Swordsmyth
11-18-2017, 11:36 PM
Beginning in January, the military is switching from a traditional pension system, in which retirees receive a monthly check for life based on their pay and years of service, to one that also includes investment accounts, like those commonly available to civilian workers. The new “blended” system is based, in part, on recommendations by the Military Compensation and Retirement Modernization Commission.
The system needed updating, the commission said, because the military’s pension system now leaves the vast majority of service members with no retirement savings when they leave the military. Service members now must serve at least 20 years to get a pension — hence its “20 or nothing” nickname. More than 80 percent of service members leave the military short of that minimum, according to the Defense Department.
The new system still offers a monthly pension, but one calculated using a formula that reduces it by 20 percent, said Michael Meese, a retired Army brigadier general and chief operating officer of the American Armed Forces Mutual Aid Association, a nonprofit group that provides insurance and other financial services to military members. (The commission’s final report noted that while its benefits recommendations weren’t “budget driven,” they would nevertheless “substantially reduce” government spending.)
But service members will also receive contributions to the Thrift Savings Plan, the federal government’s version of an investment-based, 401(k) retirement plan. The military will contribute a minimum of 1 percent of the service member’s pay, even if he or she contributes nothing. The military will also chip inasmuch as 4 percent more in matching contributions, for a maximum government contribution of 5 percent.
(Service members already may contribute to the Thrift Savings Plan, known for its low-cost investment funds, but the military now makes no contributions.)
More at: https://www.seattletimes.com/business/u-s-military-readies-major-overhaul-of-retirement-system/
The system needed updating, the commission said, because the military’s pension system now leaves the vast majority of service members with no retirement savings when they leave the military. Service members now must serve at least 20 years to get a pension — hence its “20 or nothing” nickname. More than 80 percent of service members leave the military short of that minimum, according to the Defense Department.
The new system still offers a monthly pension, but one calculated using a formula that reduces it by 20 percent, said Michael Meese, a retired Army brigadier general and chief operating officer of the American Armed Forces Mutual Aid Association, a nonprofit group that provides insurance and other financial services to military members. (The commission’s final report noted that while its benefits recommendations weren’t “budget driven,” they would nevertheless “substantially reduce” government spending.)
But service members will also receive contributions to the Thrift Savings Plan, the federal government’s version of an investment-based, 401(k) retirement plan. The military will contribute a minimum of 1 percent of the service member’s pay, even if he or she contributes nothing. The military will also chip inasmuch as 4 percent more in matching contributions, for a maximum government contribution of 5 percent.
(Service members already may contribute to the Thrift Savings Plan, known for its low-cost investment funds, but the military now makes no contributions.)
More at: https://www.seattletimes.com/business/u-s-military-readies-major-overhaul-of-retirement-system/