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Old 12-14-2013, 06:36 PM   #41
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Another point on the existing proposal: It reinstates TRICARE Prime eligibility for 171,000 retirees who were to be kicked out of the program (because they live too far from a military hospital--though why that should matter to TRICARE baffles me). It's a one-time reinstatement: move 2 miles to a new house closer to the hospital but out of your present ZIP code and you've lost eligibility again.

Here's an article about it.

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Old 12-14-2013, 06:40 PM   #42
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This cut is tough for service members in or nearing retirement. More so because there was no pension underfunding, as has been the case for recent public sector pension changes. It will be interesting to see what other members think, especially those in the armed forces. The discussion will be all the richer if we can keep it focused on pension and retirement and away from politics and other unrelated topics.
Agreed. I was not in the armed forces (unless you count the REW patrol) but I know about cuts. I think it can be difficult to adapt.
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Old 12-14-2013, 07:14 PM   #43
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Before the thread gets derail. McDevin if you haven't purchased Nord's book The Military Guide to Financial Independence and Early Retirement you should.

Also start reading his blog here
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Old 12-14-2013, 09:25 PM   #44
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Quick Math

Did a few simple calculations based on my anticipated retirement date, age at retirement, and estimated retirement. My quick hip shot shows me losing roughly 65K. I'll rework my calcs to factor the compounded loss, suspect that will add another good chunk.

Running a few scenarios to see how much additional time I'd need to serve in order to make up the lost buying power between age 51 and 62. My quick SWAG tells me I'd need to work an additional 2.75 yrs (ballpark) to stay where I'd planned to be. Good news is at age 62 I'd be ahead of where I had planned. That said, don't think I can stay sane in the current environment for another 2.75 yrs.

Heck of a way to treat those already retired, and folks like me that have planned for decades and are close to retiring.

I started thinking about ER as a teen. Besides wanting to serve the Nation, the primary driver for me enlisting, and later earning my commission was the retirement plan. There were many times while I was deployed that I thought to myself, "suck it up....in a few years you can ER". Well, maybe that's just a few more years off now.... Wish I could believe that. I think this is just the first step down a very slippery slope of reductions.
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Old 12-14-2013, 09:29 PM   #45
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This finagling with CPI is one more reason that we should all hope for an economy that can sustain a low-inflation policy.
Maybe I'm interpreting this wrong, but wouldn't low inflation be worse for the pension recipient if this change takes effect? If inflation ran 2%, the resulting 1% COLA would be only half of what's needed to maintain purchasing power. If inflation ran 10%, the resulting 9% COLA comes a lot closer to matching inflation.

The -1% formula seems very arbitrary.

EDIT: Playing with a spreadsheet, it looks like the amount of inflation actually makes very little difference over a 20 year period. In the 20th year, I see a loss of purchasing power of about 19% with very low inflation (1%, i.e. zero COLA), and about 17% with very high inflation (15%).

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Old 12-14-2013, 10:02 PM   #46
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If I'm thinking about this right, every year the real purchasing power of your retirement check will be reduced by 1% (since an increase by the CPI rate would be "keeping up"). I don't think it matters much whether the CPI increases 2% or 20% per year: 20 years into retirement you are 20% behind (a little less than that, because the part you never got isn't reduced in the future).

Right now there is a "catch up." I expect that soon the age for that catchup might ("logically") be adjusted to match the retiree's SS Full Retirement Age.

Also: I note the legislation refers to "working age retirees," I think the implication is very clear. It seems to me that this compensation was earned and is now due. Whether a retired soldier, sailor, airman or Marine gets a job after fulfilling the requirements for this pension is not germane.
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Old 12-15-2013, 08:24 AM   #47
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I think that deficit reduction will try to be accomplished with shared sacrifices. We have raised taxes on high income earners, put price controls on medical fees, and raised SS retirement to 67. There will be more to come. Specifically, I run my retirement numbers with a 30 % reduction in investment value, figuring that is about what is coming in the way of SS and Medicare cuts and tax changes.
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Old 12-15-2013, 08:29 AM   #48
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Regarding the "working age retirees" language, you are absolutely right. A lot of the people are looking at this from the perspective of "they don't really need the money," as if the pension is a kind of social welfare program, as opposed to "this money is due because of a contractual obligation."

I've heard people make similar arguments about military healthcare: "Why is it fair that troops and their families get free government healthcare but other Americans don't?" A surprising number of critics fail to recognize that service members have an employee relationship with the government, just like the critics have with their MegaCorp, instead of just a citizen/taxpayer relationship.

