Posted on 01/28/2017 9:35:35 AM PST by SandRat
Comparing the Current Military Retirement Plan with the New Military Retirement Plan
Specifics about the new military retirement plan are scarce, so will do our best to compare the current military retirement plan with the new military retirement plan based on information obtained through news sources and briefings. If you know of something that we can add to the comparison chart below, let us know about it. We hope that this continues to be a growing resource comparing the two plans so we can all learn more.
The current plan is listed on the left and is compared with the new plan listed on the right. To the best of our knowledge the information below is accurate. If you know something needs to be edited, let us know.
Current Military Retirement Plan
New Military Retirement Plan
- According to recent news reports, over time you earn more with the current military retirement plan versus the new military retirement Plan. If the reverse was true, they would not be looking at changing it.
- Will likely earn less money during retirement than the plan currently in place.
Once you hit 20 years of service, you are eligible to retire and receive lifetime benefits equaling the average of the last 36 months of pay.
- Whether you serve 5 or 25, you will not be eligible to draw retirement until you are 60-65 years of age, but you can take your money with you to keep investing. You will be able to withdraw money in the form of a loan for healthcare, home buying and specified emergencies.
- The current military retirement plan was designed when many personnel left Military Service and did not seek, or in some cases, did not have the skills to get post-military retirement employment (second career)
- Getting into a second career is more common now and the new military retirement plan would allow personnel to leave service even before the 20 year mark for another career and continue to build the retirement savings they started to accrue while serving.
- The current military retirement plan was designed at a time when military pay was not necessarily competitive with the private sector.
- The new military retirement plan is being designed in a time when military pay is in the top 25% of pay for high school Graduates (Enlisted) and College Graduates (Officers)
- If you leave service prior to hitting the 20 year mark, you receive none of the retirement money that you have "earned" over the course of your time in service
- If you leave service prior to the 20 year mark, you will get to take the retirement money that you earned with you.
- You have less of a chance of your retirement money earning more money through investing
- You will be able to choose the how you would like to invest your money through TSP on a yearly basis
- Participation in the Thrift Savings Plan (TSP) is an optional way to invest some additional money towards your future through the U.S. Military's version of the 401k style account
- Participation in the Thrift Savings Plan will be mandatory and the Government will contribute a defined contribution into your account. Current estimates are that the contribution may be 16.5% of base pay.
- Retirement benefits are not greater for personnel serving in high risk jobs, on combat deployments or hardship tours. Whether you sit behind a desk for 20 years or you clear routes of IEDs for 20 years, both would get the same retirement.
- Contributions into TSP by the Government may be increased for personnel deployed to combat zones, on hardship tours or possibly with higher risk jobs.
- Knowing that you will receive 50% of your pay when you retire with at least 20 years of Service may be a benefit to serving in the military longer.
- There is no benefit to staying in 20 years other than additional contributions by the Government into your TSP account.
- lifetime benefit of 50% of your last three years of base pay is something that can be counted on.
- With your retirement money being invested in bonds, mutual funds, etc., there would be no extra protection against market fluctuations meaning that you could make money or just as easily, lose money.
They can try this, but people will leave in droves, especially if they are constantly moved and/or deployed.
The article at the link is 5 years old — is it still applicable with our current administration?
I did 1968-1976. As an Airman Basic, I remember my first advance pay was a twenty a five and a one. I had to give the one to a damned barber to whack off my hair.
After basic, it was about $94 a month that stayed pretty much around there until I went “over two.”
After 8 plus years as an E-5 my monthly pay was $597.30 with another $153 thrown in for housing. Me and the wife subsisted on Stouffers Macaroni and Cheese (at 25 cents) and our son got everything else, including all the heat in our electric house.
Nobody ever told me about “investments” and “bonds” and 401Ks - just that 50% basic pay stuff of retirement. The only so-called good-thing I got back then was an additional life insurance policy for $15K that cost ONLY $33.65 a month and I could get it all back at ‘age 65’...problem was that ‘age’ was the policy age - Metropolitan Life Insurance Company folks.. thieving bastards! Screw the hell out of Snoopy.
I will say this, and I believe it was my godsend. The GI Bill. I used that to pay for books and tuition all through my three years at Georgia Institute of Technology where I went on to a much better life.
