26, Military, My Retirement Plan

[ATC Guy]

Hello everyone. I haven't posted in awhile but I read this forum almost everyday. Quick background on myself. I'm 26, married, planning to have our first child within the next year. We'd like to have 3 kids when all is said and done. I am an Air Force officer doing air traffic control with 1 year left on my 4 year commitment. I intend to separate late next year and get picked up with the FAA (already in the hiring process). I also plan on staying with the Air National Guard or AF Reserves.

So I realize at 26 a lot can change, but I wanted to write out my plan to ER and get the forum's opinion on it.

The Plan
1. 22 Years of FERS + 4 Year Military Buyback= 40% of high 3 (estimating 40% of $150k or $60,000 COLA'd pension plus health benefits) - this is based on the special retirement provisions for air traffic control.

2. Estimating $1,000,000 in savings based on conservative returns and maxing out the TSP program in addition to the Agency match of 5% of base salary.

3. 16 Years with Guard/Reserves plus my 4 years Active Duty, with a final pay grade of O-4. (Estimating $15,000 year COLA'd pension starting at 60)

4. Intend to have house paid off by retirement as well.

I know this is pretty generalized but I wanted to run it by the ER forums. I also understand the uncertainty of both the military and FERS pension systems. Something i purposely left out was the current social security supplement fed retirees recieve until age 62, and social security because i have doubts about their existance by the time I'm eligible.

I respect your opinions and would like to hear your thoughts, suggestions, and criticisms.

[Greg V]

A few thoughts...I have the FERS/Military pension combination and it is a great foundation for your retirement. TSP is an outstanding plan for retirement savings and, though the choices are limited, they are low cost and cover most major investment classes.

Just curious, wouldn't you need 30 years of qualifying gov't service and also be at Minimum Retirement Age (57 for you) to both get the enhanced FAA vesting level listed in your post and receive an immediate annuity (assuming you're in the ATC field your entire career)?

If that is accurate and you are planning on ER at ~50 yrs old, your projected FERS pension may be lower and you would also need a financial bridging plan from 50 to 57, including health insurance.

Keeping your military options open is a good idea...it can be a valuable for you both financially and professionally.

Best of luck.

[ReadyAimFired]

Thank you for your service as I enjoyed my six years in the Army but also left for the private sector. One thing I have learned from this forum is that your expenses are just as important if not more than your earnings. If you feel comfortable could you provide an estimate?

[timwalsh300]

If things go according to that plan you'd be fine as long as you keep your expenses below about about $100k/year, which is pretty easy for all but the most prolific spenders.

Some questions (not saying you are wrong; I just don't know): Do Air Force officers really get hired on as FAA controllers? I thought all the folks actually talking to me on the radio were enlisted. That's how Army ATC operates, anyway. Also, would all of that $150k be your base salary used to compute the pension? And can you really draw FERS, Guard/Reserve retirement, and Social Security all at the same time?

Lastly, I think that if Social Security isn't around in a few decades, these government/military pensions with medical coverage won't be around either. I'm not particularly worried about either system going away, but there is a hell of a lot more public support for Social Security.

Tim

[martyb]

Quote:

Originally Posted by timwalsh300 And can you really draw FERS, Guard/Reserve retirement, and Social Security all at the same time? Tim

I can answer this part....yes. I'm not FERS, but am CSRS. I will be drawing my AF Reserves retirement in addition to my CSRS pension. Since I fall under the Windfall Elimination Provision (FERS doesn't) I will get a much reduced SS payment when I reach eligibility age.

CSRS doesn't pay in to SS, but FERS does. I have 36 yrs under CSRS, but I did pay into SS before starting my CSRS covered career, so I paid in just enough into SS to just barely qualify.

[BLS53]

Military retired pay is not affected by other government pensions. The only time SS is going to be effected, is if you receive a pension based on work where you didn't pay FICA taxes.

I would be more concerned about the ATC profession being around for the next 30 years, than I would federal/military pensions and SS going away. Big changes loom once NextGen is implemented, that will reduce the controller workforce considerably. With the profession eventually facing the same obsolescence as navigators and flight engineers.

Anything in aviation is a nightmare of a career choice, Most military aviation ratings and specialties are overmanned. There's a reason for that. The grass is not greener on the civilian side.

[ATC Guy]

Thanks everyone for your responses so far!

As far as our expenses, between my wife and I, we spend about $30,000/yr without housing (we live on base and have no housing costs).

Tim, air traffic control is primarily an enlisted job however the Air Force has Airfield Ops officers who run air traffic control and airfield management. We get the same certifications as our enlisted controllers and are therefore eligible for the FAA.

BLS, it's true ATC technology is changing however I believe the career field isn't going anywhere anytime soon. I do worry about the lifespan of the FERS program. I will be vested within a year after starting with the FAA from what I understand with my 4 years military time (I've read you need 5 years to be vested). Every year after that will add on and with some good luck maybe I will get grandfathered in if they change the system.

[Boxkicker]

ATCguy, that is not true. You need to do 5 years of actual civil service to be eligible for FERS retirement. Upon that time, then your military time (assuming you bought it back) would then kick in for your annuity computation.

[martyb]

Quote:

Originally Posted by BLS53 Military retired pay is not affected by other government pensions. The only time SS is going to be effected, is if you receive a pension based on work where you didn't pay FICA taxes.

Actually, not quite true. If a military retiree (from active duty) wants to get credit for their military service towards their federal civil service retirement, they will have to give up the military retirement once the civil service retirement commences. The military time in years will be added to the civil service time, plus will require a deposit from the soon-to-be federal retiree for all the years they didn't contribute into the retirement system, and then they will get credit for both systems, going forward. They are free to draw the military retirement up to the point at which they retire from federal civilian service and combine the two.

This is not the case for a guard/reserves retiree though. They don't begin drawing their retirement until age 60. They are free to receive a pension from both sources. This is the category I fall into. You're right though, about the SS issue. I paid into SS for about 10 years way back in the 70's & early 80's so am qualified for a small SS check when I turn 60. However, since around 1983, I have not paid into SS at a level that meets the Qualified Contributions threshold, so get no SS credit for that period. I'll receive around $250 SS at age 62.

[BLS53]

Quote:

Originally Posted by martyb Actually, not quite true. If a military retiree (from active duty) wants to get credit for their military service towards their federal civil service retirement, they will have to give up the military retirement once the civil service retirement commences. The military time in years will be added to the civil service time, plus will require a deposit from the soon-to-be federal retiree for all the years they didn't contribute into the retirement system, and then they will get credit for both systems, going forward. They are free to draw the military retirement up to the point at which they retire from federal civilian service and combine the two. This is not the case for a guard/reserves retiree though. They don't begin drawing their retirement until age 60. They are free to receive a pension from both sources. This is the category I fall into. You're right though, about the SS issue. I paid into SS for about 10 years way back in the 70's & early 80's so am qualified for a small SS check when I turn 60. However, since around 1983, I have not paid into SS at a level that meets the Qualified Contributions threshold, so get no SS credit for that period. I'll receive around $250 SS at age 62.

But still, it seems that the buy in wouldn't result in any net loss in the total benefit, whether one draws two pensions or one. It doesn't seem one is sacrificing the military retired pay, but shifting the benefit to another source. Otherwise, why would a military retiree purchase the military time to credit to their federal service? My guess is that the federal pension is worth more by buying the military time, than the military retired pay and uncredited military time federal pension would be separately. This would not be the same as a penalty like SS applies with the WEP and GPO. If dollar for dollar, the buying of military time, results in the same or better monthly benefit, then for practical purposes the military retired pay isn't being sacrificed.

[Greg V]

BLS,

Your notion is correct if the person is a Military retiree from the Regular component who gets an immediate annuity upon retiring. They can choose to have two retirements (assuming they qualify for the FERS annuity) or waive their military retirement and combine those years into their FERS total (combination is one way only…can’t add the Civil Service time to the Military retirement). Most folks I know in this situation stick with two separate retirements as each system has some unique benefits.

It is different for a Guardsman or Reservist who does not usually get an immediate annuity upon retiring (normally begins at age 60, though there can be some adjustments to that age). For example, let’s say an airman serves 10 years on active duty and then leaves the Regular component and becomes a Guardsman or Reservist and also gets a Civil Service position. He/She can buy back those 10 years of military duty for FERS and also count those 10 years of Active Duty days, and points, to increase the amount of his/her Guard or Reserve military annuity. The military time can be credited to both systems at the same time, not just one or the other…a good deal for our folks in the Guard and Reserve.

This second situation would fit the OP if he gets the FAA job, becomes a Guardsman or Reservist and qualifies for an annuity under both systems. Last I heard, the FERS buyback was 3% of your base pay for the time you’re purchasing…usually buying the time ends up being a good fiscal choice if you're planning on a Civil Service career. Militarily, there’s no buyback, you continue your career and can count the time.

