferral limit is $18,500. This limit does not include Service Automatic (1%) Contributions and Service Matching Contributions. Service Automatic (1%) Contributions and Service Matching Contributions will always be traditional, tax-deferred contributions, even if your own contributions are only Roth.

 

[SlickAg]

Well...why would you? Thinking about it a bit more, seems like BRS offers nothing for Reservists.

BRS seems to rely on TSP matching contributions making up most of the shortfall of the pension payout reduction.

But if you're a Reservist and not collecting active duty pay regularly, and/or pulling in matching contributions on a separate 401k plan (401k and TSP share the contribution match limit), then BRS has no way to make up the difference.

That was sort of my point. I am one, I know a lot of them, and we're not doing it...hence he could probably draw a conclusion from that.

Nowadays as a reservist you will likely do at least one mobilization, getting one point per day on active duty, and for every 90 days you serve on active duty you get your retirement 90 earlier (not including medical). I know quite a few folks who will get over 50% in reserve retirement but they usually did 4-7 years on active duty as a reservist after completing their active duty stint, more often than not they were furloughed airline pilots who took long-term MOB's or ADSW jobs that no longer exist.

The only possible scenario that I think your VT IP guy is on active duty right now is through something called ADSW but I don't think that is common in the training command and not something to depend on. Either that or something got lost in the translation between him and you.

It's been interesting to see the shift from the days of the Basically Unemployed Reserve Pilots (BURPs) to what there is now. From my vantage point (jet VTs), they are screaming for more IPs, and CNATRA and PERS have publicly stated (multiple times) that their get well plan is to "utilize the Reserves more". Unfortunately, I don't think they really understand that:
1) you can't FORCE guys to take orders
2) the lost decade days of the BURPs and other Reserve bums is essentially over
3) after reaching second year pay at the airlines the financial incentive isn't there anymore since a day of work for the Navy is money out of your pocket. Instead of my 5 days a month commitment that will net me about $2500 on drills, I could still be gone from my family and pick up 5 days worth of trips and make $3250 instead, plus that $500 being put into my 401k with over 30 years to grow
4) guys get out for a reason and they aren't exactly itching at the chance to come back on extended orders and put up with nonsense from the active duty types.
5) the Navy is no longer our primary job, and we've already quit once. Every day spent drilling typically means another night away from the family.

Anyway, right now it's basically unlimited ADT, they're not ADSWing guys. There was chatter of "local" mobs to your training wing, but they can't get the money since it's not directly fighting the war on terror.

They're especially short on O-4s, since only FTS types and Marines are manning the advanced VTs these days. I don't think the jet VTs have gotten an OP-T DH since 2015. Probably running about 70% staffed? But PERS says there isn't a manning problem because they have enough fleet DHs...

Any chance you could explain this a little bit more? This is kind of what I was trying to get at with the question.. I know for him it was a specific situation because he is a VT IP so has some sort of long term orders that allow him to drill for the whole year, and I am unfamiliar with the rest of the reserve flying opportunities and how you accrue points for retirement. But basically what you are saying is that if someone were to try and finish out 20 as a reservist after their MSR as a pilot they would be better served staying with the legacy system?

It doesn't really matter, but just understand that being on orders is not the same thing as drilling.

Correct, for a current reservist. YMMV since you'd have ~10 years to take advantage of the math. Without running the numbers, I'm skeptical since I don't think the government is doing this to be benevolent, but try to save money in the long run by trying to pay off while you're young and impressionable.

 

[Jim123]

I don't know a single reservist that has happened to, while the Navy Reserve may not be the most well-run organization they haven't gone out of their way to screw people over like that. If that has happened I would guess it was an honest mistake and would have been corrected once noticed.

I've seen a "voluntary" sanctuary waiver in a set of active duty orders and I thought that was a pretty underhanded thing to include in the terms and condition.

YMMV

 

[Flash]

I've seen a "voluntary" sanctuary waiver in a set of active duty orders and I thought that was a pretty underhanded thing to include in the terms and condition.

YMMV

And I know a guy whose orders were switched 10 days prior to getting sanctuary, but sanctuary was the only instance I am personally aware of where the Navy Reserve played that sort of game.

 

[bubblehead]

And I know a guy whose orders were switched 10 days prior to getting sanctuary, but sanctuary was the only instance I am personally aware of where the Navy Reserve played that sort of game.

The Navy Reserve closely tracks and monitors anyone - by name - who even remotely coming close to hitting sanctuary. In earlier years, the Reserve did a shit job of tracking it. Many, many enterprising people were gaming the system and went on to receive active duty retirements.

Reservists getting active duty retirements seriously screws up the system.

In today's system, you will never hit sanctuary. Ever.

 

[Gatordev]

In today's system, you will never hit sanctuary. Ever.

Unless you're an Admiral.

 

[bubblehead]

Unless you're an Admiral.

Any examples? Does 10 U.S. Code § 12646 specifically exclude general and flag officers?