Blended Retirement System-US Military

[mickeyd]

I missed this January 2016 piece of info about future military retirees. None of this will affect me, but it will affect those in the future.

Still looks like a good retirement program, just not as "guaranteed" as mine.

"An overhaul of the current military retirement system is slated to take effect January 1, 2018. The new system has three elements: a 401(k)-style component with Defense Department matching funds for entry-level and other service members, a mid-career continuity bonus, and a retirement annuity similar to the one now in place for service members that complete twenty or more years of eligible service."

DoD Plans Benefit Revision With ‘Blended Retirement’ > U.S. DEPARTMENT OF DEFENSE > Article

 

[Eagle43]

You're right, it isn't guaranteed. I'm betting the long range goal is most troops will not stay in for 20 years. I didn't see anything about medical care.

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[braumeister]

Nords looked at this last year and had some very good comments:
Should You Choose The Military's New Blended Retirement System?

 

[ExFlyBoy5]

You're right, it isn't guaranteed. I'm betting the long range goal is most troops will not stay in for 20 years. I didn't see anything about medical care.

As it stands, very few stay past 20 anyway. The last numbers I looked at for the AF had about 18% of officers staying to 20 and 13% of enlisted and the number for the Army and USMC are considerably lower (by design...you don't want a bunch of 45 year old troops fighting wars). So I think he blended retirement is a pretty good deal for the large majority who DON'T get vested since they don't do 20.

If you are CRAZY bored, here is some reading from the DoD Office of the Actuary on the Mil Retirement system (Sept 2015):

http://actuary.defense.gov/Portals/...t_2015 Final v2.pdf?ver=2016-07-26-162207-987

 

[nash031]

I think it's a good idea and a fiscally responsible move. Let's face it - the 20 year DB pension and health care for life creates a number of folks who are just sticking out their time for the wrong reasons (not that aiding one's personal financial security is a bad reason, but it's not the right reason we ideally want folks to serve).

 

[kitesurfer2]

I think it's a good idea and a fiscally responsible move. Let's face it - the 20 year DB pension and health care for life creates a number of folks who are just sticking out their time for the wrong reasons (not that aiding one's personal financial security is a bad reason, but it's not the right reason we ideally want folks to serve).

and what reason might that be? i did my 20, but probably none of my reasons match yours.

 

[ExFlyBoy5]

and what reason might that be? i did my 20, but probably none of my reasons match yours.

I'll answer the question; after about 18 years, I stopped caring. Not just a little..A LOT. So, was that a detriment to my co-w*rkers? Probably. I didn't care though...I was in it for me. I could have cared less about the mission anymore. I spent enough damn time answering the call from Big Blue and the last few years I was in it for ME and NOTHING MORE. And guess what? I guarantee that I was NOT the only one.

Had there been a blended retirement available, I would have probably punched at 15 years and made some room for those below me and WANTED to serve for the right reasons.

 

[jimnjana]

I think it's a good idea and a fiscally responsible move. Let's face it - the 20 year DB pension and health care for life creates a number of folks who are just sticking out their time for the wrong reasons (not that aiding one's personal financial security is a bad reason, but it's not the right reason we ideally want folks to serve).

I really don't think this will save much money. I believe they will have to use more financial incentives to have NCOs and junior officers stay to the 10-15 year mark. TSP matching for nearly 100% of the force vs DB pension for 10-20% of the force... This won't solve the issue of those that stick around for their own financial security.

 

[samclem]

I really don't think this will save much money. I believe they will have to use more financial incentives to have NCOs and junior officers stay to the 10-15 year mark. TSP matching for nearly 100% of the force vs DB pension for 10-20% of the force... This won't solve the issue of those that stick around for their own financial security.

Perhaps the rank structure will change/get flatter. Responsibilities will be pushed down to more junior ranks, staffs (especially) will have a rank structure with a wider (and less "years-in-service") base. IMO, in some cases that would be good, in many places it would not. Promotion rates could be lower and the "up-or-out" eliminated with short-term, as needed incentives. A big concern, regardless of the ranks, is that detailers now have pool of "very unlikely to be promoted but can't afford to leave" folks that they put against some really crummy assignments. When folks >can< afford to leave, those assignments become a lot harder to fill.