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Old 12-15-2013, 08:46 AM   #49
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Yeah I'm with you! It certainly is cause for concern. However, i think military retired pay / disability will be the last benefits touched by the government. This would cause riots in the streets especially after the past 11-12 years of constant deployments and wars. I anticipate future retirement benefits being changed for those entering active duty, as I don't think it's sustainable for our government to keep paying future pensions, but I seriously doubt that they will fool around with the entitlements that were promised to those that so bravely served this nation in the past.

The Tricare, I expect to go up. So not sure what to think about that.
Devin,
I read all of your posts in this thread, and have general advice for you. Make sure you read and re-read advice, as it can fall between the cracks. The idea of reading the book mentioned is a perfect start.

The way you're gathering advice and all is similar to what I do. It is not the quickest route, but you get to ask a lot of questions and look at various scenarios. The base pension you're working from is well-deserved, but you see how things change in just a few months. I'm sure that at the time of your August post most of us would wager that mil pensions would not be touched. This is a very good example of how the unexpected can upset a plan. If you retirement dream is built on additional pillars, it will be more difficult to knock off course.

For now at least, it seems that some of your pension won't keep up with inflation, but at 62 will reset. Still, that's 20 years, and legislation can change anything as you've seen.

The part of your plan where you continuing working and wife gets a tech degree is fantastic. That has to happen, and it will add another pillar to the plan. But it will take 20 years of work and saving.

Your own job is what is causing the concern. Right now your plan stands on two pillars (pension and current job), and you want to quit. BTW, so do I, but I am waiting for megacorp to lay me off instead of quitting. I'm 20 years ahead of you, and have no pension (but wife will get one). We have at least six investing spaces (pillars) to support our retirement. None are large enough to support our plan alone. That is why we still work--to build more support into the plan.

Back to your job. Turn it into something that works for you, if possible. At least for now. If there is a way to cut the number of days you must go to the cube farm and eat b/s, by all means do that.

Keep gathering numbers and facts as best you can. Use all the tools to model and predict, and take some time to look at all of the future needs in depth. Health care is one big wild card, for instance.

Whatever way you go, I wish you well.
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Old 12-15-2013, 08:53 AM   #50
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Regarding the "working age retirees" language, you are absolutely right. A lot of the people are looking at this from the perspective of "they don't really need the money," as if the pension is a kind of social welfare program, as opposed to "this money is due because of a contractual obligation."

I've heard people make similar arguments about military healthcare: "Why is it fair that troops and their families get free government healthcare but other Americans don't?" A surprising number of critics fail to recognize that service members have an employee relationship with the government, just like the critics have with their MegaCorp, instead of just a citizen/taxpayer relationship.
Good points. This made me think of some of the discussion in other threads about what is happening to megacorp retirees. The plan that was promised (or you thought was promised) is not delivered, and the money to be paid to offset costs will go un-used, as the plan being offered this year is way more expensive than going into the ACA marketplace.
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Old 12-15-2013, 09:03 AM   #51
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I think that deficit reduction will try to be accomplished with shared sacrifices. We have raised taxes on high income earners, put price controls on medical fees, and raised SS retirement to 67.
I understand what you are saying, and fully appreciate the need for shared sacrifice. But I want to shed light on the reasons that servicemembers and retired servicemembers may feel betrayed by this particular cut.

Preliminary step: What is a "contract?" From the mouth of Wiki (emphasis added):
Quote:
"In common law legal systems, a contract is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them."
There is very little "voluntary" about taxes or SS, and this reduces the degree to which both parties are "bound." There's no contract, and the courts have made this very clear. On the other hand, a servicemember freely chooses to enlist and to remain under obligation in exchange for the compensation (including retirement pay) offered by the government. This is a contract, and you can be d*mn sure the government enforces every tenet of it against servicemembers very strictly.

The retroactive nature of the cuts is also a source of irritation. If a doctor doesn't like the future terms of Medicaid reimbursement being offered, he can elect not to participate in the program any longer. The military retiree has already performed the services and is just waiting for payment he/she earned. "Oh, you are changing the rules? Okay, where do I change my decision to re-enlist in 2006 and spend a year in Khandahar getting shot at and blown up with my team?"

