Mmm- Yeah, I’m gonna have to ask you to save much more for retirement, okay?
Defined-Benefit Pension Programs (like your FERS Annuity and/or Military Retirement Pension) are headed the way of the Dodo Bird. Here’s a recent example.
The State of California recently illustrated the difficulty of running a Defined-Benefit Pension program. CALSTRS (the California State Retirement System) is a juggernaut of a pension fund that is designed to support almost 500,000 teachers, state employees, and municipal employees in retirement. Continue reading
As I’ve written many a time before, GubMints is a big fan of the Thrift Savings Plan (TSP).
Recently the White House Social and Behavioral Sciences Team decided to get ‘Freaky’ with Behavioral Economics and do some experiments to encourage more Active Duty Servicemembers to enroll or re-enroll in the TSP. They did some interesting experiments to try and ‘move the needle’. Continue reading
It’s going to take a while, but the Thrift Savings Plan has approval to move forward with slacking the noose of rules around TSP Withdrawals. Continue reading
Pentagon Brass, Congress, Military Service lobbying agencies, and the supposed ‘watchdog’ press are all lauding the proposed ‘New’ Military Retirement System that blends the Thrift Savings Plan in with a slightly-reduced ‘cliff-vested’ pension at the completion of a 20-year military career.
Um, have any of you actually read this proposal and done the math?
Since this post might get read by high-ranking officials, I’ll dumb it down for you right now and give you the ‘Bottom Line Up Front’ (BLUF) before doing a deep-dive in to the details.
Point #1 – Is this a good deal for Junior Enlisted? No. The ‘Hybrid’ retirement proposal gives them an IRA rollover check for a whopping $6704 at the end of a typical 5-Year first Enlistment Contract.
Point #2 – Is this a better deal for a 20-year Enlisted Career? No. A Career Soldier/Airman/Sailor/Marine has a shortfall of almost $4k/year in annual income at 20 years of service.
Point #3- Is this a better deal for a 20-year Officer Career? No. A 20-year Officer Career retirement check falls short by $3k per year. (However, if the TSP returns more than 11% per year OR officers save more than 5 percent per year in salary deferrals then the ‘New’ Retirement System is a better deal for Officers).
Assumptions for above: 1) Salary inflation rate of 2% per year, 2) TSP rate of return is 6% per year (or 3 times the current G Fund rate), and, 3) Soldier TSP salary deferrals are enough to ‘max out’ Uncle Sam’s ‘TSP Match’.
What to conclude? Here’s my $.02: