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Nords podcast - New Retirement
Old 08-30-2019, 12:51 PM   #1
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Nords podcast - New Retirement

See below for a podcast featuring our very own "Nords" on Military Retirement Benefits.


https://www.newretirement.com/retire...ign=BlogDigest
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Old 08-30-2019, 01:12 PM   #2
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After I got RIF'd from the active duty Army in the early 90's, I went back in (Army Reserve) a few years later and qualified for retirement at age 60. It was one of the wisest decisions that I ever made. The medical insurance allowed me to parachute from mega-c*rp at 60 YO. The pension (also @ 60 YO) was icing on the cake.

The name of the USAR recruited that drug me back in was SSG Mata. I tell my wife that she is my "other sweetheart." God Bless You SSG Mata, wherever you may be.

My stats: E-8, 30(+) years TIS, 7000(+) USAR retirement points
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Old 08-31-2019, 07:52 AM   #3
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Thank you. I read the transcript.

My son is in the navy and just "detached" again this week. (He kept using a the word "det" so I had him what he meant, and he explained to me the difference between detachment and deployment.) His wife gets very lonely when he's gone, and he misses his wife and baby. He has concerns about being away from them on a sea tour (a/k/a aviation appreciation tour), although interestingly, he would prefer a submarine to a surface ship (although according to him that would most likely not be an option.) A lot seems to be about "timing."

He is very fiscally responsible, but also wants what is best for his family.

When I get a chance to speak with him, I am going to mention the Reserves as something to think about. I hope that would be an option for him. He has a computer science degree and has a top secret clearance, but I don't know if his current position would be translatable into the Reserves. In any event, it can't hurt to explore that as a possibility. While I would love him to get a pension, I want him to know that I will be proud of him no matter which path he follows.
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Old 08-31-2019, 07:56 AM   #4
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After I got RIF'd from the active duty Army in the early 90's, I went back in (Army Reserve) a few years later and qualified for retirement at age 60. It was one of the wisest decisions that I ever made. The medical insurance allowed me to parachute from mega-c*rp at 60 YO. The pension (also @ 60 YO) was icing on the cake.

The name of the USAR recruited that drug me back in was SSG Mata. I tell my wife that she is my "other sweetheart." God Bless You SSG Mata, wherever you may be.

My stats: E-8, 30(+) years TIS, 7000(+) USAR retirement points
Is there a survivor pension for a spouse of someone who retires from the Reserves? (I am thinking about my DIL who is currently a SAHM.)
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Old 08-31-2019, 10:13 AM   #5
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Is there a survivor pension for a spouse of someone who retires from the Reserves? (I am thinking about my DIL who is currently a SAHM.)
Yes. It pays 55% of retirement pay and it is COLA'd. It's called SBP.* The monthly premium is around $160(?). If that's way off, I'll correct after verification. Not to be overlooked is Tri-care. It is the primary insurance until medicare, then it becomes secondary. Oh, and it's free (modest deductible, then pays 80%).

I think a reserve retirement is an awesome supplement for anyone who can go that route.

*Survivor Benefit Plan
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Old 08-31-2019, 10:16 AM   #6
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Thank you, my DIL has been very good to my son, and is a wonderful mother.
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Old 08-31-2019, 10:43 AM   #7
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See below for a podcast featuring our very own "Nords" on Military Retirement Benefits.
Thanks, Dtail! I've known Steve for a few years and helped review the military aspects of NewRetirement's analysis. We finally got around to recording an interview.

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Thank you. I read the transcript.
When I get a chance to speak with him, I am going to mention the Reserves as something to think about. I hope that would be an option for him. He has a computer science degree and has a top secret clearance, but I don't know if his current position would be translatable into the Reserves. In any event, it can't hurt to explore that as a possibility.
There might not be an exact translation between what he's doing now and what's available in the Reserves, and it might not be in a location he wants, but there'll be a billet.

It doesn't have to be Navy Reserve-- it could be any of the service's Reserves who are interested in his skills, or the National Guard unit in his state. (The process of going from active duty to Reserve/Guard status begins by visiting the recruiter.) Guard units tend to have more armories closer to home, and Navy Reserve units tend to be farther away than the other services. Even though my daughter lives on the coast, she's still facing a two-hour drive to the nearest unit for the monthly drill weekend.

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Is there a survivor pension for a spouse of someone who retires from the Reserves? (I am thinking about my DIL who is currently a SAHM.)
There is, but the Reserve Component Survivor Benefit Plan is not necessarily a good product for everyone.