There is a bitterness out there that neither Congress nor the public understands. It will linger, and it will have an impact. I think many military retirees would have been less POe'd if the same amount of money was taken as a specific extra tax, rather than some slicky "minor reduction" in the contractually obligated pay. We all understand Congress can change the tax code, it's far less clear that the way they are doing this is "right."
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Old 12-15-2013, 09:54 AM   #52
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I understand what you are saying, and fully appreciate the need for shared sacrifice. But I want to shed light on the reasons that servicemembers and retired servicemembers may feel betrayed by this particular cut. Preliminary step: What is a "contract?" From the mouth of Wiki (emphasis added): There is very little "voluntary" about taxes or SS, and this reduces the degree to which both parties are "bound." There's no contract, and the courts have made this very clear. On the other hand, a servicemember freely chooses to enlist and to remain under obligation in exchange for the compensation (including retirement pay) offered by the government. This is a contract, and you can be d*mn sure the government enforces every tenet of it against servicemembers very strictly. The retroactive nature of the cuts is also a source of irritation. If a doctor doesn't like the future terms of Medicaid reimbursement being offered, he can elect not to participate in the program any longer. The military retiree has already performed the services and is just waiting for payment he earned. "Oh, you are changing the rules? Okay, where do I change my decision to re-enlist in 2006 and spend a year in Khandahar getting shot at and blown up with my team?" There is a bitterness out there that neither Congress nor the public understands. It will linger, and it will have an impact. I think many military retirees would have been less POe'd if the same amount of money was taken as a specific extra tax, rather than some slicky "minor reduction" in the contractually obligated pay. We all understand Congress can change the tax code, it's far less clear that the way they are doing this is "right."
I understand the bitterness and anger. I also believe, as I have said on many occasions, that existing pensions should be honored. I've also stated that DB plans are a disaster and should be winded down for obvious reasons. There will always be those that think DB plans are great as long as they are funded which is pretty silly. Any firecalc computation will show the futility of trying to plan for a specific benefit. I think my personal firecalc result shows me with somewhere between 300k and 8 million after only 30 years! Oh, and by the way, past returns are no guarantee for future results. : face palm:
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Old 12-16-2013, 12:34 PM   #53
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I actually am just looking for reassurance. I receive $3000 a month in pension after taxes and will have a monthly budget of ~ $3000 includes $300 a month into roth account and $150 into savings and 11-1200 mortgage. My wife will work and earn ~ $20,000 a year as a dental assistant and I plan to work part time completely on my terms to earn ~ $10,000 ebay seller or something on a golf course

I am sick of working 40 hour weeks and plan to spend more time doing what I want. I currently have $40,000 in roth IRA and will have 85-90,000 in savings when I sell my home.

I am 42 and looking at maybe 3 more years of corporate slavery. How doable do you feel this is considering my budget and income?

Thanks to those who responded to my questions on the introduction thread!! I would like to get further insight or suggestions from others as well.

Thank you in advance!
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Old 12-16-2013, 01:01 PM   #54
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I actually am just looking for reassurance. I receive $3000 a month in pension after taxes and will have a monthly budget of ~ $3000 includes $300 a month into roth account and $150 into savings and 11-1200 mortgage. My wife will work and earn ~ $20,000 a year as a dental assistant and I plan to work part time completely on my terms to earn ~ $10,000 ebay seller or something on a golf course

I am sick of working 40 hour weeks and plan to spend more time doing what I want. I currently have $40,000 in roth IRA and will have 85-90,000 in savings when I sell my home.

I am 42 and looking at maybe 3 more years of corporate slavery. How doable do you feel this is considering my budget and income?

Thanks to those who responded to my questions on the introduction thread!! I would like to get further insight or suggestions from others as well.

Thank you in advance!
Devin
No way. You do not even have close to the required assets you will need for future health care, let alone other expenses.
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Old 12-17-2013, 12:44 AM   #55
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No way. You do not even have close to the required assets you will need for future health care, let alone other expenses.
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I forgot to address another question in regards to our healthcare, our healthcare is through Tricare and cost $148 per month. This was figured into my projection of $3000 a month budget.
I think there's enough room in this military retiree's budget for Tricare. Its future enrollment fees are limited (by previous legislation) to rise at the CPI. Admittedly that's subject to change but a number of Congressional members and DoD staffers are still licking their wounds after battling out that compromise.

Duckguru, I know of at least two other military retirees who are enjoying life on less pension and lower savings. It can be done.

As nasty as the military pension "CPI-1%" surprise has been, I'm starting to see Twitter rumors from MOAA's day on Capitol Hill. Both Armed Services Committees seem to be a tad miffed at being cut out of the loop, and there might be a Senate amendment to the bill after all. If all else fails during this week of debate, the law won't take effect until December 2015. That's plenty of time (during an election year) for Congress to repent at leisure and work out a compromise with their (very vocal) constituents.

I ran some numbers on my own O-4 pension. Over the last 11+ years I would've lost $25K (which would have been invested and compounded to $30K). Over the next nine years (to age 62) I would have lost even more ground for a grand total of $100K. MOAA's numbers seem pretty good to me, and this whole plan smells a lot like REDUX. We old-timers know how well that little experiment worked out.

