Big Decision On Retirement Pay Looming For Servicemembers

Community
Photo by Patrick Gordon

MANAMA, Bahrain — Servicemembers must choose soon whether to keep their retirement plans or enroll in a new plan that more closely resembles those available in the private sector.


Training required for servicemembers to decide whether to switch to the new plan, known as the Blended Retirement System, must be completed by Dec. 31.

Currently, retired servicemembers each month receive 50 percent of the average of their highest three years of base pay, plus 2.5 percent more for each year of active duty after 20 years.

Under the new plan, the payout is reduced to 40 percent and 2 percent more for each year of active duty after 20 years.

However, the new plan includes matching contributions to the Thrift Savings Plan, a program similar to a traditional 401(k). Servicemembers can choose to invest their money in different funds, with varying risk.

Many servicemembers already contribute to the Thrift Savings Plan. Under the Blended Retirement System, the government will match contributions up to 4 percent.

Servicemembers with less than 12 years of service can opt in to the new retirement plan throughout 2018. Starting Jan. 1, all new servicemembers are automatically enrolled in the new plan.

The mandatory training directs servicemembers to a retirement calculator that can help them decide whether to switch plans. The difference in benefits could amount to hundreds of thousands of dollars.

“I don’t want to switch over because I joined the Navy under the old retirement system,” said Petty Officer 2nd Class Gabriel Robidart, a sailor stationed in Bahrain with nearly 10 years of service. “I think (the legacy retirement plan) benefits me more in the long run.”

Without factoring in future pay raises or taxes, if an E-7 with 20 years of service retired today and lived for 40 more years, he or she would end up getting roughly $1.1 million over that time. The same E-7 retiring under the new plan would get roughly $876,787, plus the additional investment income from the Thrift Savings Plan.

A servicemember contributing $5,000 per year for 20 years, with government matching funds and a 5% annual rate of return, would end up with about $200,000, excluding inflation and taxes.

As with a traditional 401(k), participants must wait until age 59 1/2 to withdraw from the savings plan without penalties.

For servicemembers close to the 12-year career mark who haven’t invested much in the Thrift Savings Plan, switching may not be beneficial.

Only about 20 percent of servicemembers make it to their 20-year mark. Most who serve never get to the point where they can collect that monthly retirement check.

For sailors like Petty Officer 2nd Class Naomi Vanduser, who is on her first enlistment and may get out before 20 years, the new plan helps ensure that she will have more money invested in her Thrift Savings Plan fund, which she can then roll over to a 401(k).

“I don’t know if I’m going to do 20 years, and I’d rather get something, rather than nothing,” she said. “So, if I get out after my next enlistment, then at least I walk away with something.”

The Blended Retirement System also offers other incentives, such as a continuation of pay bonus at the 12-year mark of a servicemember’s career and the option to receive lump-sum payments at retirement. However, choosing to receive a lump-sum payment also greatly affects the amount of retirement pay servicemembers will receive over their lifetimes.

The training can be found on the Joint Knowledge Online website: https://jkodirect.jten.mil

behnke.jason@stripes.com

©2017 the Stars and Stripes

Visit the Stars and Stripes at www.stripes.com

Distributed by Tribune Content Agency, LLC.

Every once in a while, we run across a photo in The Times-Picayune archives that's so striking that it begs a simple question: "What in the name of Momus Alexander Morgus is going on in this New Orleans photograph?" When we do, we've decided, we're going to share it — and to attempt to answer that question.

Read More Show Less
Members of the Syrian Democratic Forces control the monitor of their drone at their advanced position, during the fighting with Islamic State's fighters in Nazlat Shahada, a district of Raqqa. (Reuters/Zohra Bensemra)

MUSCAT (Reuters) - The United States should keep arming and aiding the Kurdish-led Syrian Democratic Forces (SDF) following the planned U.S. withdrawal from Syria, provided the group keeps up the pressure on Islamic State, a senior U.S. general told Reuters on Friday.

Read More Show Less

President Donald Trump claims the $6.1 billion from the Defense Department's budget that he will now spend on his border wall was not going to be used for anything "important."

Trump announced on Friday that he was declaring a national emergency, allowing him to tap into military funding to help pay for barriers along the U.S.-Mexico border.

Read More Show Less

Long before Tony Stark took a load of shrapnel to the chest in a distant war zone, science fiction legend Robert Heinlein gave America the most visceral description of powered armor for the warfighter of the future. Forget the spines of extra-lethal weaponry, the heads-up display, and even the augmented strength of an Iron Man suit — the real genius, Heinlein wrote in Starship Troopers, "is that you don't have to control the suit; you just wear it, like your clothes, like skin."

"Any sort of ship you have to learn to pilot; it takes a long time, a new full set of reflexes, a different and artificial way of thinking," explains Johnny Rico. "Spaceships are for acrobats who are also mathematicians. But a suit, you just wear."

First introduced in 2013, U.S. Special Operations Command's Tactical Assault Light Operator Suit (TALOS) purported to offer this capability as America's first stab at militarized powered armor. And while SOCOM initially promised a veritable Iron Man-style tactical armor by 2018, a Navy spokesman told Task & Purpose the much-hyped exoskeleton will likely never get off the launch pad.

"The prototype itself is not currently suitable for operation in a close combat environment," SOCOM spokesman Navy Lt. Phillip Chitty told Task & Purpose, adding that JATF-TALOS has no plans for an external demonstration this year. "There is still no intent to field the TALOS Mk 5 combat suit prototype."

Read More Show Less

D-Day veteran James McCue died a hero. About 500 strangers made sure of it.

"It's beautiful," Army Sgt. Pete Rooney said of the crowd that gathered in the cold and stood on the snow Thursday during McCue's burial. "I wish it happened for every veteran's funeral."

Read More Show Less