Military weighing retirement overhaul

[Monello]

Anyone joining the military after Jan. 1, 2018, would have a defined retirement benefit plan as well as a 401(k)-type plan. The department would begin matching contributions, up to 5 percent, after three years. No one now in the military would have to participate in the contribution plan, but those with fewer than 12 years in the service could choose to join.

Another interesting fact from the article:

More than 60 percent of current recruits come from the South, and many of them are from families with military backgrounds.

cha,cha,cha, changes

 

[Hodr]

Changes to the retirement system (military or civil service) never seem to be a benefit to the employee, just a way for the government to cut our compensation and make it more attractive to go contractor.

Under CSRS you never had to pay social security and could retire with 80% of your pay after 30 years. Under FERS you can get up to 33% after 30 years, plus social security and TSP. The social security hits you for 6% of your income, and if you expect to get anything out of TSP you should probably be fully funding it ($17k/yr currently).

So, once that retirement system rolled in we effectively received an ~20% pay cut. And while it's technically possible you will do better under FERS than under CSRS when retired (if the stock market does well and you were properly invested in C/S/I funds), you still would have been much better off with CSRS and a traditional IRA.

Given the shorter period for military retirements, the lower starting wages, the less financially savvy youth, and the fact that this plan doesn't start matching for 3 years those retirement accounts are going to be pretty pathetic for someone who retires with 20 years and will quickly be exhausted. Way to look after our servicemen.

 

[blacklabman]

Hey Hodr!

Under CSRS you never had to pay social security

True, but civil service was paying 7 1/2 % into the CSRS system.

 

[Hodr]

Hey Hodr!

Under CSRS you never had to pay social security

True, but civil service was paying 7 1/2 % into the CSRS system.

Yeah, which is supposed to be equal to the SS + FERS contribution. So, provided you put zero into your TSP you would be paying roughly the same but expect to get much less at retirement.

So the difference may not be quite as drastic, and mostly equal to whatever you put into TSP (so 5% to get the matching, up to 15% or so to fully fund, ob. depending on how much you make).

But this also is assuming SS will still be around when you retire. Some of us are not too sure about that.

 

[Peepaw95]

Under CSRS you never had to pay social security and could retire with 80% of your pay after 30 years.

I agree with most of what you said but you better check your facts on this issue. At 55 years old and 30 years of service you got 56% of your pay not 80%.

 

[Hodr]

At 55 years old and 30 years of service you got 56% of your pay not 80%.

Just double checked, and you are correct it would take 41 years to get to 80%. Though they count sick time and leave 1 to 1 in your total, which at least in the case of my old man added two years to his time. Which he didn't need as he was a Navy employee from the age of 17 (counting service time) and retired at 64.

But I think the point stands. My minimum retirement age (MRA) is 57, but I believe you need to be 59.5 to access TSP (and older for social security). So I think most would have on until 59.5. If you entered the workplace at 22 you would have around 38 years under your belt when you retire. Not quite enough to have maxed out CSRS, but close. Especially if you never used much sick leave.

 

[PeoplesElbow]

Don't forget the automatic 1% you get into the TSP regardless whether you put anything in or not.

 

[b23hqb]

Under CSRS you never had to pay social security and could retire with 80% of your pay after 30 years.

I agree with most of what you said but you better check your facts on this issue. At 55 years old and 30 years of service you got 56% of your pay not 80%.

Not quite. In 2009, I retired at 55 with 37 years, 5 months (32 years, 4 years military I bought back, nearly 3000 hours of sick leave - I can't help it I was healthy) I get CSRS of 70% of my high three gross, so not too shabby. Pre-CSRS work plus 21 years Reserve get me SSI when I want it. I'm just letting my voluntary contributions to the TSP ride as play around money.

We did pay 7.5% every two weeks for those 32 years, though. So it's not like many state and local govts that require no investment by the employee.