Speaking of Twitter, it was impressive to watch MOAA (on several different accounts) call out the Twitter handles of each member of Congress for everyone to send another 140 characters of feedback. MOAA has reached literally millions of servicemembers, veterans, and organizations through Twitter alone. Over 150,000 e-mails have already been sent to Congress (nearly 300 per member) and the other military advocacy groups are just beginning to rev up their campaigns.
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Old 12-17-2013, 05:19 AM   #56
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Iīm 5 years from military retirement and am very angry about this change. I stand to lose about $130k between retirement and age 62.

Even worse, this has a bigger negative effect on the lower paid enlisted folks who retire at age 37 or 38 than it does on the generals who retire close to age 62. I think this is the biggest crime. The E-7 who retires at age 37 after 20 years of service will have the reduced COLA for 25 years. A general might have no years of reduced COLA.

In addition, this will lead to a situation in which 2 people of different ages enlist on the same day, get promoted on the same days, and finally retire on the same day. They have done the exact same things over the course of their military careers, but the younger member will receive less in lifetime pension payments (if they die on the same day). Thatīs not right.

As much as I hate this change, I think the only fair way to implement some sort of reduced COLA (in addition to implementation for new members only) is to decouple it from age. Maybe all retirees get 20 years of reduced COLA, regardless of age. Thatīs basically how we do it for SBP premiums.
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Old 12-17-2013, 07:44 AM   #57
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Nords, thanks for the update. Regardless of how this plays out, I feel fortunate to have learned a couple big lessons early in my career: (1) what it felt like to invest real money into the teeth of a bear market in 2008-2009, and now (2) just how quickly our elected officials can alter military retirement benefits with what seems to be little or no protest from the general public. I will proceed with my plans carefully.

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Old 12-17-2013, 07:57 AM   #58
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it was impressive to watch MOAA ... and the other military advocacy groups are just beginning to rev up their campaigns.
Agreed. MOAA is one of the most effective lobbying groups we have, and I've always been very happy to be a member.
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Old 12-17-2013, 01:32 PM   #59
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I'm not. Compare the number of military retirees + active duty lifers to the number of people who won't be able to take the kids to Disney World this year or who will have to settle for a 3 series BMW instead of the 5 series because they have to pay the taxes to support those pensions. I think you can guess how that will always turn out.

For it's Tommy this, an' Tommy that, an' "Chuck him out, the brute!"
But it's "Saviour of 'is country" when the guns begin to shoot;


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Kipling's Tommy Atkins (full poem)

To follow up on my earlier post, consider the following charts:

http://www.va.gov/vetdata/docs/quick..._slideshow.pdf

and

http://www.census.gov/population/pro...document09.pdf

Combining them, one sees that the number of veterans as a percentage of the US population will fall from about 6.8% in 2010 to about 3.4% in 2040. With falling numbers comes falling influence. MOAA may be able to turn the tide this time, but the future looks grim.
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Old 12-17-2013, 06:25 PM   #60
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I think there's enough room in this military retiree's budget for Tricare. Its future enrollment fees are limited (by previous legislation) to rise at the CPI. Admittedly that's subject to change but a number of Congressional members and DoD staffers are still licking their wounds after battling out that compromise.

Duckguru, I know of at least two other military retirees who are enjoying life on less pension and lower savings. It can be done.

As nasty as the military pension "CPI-1%" surprise has been, I'm starting to see Twitter rumors from MOAA's day on Capitol Hill. Both Armed Services Committees seem to be a tad miffed at being cut out of the loop, and there might be a Senate amendment to the bill after all. If all else fails during this week of debate, the law won't take effect until December 2015. That's plenty of time (during an election year) for Congress to repent at leisure and work out a compromise with their (very vocal) constituents.

I ran some numbers on my own O-4 pension. Over the last 11+ years I would've lost $25K (which would have been invested and compounded to $30K). Over the next nine years (to age 62) I would have lost even more ground for a grand total of $100K. MOAA's numbers seem pretty good to me, and this whole plan smells a lot like REDUX. We old-timers know how well that little experiment worked out.

Speaking of Twitter, it was impressive to watch MOAA (on several different accounts) call out the Twitter handles of each member of Congress for everyone to send another 140 characters of feedback. MOAA has reached literally millions of servicemembers, veterans, and organizations through Twitter alone. Over 150,000 e-mails have already been sent to Congress (nearly 300 per member) and the other military advocacy groups are just beginning to rev up their campaigns.
The OP is age 42. I have a reasonable expectation that all retiree health care will be reduced as more baby boomers enter the pool. Tricare or not.
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