[BLS53]

Quote:

Originally Posted by Greg V BLS, Your notion is correct if the person is a Military retiree from the Regular component who gets an immediate annuity upon retiring. They can choose to have two retirements (assuming they qualify for the FERS annuity) or waive their military retirement and combine those years into their FERS total (combination is one way only…can’t add the Civil Service time to the Military retirement). Most folks I know in this situation stick with two separate retirements as each system has some unique benefits. It is different for a Guardsman or Reservist who does not usually get an immediate annuity upon retiring (normally begins at age 60, though there can be some adjustments to that age). For example, let’s say an airman serves 10 years on active duty and then leaves the Regular component and becomes a Guardsman or Reservist and also gets a Civil Service position. He/She can buy back those 10 years of military duty for FERS and also count those 10 years of Active Duty days, and points, to increase the amount of his/her Guard or Reserve military annuity. The military time can be credited to both systems at the same time, not just one or the other…a good deal for our folks in the Guard and Reserve. This second situation would fit the OP if he gets the FAA job, becomes a Guardsman or Reservist and qualifies for an annuity under both systems. Last I heard, the FERS buyback was 3% of your base pay for the time you’re purchasing…usually buying the time ends up being a good fiscal choice if you're planning on a Civil Service career. Militarily, there’s no buyback, you continue your career and can count the time.

The one I've never understood is the "technician" program the Guard has, where the member wears the uniform part time, and civvies part time, creating sort of a hybrid between active duty and civil service. I've never even attempted to figure out their retirement plan.

In the Navy, we had full-time active duty members administer the Reserve programs, who rotated through as normal tours of duty.

[Greg V]

The scenario I outlined is how it works for almost all Technicians. The major differences from other FERS employees are that military membership is a condition of employment for their Civil Service job and that they normally can't stay past their FERS Minimum Retirement Age without a waiver.

Often a Technician wants to continue as a Civil Servant and they qualify for a Priority Placement Program since the termination of their Tech job is related to military tenure policies and considered involuntary. As you can imagine their are plenty of policies, regulations and statutes that can make for lots of exceptions and complexities.

[martyb]

I was a technician with the Air Force Reserves from 1981 through most of 2008. The scenario of whether it's a good or bad idea financially for a retired active duty member to "buy back" their military time and go with just the civil service pension, giving up the military one, is largely dependent on the military rank/grade at which they retired. Generally, the higher in rank, the less desirable to do that. Seems like the cutoff on the enlisted side is somewhere around E-8 or so. I'm not sure about the officer situation, but there is a difference. Looking back, I really wish I'd stayed on active duty long enough to retire, but instead I punched out at 4 1/2 yrs. At least I did the 2nd best thing and got into the Reserves almost immediately after separating, and stayed in while earning my military retirement and also working on my fed career.

As far as technicians being required to leave their civilian jobs when they reach retirement age, the law says they can't be forced out before they reach an age/years of service combination that would allow them to retire with an un-reduced annuity. For me, being under the old CSRS system, that would have been age 55 & 30 yrs of service. However, I reached the 30 yrs part when I was only 49 yrs old because I did buy back my 4 1/2 yrs of active duty time (enlisted at age 19), so under the law, they couldn't give me the boot until I reached age 55.

Having always been inclined to prefer having a choice in matters, I bailed on my technician job in 2008 at age 51, and transferred to a different DoD agency that had no requirement that I remain in the reserves. I was then free to work as long as I wanted. Of course, somewhere just before that time, I found this board, and the wheels of retirement began really churning in my head.

So....here I am, just 6 months past my 55th birthday, and strongly leaning towards retirement this year. I could have punched in January when I turned 55, but decided to try to stick it out most of the year to put a little more into the TSP and also to max on my vacation time so I could get paid for it when I go. Also...maybe I'm a little skeered.....

BTW, I did go ahead & retire from the reserves in 2010. Now I just have to wait 4 1/2 yrs to collect on that one...

[Boxkicker]

BLS, I am a retired TAR/FTS. Receive the same retirement as any other Active Duty Navy.

[ATC KH]

Sounds like a plan ATC Guy, and I have a similar strategy in mind (Air Guard ATC, FAA ATC, retire in 50s with two pensions and a seven figure portfolio in today's dollars, etc.). A couple of minor suggestions:

One is that finding an open 13M slot in the Guard may be difficult, or it may be halfway across the country from your FAA facility. Like most things though, it is a matter of timing.

As I'm sure you are aware the wait for the FAA can be long and painful. The good news is that the FAA seems to love to hire military controllers so your chances of getting an offer are likely pretty good. I would just have a plan for what to do in the meantime.

A minor point, but FERS is only partially COLAd; the Guard pension has full COLA.

Good luck!

[ATC KH]

Quote:

Originally Posted by Greg V Just curious, wouldn't you need 30 years of qualifying gov't service and also be at Minimum Retirement Age (57 for you) to both get the enhanced FAA vesting level listed in your post and receive an immediate annuity (assuming you're in the ATC field your entire career)? If that is accurate and you are planning on ER at ~50 yrs old, your projected FERS pension may be lower and you would also need a financial bridging plan from 50 to 57, including health insurance.

The ATC FERS pension is different from the regular FERS pension. In summary, ATC is 1.7% per year for the first 20 years and then 1% for each additional year. A controller is eligible for full retirement after either 25 years at any age or 20 years if at least 50, and 56 is the mandatory retirement age.