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:
Happy Memorial Day!
Since the Thrift Savings Plan (TSP) might soon be the cornerstone of the Military Retirement System, I though I’d take some time to highlight some of the attempted shenanigans taking place with the TSP.
I say attempted because it literally takes an act of Congress (that’s the entire Congress) to alter the TSP’s charter/regulations. This is by design, because the TSP is deliberately designed to be apolitical and avoid the business of picking winners and losers. This prevents a Congressman/Senator from creating a fund designed to funnel federal employee retirement savings to his or her district/state/pork project.
Enter Congressman Don Beyer (D-VA). Continue reading
Recently the Labor Department posted a draft of proposed revisions to the Employee Retirement Income Security Act (ERISA). The purpose of the revision is to ensure that any finance professional who solicits or administers your Retirement Plan must act in a ‘Fiduciary’ capacity, disclosing in the contract how they are compensated- And notifying you of any Conflicts of Interest they have in administering your IRA (or Qualified Plan).
This is a much-needed change. Look at the DOL’s graph of retirement assets by plan type (IRA, 401k, or Pension) over the past 30 years: Continue reading
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