People tend to compare SBP to term life insurance as if they're equivalent and mutually exclusive. The answers are actually one, or the other, or just for the kids, or both, or neither.

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The monthly premium is around $160(?). If that's way off, I'll correct after verification.
Yes, that's way off. The RCSBP premiums are different from SBP. They're also calculated individually and manually from the references linked below.

Let me start with the issue of whether or not RCSBP is even necessary, let alone desirable.

If your DIL decides that an inflation-fighting survivor annuity is still a good idea, then SBP is the cheapest (and most reliable) inflation-adjusted annuity available. (The federal government subsidizes the premiums and you can pay in 360 monthly installments.) However RCSBP has an additional premium (the Reserve Component Premium) which might make it prohibitively expensive when it has to be paid for the same 360 months.

In addition, families might only want insurance for a limited number of years or paid out as a lump sum. That's a different analysis than managing a COLA annuity, and the product is term insurance.

People who've reached financial independence might not want either product. My spouse and I both have enough income & assets if the other dies, so when we retired then we declined SBP and RCSBP on each other. We'd rather have the money to spend on each other while we're both still alive.

The attractive trap about RCSBP is that it has an option to provide "free" coverage between the year the Reserve/Guard servicemember applies for retirement and the date that the pension starts. Someone could reach 20 good years and file for retirement in their late 30s or early 40s, opt for RCSBP with an immediate payout at their death, die right after signing the papers, and their spouse would have an inflation-adjusted life annuity. This "free" coverage is why RCSBP charges the Reserve Component Premium.

The trap part is that the retiree still has to pay a couple years of SBP premiums after starting their pension at age 60, although they can cancel the SBP policy between the 25th and 36th months of payments. After that opt-out window they have to pay until "age 70 and 360 monthly payments", which is effectively the rest of the Reserve retiree's life. Even if the Reserve retirees cancel the SBP part at the 25th month, Reserve retirees still have to pay the Reserve Component Premium for effectively the rest of their lives.

The federal law also has a bunch of arcane exceptions, deadlines, and exclusions for divorces, spouse deaths, remarriages, and additional children. I get sad e-mails every month from someone who thought they were covered but... they were not.

Having said that, RCSBP can be a bargain for families with adult disabled children (the annuity can be paid to a Special Needs Trust), or for minor children (coverage will lapse when the kids turn 18, or age 22 for full-time students). It might also be a good choice for disabled vets, especially those with 100% VA disability ratings who might not even be eligible for commercial term insurance.

Anyone eligible for SBP or RCSBP should hire a fee-only CFP to review the coverage (and exclusions) and pricing (including the Reserve Component Premium). That CFP should already be familiar with the programs, because you don't want to pay them to learn about SBP on your dollar. You can also learn about the progams from the source reference: the Financial Management Regulation (DoD 7000.14-R) Volume 7B chapters 42-46, 49, and 54. The links start here:
https://comptroller.defense.gov/FMR/vol7b_chapters.aspx

Here's a very basic overview of the program and its issues:
https://the-military-guide.com/the-r...-benefit-plan/

You can also buy an eBook with an extensive financial analysis of SBP from Forrest Baumhover, a CFP (and military retiree):
https://www.amazon.com/Military-Tran...dp/B01EPB5H1Q/

Again... for most military retirees, term life insurance is the least expensive option. SBP is a niche product that's not necessary for most. Don't get suckered by the attractive idea of an inflation-adjusted survivor annuity.
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Old 08-31-2019, 10:59 AM   #8
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Thanks, Dtail! I've known Steve for a few years and helped review the military aspects of NewRetirement's analysis. We finally got around to recording an interview.


There might not be an exact translation between what he's doing now and what's available in the Reserves, and it might not be in a location he wants, but there'll be a billet.

It doesn't have to be Navy Reserve-- it could be any of the service's Reserves who are interested in his skills, or the National Guard unit in his state. (The process of going from active duty to Reserve/Guard status begins by visiting the recruiter.) Guard units tend to have more armories closer to home, and Navy Reserve units tend to be farther away than the other services. Even though my daughter lives on the coast, she's still facing a two-hour drive to the nearest unit for the monthly drill weekend.


There is, but the Reserve Component Survivor Benefit Plan is not necessarily a good product for everyone.

People tend to compare SBP to term life insurance as if they're equivalent and mutually exclusive. The answers are actually one, or the other, or just for the kids, or both, or neither.