 

[nash031]

I'll answer the question; after about 18 years, I stopped caring. Not just a little..A LOT. So, was that a detriment to my co-w*rkers? Probably. I didn't care though...I was in it for me. I could have cared less about the mission anymore. I spent enough damn time answering the call from Big Blue and the last few years I was in it for ME and NOTHING MORE. And guess what? I guarantee that I was NOT the only one.

Had there been a blended retirement available, I would have probably punched at 15 years and made some room for those below me and WANTED to serve for the right reasons.

Pretty much exactly this.

For kite surfer- you'll note that I said "a number of people", not "all" or "most", etc. It is undeniable that the DB at 20 creates ROAD people. Maybe you weren't one - kudos. But they're out there and the quantity is significant.

 

[nash031]

I really don't think this will save much money. I believe they will have to use more financial incentives to have NCOs and junior officers stay to the 10-15 year mark. TSP matching for nearly 100% of the force vs DB pension for 10-20% of the force... This won't solve the issue of those that stick around for their own financial security.

It's hard to see where it won't save money. Every private firm that has switched from major DB to DC has saved money over the long term. In the near term, it will not because you'll still have a lot of pensioners on the books, but over the long term, you'll be able to match contributions for four service members for every O5 pension you reduce, and higher for higher E and O ranks. It is undoubtedly a money saver, and a necessary one because the problem isn't getting better as time goes on, life expectancy increases, and health care costs go up.

Up next: copays for TFL.

 

[Nords]

Oh, the new retirement system will save money. For DoD.

DoD currently funds military pensions with special-purpose Treasuries that pay a ridiculously low (but guaranteed) rate of return. When DoD shifts that burden to the servicemembers, DoD's expenses will plummet.

The good news is mandatory TSP enrollment with mandatory 1% contributions to the L2050 fund. It's a start. Fewer than half of today's servicemembers even have TSP accounts, and way too many of them are invested in the G fund. Meanwhile the FERS civil-service employees are seeing a 90% contribution rate via their mandatory enrollment.

It's not all rainbows and unicorns, however:
Beware of Huge Flaws with the Military Blended Retirement System

 

[jimnjana]

It's hard to see where it won't save money. Every private firm that has switched from major DB to DC has saved money over the long term. In the near term, it will not because you'll still have a lot of pensioners on the books, but over the long term, you'll be able to match contributions for four service members for every O5 pension you reduce, and higher for higher E and O ranks. It is undoubtedly a money saver, and a necessary one because the problem isn't getting better as time goes on, life expectancy increases, and health care costs go up.

Up next: copays for TFL.

Most private firms main business is not the conduct of war. Higher turnover in the military increases costs of training, PCS, and retention(bonus/special pay). If looking at only retirement pay, then someday down the road it might save retirement pay funds but not so sure about overall defense spending. I'm in favor of increasing what retirees pay for tricare but I think that is a different issue.

 

[mickeyd]

I'm in favor of increasing what retirees pay for Tricare

Why?

 

[trixs]

I will hit 15 years with Big Blue in a few months. Obviously I have had many conversation regarding this very subject with people who are currently serving. The main point that is always highlighted is retention. Why would anyone stay in for longer than 10 years if they can obtain the same 401k matching, or better on the outside? I think most people will swap to the GS side and buy back their time. Didn't we already try this with the REDUX? I guess history repeats itself.

Some people mentioned the ROAD mentality and they are right. The problem is the new system will not fix that particular problem. The services need the ability to award bonus's for performance to keep people engaged. You have a huge group of people who know they will get paid but will never obtain another promotion. What incentive do they have not to go ROAD?

For those on the forum who are not familiar: ROAD - Retired on Active Duty

 

[braumeister]

a huge group of people who know they will get paid but will never obtain another promotion. What incentive do they have not to go ROAD?

For some, all the incentive needed was an interesting, meaningful job and good colleagues.

Maybe I was just lucky.

 

[ExFlyBoy5]

I will hit 15 years with Big Blue in a few months. Obviously I have had many conversation regarding this very subject with people who are currently serving. The main point that is always highlighted is retention. Why would anyone stay in for longer than 10 years if they can obtain the same 401k matching, or better on the outside? I think most people will swap to the GS side and buy back their time. Didn't we already try this with the REDUX? I guess history repeats itself.

