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:
I’ve written before about ways to navigate the rules for making TSP Withdrawals after Separation from Federal Service. Unlike an IRA (or most employer-sponsored 401k plans) the Thrift Savings Plan (TSP) has strict rules on when and how you may withdraw from TSP – Each one of these TSP Withdrawal events is like using up a ‘Silver Bullet’ from your retirement savings arsenal.
I’ve read many posts here lamenting how inflexible TSP is in allowing withdrawals.
Faithful Gubmints readers, know that there are technically FOUR ways to perform partial withdrawals from your TSP Account. Continue reading
I’ve mentioned the Pluses and Minuses of the Thrift Savings Plan (TSP) here many times. I’m on record stating that overall I’m a big fan of the TSP.
Recently, Congress passed regulations that automatically enroll new hires in to ‘age appropriate’ Lifecycle (or ‘L’ Funds) based on employee age. This was done because the G Fund is viewed as being less lucrative or too conservative for most folks. Before we dive head first in to L funds, let’s extoll the virtues of the TSP G Fund.
Here’s why I like the TSP’s G Fund.
TSP’s Executive Director is having a change of heart.
Recently the Federal Retirement Thrift Investment Board (FRTIB – the group who runs the TSP) announced that it will finally (and they really mean it this time) consider adding a Mutual Fund Window option to the TSP. FRTIB is commencing a study that will last through 2015 on how best to implement the Mutual Fund Window option. Continue reading