If your DIL decides that an inflation-fighting survivor annuity is still a good idea, then SBP is the cheapest (and most reliable) inflation-adjusted annuity available. (The federal government subsidizes the premiums and you can pay in 360 monthly installments.) However RCSBP has an additional premium (the Reserve Component Premium) which might make it prohibitively expensive when it has to be paid for the same 360 months.

In addition, families might only want insurance for a limited number of years or paid out as a lump sum. That's a different analysis than managing a COLA annuity, and the product is term insurance.

People who've reached financial independence might not want either product. My spouse and I both have enough income & assets if the other dies, so when we retired then we declined SBP and RCSBP on each other. We'd rather have the money to spend on each other while we're both still alive.

The attractive trap about RCSBP is that it has an option to provide "free" coverage between the year the Reserve/Guard servicemember applies for retirement and the date that the pension starts. Someone could reach 20 good years and file for retirement in their late 30s or early 40s, opt for RCSBP with an immediate payout at their death, die right after signing the papers, and their spouse would have an inflation-adjusted life annuity.

The trap part is that the retiree still has to pay a couple years of SBP premiums after starting their pension at age 60, although they can cancel the SBP policy between the 25th and 36th months of payments. After that opt-out window they have to pay until "age 70 and 360 monthly payments", which is effectively the rest of the Reserve retiree's life. Even if the Reserve retirees cancel the SBP part at the 25th month, Reserve retirees still have to pay the Reserve Component Premium for effectively the rest of their lives.

The federal law also has a bunch of arcane exceptions, deadlines, and exclusions for divorces, spouse deaths, remarriages, and additional children. I get sad e-mails every month from someone who thought they were covered but... they were not.

Having said that, RCSBP can be a bargain for families with adult disabled children (the annuity can be paid to a Special Needs Trust), or for minor children (coverage will lapse when the kids turn 18, or age 22 for full-time students). It might also be a good choice for disabled vets, especially those with 100% VA disability ratings who might not even be eligible for commercial term insurance.

Anyone fortunate enough to be eligible for SBP or RCSBP should hire a fee-only CFP to review the coverage (and exclusions) and pricing (including the Reserve Component Premium). That CFP should already be familiar with the programs, because you don't want to pay them to learn about SBP on your dollar. You can also learn about the progams from the source reference: the Financial Management Regulation (DoD 7000.14-R) Volume 7B chapters 42-46, 49, and 54. The links start here:
https://comptroller.defense.gov/FMR/vol7b_chapters.aspx

Here's a very basic overview of the program and its issues:
https://the-military-guide.com/the-r...-benefit-plan/

You can also buy an eBook with an extensive financial analysis of SBP from Forrest Baumhover, a CFP (and military retiree):
https://www.amazon.com/Military-Tran...dp/B01EPB5H1Q/

Again... for most military retirees, term life insurance is the least expensive option. SBP is a niche product that's not necessary for most. Don't get suckered by the attractive idea of an inflation-adjusted survivor annuity.
Thank you Doug. I suspect that the strongest motivation for my son will be spending time with his family, so Coast Guard looks like a promising option. My son mentioned that at this point, the cost of his term beyond the 400k jumps. That may be because of his job. He still has a few years to go on his commitment, and plans to study for his GRE during this latest detachment. Thank you for the references.

I will also pull out your book to reread. (Bought one for him and one for me.)
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Old 08-31-2019, 11:01 AM   #9
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Yes. It pays 55% of retirement pay and it is COLA'd. It's called SBP.* The monthly premium is around $160(?). If that's way off, I'll correct after verification. Not to be overlooked is Tri-care. It is the primary insurance until medicare, then it becomes secondary. Oh, and it's free (modest deductible, then pays 80%).

I think a reserve retirement is an awesome supplement for anyone who can go that route.

*Survivor Benefit Plan
Everything Nords said.

Plus a correction - my SBP premium is $195/month. Not for everyone, I suppose. But for me, I want DW to be secure with my pensions and SS, should I tip over first. SBP allows me to do that. So for us, it fits the plan.
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Old 08-31-2019, 12:27 PM   #10
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....Forrest Baumhover, a CFP (and military retiree):...
Haven't seen that name in over a decade. Forrest relieved me at FISC Sigonella in 2007.
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Old 09-01-2019, 08:43 AM   #11
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Yep, I'm trying to convince my kids to get their 20 via either active or Guard/Reserve.