Some people mentioned the ROAD mentality and they are right. The problem is the new system will not fix that particular problem. The services need the ability to award bonus's for performance to keep people engaged. You have a huge group of people who know they will get paid but will never obtain another promotion. What incentive do they have not to go ROAD?

For those on the forum who are not familiar: ROAD - Retired on Active Duty

I think the ROAD aspect of it (on the E side of the house) has been addressed with the modified HYTs and now having to meet a board for E-7. I think the days of being truly ROAD (prior to the coveted 18 years TOS 'sanctuary') are pretty much over.

All I can say is that's it absolutely wonderful being a member of the blue card mafia!

 

[trixs]

All I can say is that's it absolutely wonderful being a member of the blue card mafia!

Ah, one day.. one day. Until then I shall keep having a good time!

I noticed that your profile says you live in Georgia. Add the username and I have to ask if you are previous JSTARS?

 

[rodi]

For those on the forum who are not familiar: ROAD - Retired on Active Duty

Thank you for that - I was very confused and coming up with a bunch of wrong acronym ideas.

 

[jimnjana]

Why?

I'm of the opinion that TRICARE costs should be rising in sync with our COLAs (when we get them).

 

[nash031]

I think the ROAD aspect of it (on the E side of the house) has been addressed with the modified HYTs and now having to meet a board for E-7. I think the days of being truly ROAD (prior to the coveted 18 years TOS 'sanctuary') are pretty much over.

All I can say is that's it absolutely wonderful being a member of the blue card mafia!

Not so in USN. HYT at E6 is 20, so ROAD E6s and even O4s and O5s are somewhat ubiquitous.

Again this isn't saying that's everyone. I am at 17, intending to punch at 20, but am far from ROAD. As others said, I have a job that means something to me and my Sailors, so I'll keep giving max effort for them. Eventually, my mentality will shift to my own future, but that will be a good while yet.

DOD is definitely going to make hay on this retirement change, but I also agree that I think it will greatly impact retention beyond, say, ten years. When they have to start throwing bonus money around to retain subpar talent, it'll be interesting to see what they do. We have cycles of that type of thing in my designator. I know if the DB/Tricare at 20 wasn't there, I probably would've been done at 12 myself.

 

[BLS53]

If I understand, the immediate pension at the end of 20 years service is still intact. Albeit at a reduced rate.

The biggie would've been making the retiree wait until age 60 or whatever to receive their pension. There were some political power brokers trying to push that through.

I've learned never to tell a civilian at what age I started receiving my pension. It makes a lot of people angry. Generally those who have never served.

 

[trixs]

If I understand, the immediate pension at the end of 20 years service is still intact. Albeit at a reduced rate.

The biggie would've been making the retiree wait until age 60 or whatever to receive their pension. There were some political power brokers trying to push that through.
.

Yeah, it is a reduced pension similar to the REDUX option. I guess our leaders forgot what happened to retention after they attempted to force that option and we are doomed to repeat the past.

I've learned never to tell a civilian at what age I started receiving my pension. It makes a lot of people angry. Generally those who have never served.

Seriously? Its not like the military's retirement system or pay is a secret. Those same people had the option to join and enjoy being away from their family for a year at a time while sleeping in some dump country.

 

[eta2020]

I've learned never to tell a civilian at what age I started receiving my pension. It makes a lot of people angry. Generally those who have never served.

Not worth it given that one has high probability of coming home with half of a face missing or ending up homeless or in Jail.

And given a new system it is worth even less. Those who make it to 20 certainly deserve those pensions.

 

[Huston55]

After reading the background on the new 'blended' retirement system, I think it's likely to be a positive change, with the caveat that service members must be responsible for their own FI for it to work well (and I firmly believe they should).

However, on the larger issue of recruiting, retention and, more importantly - service, I'm not a fan of the all volunteer military which, of course, is a large causative factor on this issue of retirement programs. I think we should reinstitute the draft (actually, mandatory national service) for all men & women, requiring all to give 2 yrs of service (Military, AmeriCorps, Peace Corps, etc.) between the ages of 18-26. I also think such service should be a prerequisite to elected office. But, hey, that's just me.