Anyone want to talk retirement news?

[audette]

So, the Defense Department sent their recommendation to Capitol Hill about military retirement.

I'm not sure what to think.

I like that the proposal encourages the TSP, and has a decent match (after completing an initial tour - I think it's slimy that you have to have to wait until after four years of service to get the match).

But, really, do we really expect servicemembers to self-direct their retirement savings now?  Hasn't the fun with 401k's shown that the average American really doesn't save anywhere _near_ enough to fund their own retirement?

I suspect this is going to wreak havoc with mid-level and senior retention.  Frankly, if this system was in place already, DH would have jumped ship ages ago - this life is too fraught with crap to put up with it for a career if there's no carrot at the end.  But, of course, we won't see that impact for 5-10 years.

[audette]

Huh. I think I misunderstood a critical element when I first read up on it - there will still be retirement eligibility at 20 years, just that the amount of payout earned for that retirement will be 80% of what it has been. (so, at 20 years instead of getting 50% of base pay, it would be 40%)


Combining that with the TSP incentives is an interesting idea. I'd still prefer to see matching happening sooner than after 4 years service, though.


So, strike my comments above about retention issues. Even 40% is a decent carrot, although not as good as previously offered. Is it possible to do with TSP's the "substantially equal payments" or whatever it's called from a 401k to remove funds prior to age 59.5? If someone went gangbusters on retirement savings, combining that with a 40% retirement at 20 years, it might work out to some folks benefit, I suppose...


Interesting. Much to think about.

[VillainV]

So....are those of us who have been in for a while grandfathered? Can I still expect to receive my full retirement at 20 years or am I screwed?

[audette]

Jun 10, 2015 20:48:33 GMT -5 VillainV said:

So....are those of us who have been in for a while grandfathered? Can I still expect to receive my full retirement at 20 years or am I screwed?

Looks like current servicemembers will be grandfathered in, but can opt to change over to this system if they want to.  That might be worthwhile for those that only have a few years in, or who know they won't stay in the full 20.

[audette]

Stan - that's a concern of mine, too. Some of the funds within the TSP suck, frankly, particularly if you consider the average 18-20 year old enlistee who has 40-50 years of growth/risk in front of them. It's also hard to keep experienced, seasoned investors in the right balance of stocks thru a market downturn, much less someone who may or may not have any financial literacy under their belt.


I also wonder if the crappy "investment" folks that prey on young servicemembers will see ETS'ing servicemembers as a good target now, to rollover the value in the TSP into an IRA (with huge fees, of course).

[dcn]

Jun 11, 2015 0:09:38 GMT -5 Stan said:

This doesn't bother me much, except that most younger service members have no fucking clue about how their TSP works. Even if they are contributing, it's to the automatic no growth plan, but most aren't. I did what I could to explain it at both basic and OCS, but people were focused on other things. They need to make this an essential class at training where it's explained WELL.

The article I read said that everyone would have 3% withheld for contributions and you could only opt out after completing a financial competency course. They should make it mandatory for everyone IMO.

Anyway, I think this is ok, especially when you add in the 12 year "bonus" they will offer to stay in 4 more years. I think that will help retain some people. The current retirement system really isn't maintainable long term, I think this is a decent compromise.

[ilovecandy]

I don't mind most of the recommendations and if they had started the tsp match we would have been doing that. But I do think it sucks that they won't match it until after 4 years of service.

[audette]

Jun 12, 2015 19:00:26 GMT -5 dcn said:

Jun 11, 2015 0:09:38 GMT -5 Stan said:

This doesn't bother me much, except that most younger service members have no fucking clue about how their TSP works. Even if they are contributing, it's to the automatic no growth plan, but most aren't. I did what I could to explain it at both basic and OCS, but people were focused on other things. They need to make this an essential class at training where it's explained WELL.

The article I read said that everyone would have 3% withheld for contributions and you could only opt out after completing a financial competency course. They should make it mandatory for everyone IMO.

Anyway, I think this is ok, especially when you add in the 12 year "bonus" they will offer to stay in 4 more years. I think that will help retain some people. The current retirement system really isn't maintainable long term, I think this is a decent compromise.

The concerns I have is that there is no details given about the "financial competency course".  Who offers it?  Is it a couple hour powerpoint training that you can click thru without paying any attention, like so much of the mandatory training in the military seems to be?  Is it offered via the military, or will a third party come in to teach it?  And, if it is a third party, who is vetting those third parties?

The 12 year bonus is chump change, from what I've heard.  It's "at least" 2.5 times base monthly pay.  Which, might sound pretty nifty, but feels wasteful - it's small enough that it isn't likely to effect a change of opinion as to staying or leaving the military.

[dcn]

I have the same questions about the course too.

It won't be perfect. But all together with the matching tsp I really think it is a good compromise. I'd really be interested in seeing how much they think it will save over time.