One who just graduated/commissioned is heading to flight school and so will have a decade of active duty service obligation assuming they get what they want (jets, baby!)
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Old 09-01-2019, 10:41 AM   #12
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Yep, I'm trying to convince my kids to get their 20 via either active or Guard/Reserve.

One who just graduated/commissioned is heading to flight school and so will have a decade of active duty service obligation assuming they get what they want (jets, baby!)
Hi Bill, I would give him a copy of Nords book when he gets his wings. It has some good info. I referred my son to the chapter regarding the pros and cons of buying a house, when he was thinking about that. (He decided against, but did not waste the $, fully funded his TSP and Roths for himself and DW instead, as well as padding the savings account.)

Also, give yourself plenty of time to tour the Naval Aviation Museum in Pensacola. (I am not mechanically inclined and didn't think I would enjoy it, but I loved it.)
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Old 09-01-2019, 10:52 AM   #13
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Everything Nords said.

Plus a correction - my SBP premium is $195/month. Not for everyone, I suppose. But for me, I want DW to be secure with my pensions and SS, should I tip over first. SBP allows me to do that. So for us, it fits the plan.
While obviously I want DS to live forever, I want my DIL taken care of if he goes first. He has a keen interest in finances, which (though I love her) she does not seem to have - at least not yet.
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Old 09-02-2019, 06:31 AM   #14
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Haven't seen that name in over a decade. Forrest relieved me at FISC Sigonella in 2007.
We met a few years ago through FinCon as he was wrapping up his military career and finishing his CFP.

He’s working at a Tampa firm now, and he seems to be really enjoying life... doing the analysis, crunching numbers, solving problems, helping people. Only without CASREPs.
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Old 09-04-2019, 03:23 PM   #15
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We met a few years ago through FinCon as he was wrapping up his military career and finishing his CFP.

He’s working at a Tampa firm now, and he seems to be really enjoying life... doing the analysis, crunching numbers, solving problems, helping people. Only without CASREPs.
That's great to hear. Glad he was able to transition well... You know how Chops are. Always analyzing and crunching numbers. "You can take kick the suppo out of the navy. But you cant kick the suppo out of him."
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Old 09-07-2019, 03:09 PM   #16
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I can attest to the Reserves being a nice option to obtain another stream of income. What it has allowed me to do financially is not have to save as much to rely on for my retirement income. The comment about TRICARE is true although I see retirees being hit up to pay more in the future.

That said about the financials, as I look back it is the intangibles that I value equally: traveling opportunities, education opportunities (just finished up lots of stuff on GI Bill), leadership opportunities, the forced attention to physical fitness (which has helped me tremendously as I aged) and the ability to serve. I said at my retirement after 30 years combined active and Reserve, I just didn’t quit. It was a part of the yearly plan and lifestyle.

Reserves also served as a release valve for my civilian profession; when I got fed up with civilian job, I did Reserves and vice versa. My father told me I probably wouldn’t have made it 30 years in active duty. He’s correct.

I was fortunate and retired as an O-6, with about 4660 points. I was shocked at how much that is pension-wise and COLA’d too. I will receive that in 4.5 years. Nevertheless, as above, I treasure the intangibles I gained as well.
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Old 09-07-2019, 03:47 PM   #17
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My step son went into the guard at 17 with a GED. Now 11 years later he has earned a college degree, worked full time all but 1 year, is a officer and a navigator. He bought his first home at 18 when the market was down and is very good about saving money. I don’t worry about him at all.
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Old 09-07-2019, 04:16 PM   #18
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That said about the financials, as I look back it is the intangibles that I value equally: traveling opportunities, education opportunities (just finished up lots of stuff on GI Bill), leadership opportunities, the forced attention to physical fitness (which has helped me tremendously as I aged) and the ability to serve. I said at my retirement after 30 years combined active and Reserve, I just didn’t quit. It was a part of the yearly plan and lifestyle.
Agreed. 8 active years, 30 years reserves for me and life is good. The most important intangible for me was modeling behavior for my 3 daughters, who all joined the Coast Guard. Extra credit is my great SIL, who is doing rescues in the Bahamas following Dorian.
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Old 09-08-2019, 05:50 AM   #19
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I will also pull out your book to reread. (Bought one for him and one for me.)
And thanks for buying the books, Marie!
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Old 09-14-2019, 09:39 AM   #20
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And thanks for buying the books, Marie!
Doug, that YOU for your service and for your continued support of those who risk so much for our Country.
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