Those hardships are behind me and my family now, and we are all the better for it. Yet I can’t help remember back to things like no 401Ks, no bonds, lower-than-low pay and endless absence (7 of 8 years overseas).
If anyone is interested in reading about the new blended retirement system, use this link in Military One Source:
http://www.militaryonesource.mil/financial-and-legal/personal-financial-management-and-taxes
It has a section there that goes over the whole thing. Essentially, starting in January 2018 all members coming in will be in the new BRS and those with less than 12 years will have the option to join it. In a nutshell, here are the changes:
There will be a match in their TSP (Thrift Savings Plan, the mil version of a 401K) of up to 5% after two years (vesting).
At 12 years, all members will be eligible for a continuation pay which will be like a bonus if you sign up for 4 more years. The amount of bonus will probably depend on your job but everyone does get a bonus.
If you make at least 20 years, the multiplier will be 2% instead of what it is now at 2.5% to figure your pension.
All in all, I think it is a much better retirement plan than the current one. Only about 19.5% of the people are like me and do at least 20 years and retire. Most don’t get anything, now almost everyone gets something and if you are a smart investor, you will have more money after 24 years than what I got.
The big change I see, is they are preparing for the value of the dollar to deflate radically. The current plan pegs your retirement to what’s currently being paid the changed plan pegs your retirement to what was paid.
The new plan is worthless.
Did you notice when this was published? It is copyrighted 2011. These changes happened several years ago. I’d like to know what’s going on now.
Since only about 20-20% are staying for at least 20 years, the plan is more flexible. If you are getting out, you just rollover your benefits to an IRA if you want to. The plan doesn’t eliminate other existing benefits.
Now that I have over 5 years civilian federal service, my military time is added for pension purposes, and I now get 8 hours annual leave per pay period.
I also used the GI bill to pay for my masters degree, and ROTC paid for college. Overall it worked out great IMO.
“Once you hit 20 years of service, you are eligible to retire and receive lifetime benefits equaling the average of the last 36 months of pay.”
Under government restriction, if you do not reach the grade of E-7 by the time you reach 20 years, you are forced out with a retirement. But this statement only applies to troops not in a critical career field.
“The current military retirement plan was designed when many personnel left Military Service and did not seek, or in some cases, did not have the skills to get post-military retirement employment (second career)”
With the disabilities the soldiers have been retiring with, and their inability to receive the type of education and work experience employers require from their employers prior to hiring, a second career for a large amount of troops consists of stocking at Walmart or sales which places the employers in no commitment to the employee other than commission. The unemployment problem for the retiree is the same, if not more, than the person with the doctorate walking the street looking.
“Retirement benefits are not greater for personnel serving in high risk jobs, on combat deployments or hardship tours. Whether you sit behind a desk for 20 years or you clear routes of IEDs for 20 years, both would get the same retirement.”
Maybe so, but the pay while you were in was predominately different for downrange troops. It’s gotten so bad to keep people in that they are now starting to offer a selective re-imbursement bonus, (SRB) to troops just to stay in another year of $10k extra. They are hurting. So if the troops are flooding out into an almost non-existent employment possibility, what’s to retire for?
There’s a lot of things in the new retirement plan tghat add up to one thing, they can’t keep people in so they try to entice them to stay by making it ugly to get out. Problem solved.
red
I wouldn’t trade my time for anything, but there were hard times that eventually were offset by other opportunities that the time served gave me.
Right now, servicemembers are being educated about their retirement choices. This has not been communicated widely yet.
Say what?
This has not been the case for the past 30 years.
You only get 50% if you go to 30 years not 20. With the "up or out" policies the only people who will retire at 30 are O-6 or E-8 and above.
I don't know who wrote this but considering they are blatantly wrong about this I would take it with a big honking grain of salt.
Ping to article and #5 especially
Imo, changing retirement on those already under contract is a violation of that contract.
If soldiers have no reason to maintain good faith and confidence in their government, then the government should be terrified of having to try to maintain good faith and obedience of the soldiers.
High year of tenure for USAF E-8 is 26 years service.
Wouldn’t be the first time. I was told at my first reenlistiment I’d have free health care for life if I stayed in for 20 years.
By the early 90s, that promise was “retired”.
Active Duty ping.
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