Precise101
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So here's thinking ahead - does the Army offer a retirement/pension plan? Someone recently told me they do not anymore.
Retirement
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Precise101
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Is it then that it's not as good anymore? I was told it is now a 401K plan instead of a pension.
St.Katherine
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I can only assume you’re not in the military because if you are, your finance office will make sure you know about your retirement benefits.
1979 was the last year to get 50% of your base pay after 20 years of service; 75% after 30 years. I think the retirement benefits now are similar to civilian accounts where you have several options to choose from.
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The retirement plan you are eligible for depends on what is in effect when your military accession occurred.
Those entering today still have an opportunity for a pension after 20 years of service, but there are more options now for those who serve less than 20. The TSP, Thrift Savings Plan, is the Federal 401k type of plan, following the same rules, is portable, etc. Go to www.tsp.gov
Though the current Blended Retirement System (BRS) is not as generous as the previous plans, it’s still very good, especially when you add in the medical, dental, pharmacy, military exchange and commissary benefits, etc. As with any employer, personnel costs are usually a big chunk of the budget. Retirees started living a lot longer past retirement date, so you saw corporate America start the move away from defined benefit pension plans, about 20-30 years ago. There are still many people on active duty eligible for the most recent three retirement plans. I retired at 46, and will be blessed to receive half of my base pay as an O-6 the rest of my life (Final Pay Plan, since I came into the Navy when that was in effect, and then served 26 years, watching two more plans come into effect) - think how many are like me, potentially receiving plus or minus 40 years of half-pay. The plan now in effect for those entering the military tempers that much more for Govt personnel accounts down the road, using a different formula to arrive at the pension amount. There are, of course, still many who will be on the other plans, but those will eventually dwindle. No doubt there will be another plan down the road.
Some links from an unofficial but reliable source:
www.military.com
www.military.com
www.military.com
Those entering today still have an opportunity for a pension after 20 years of service, but there are more options now for those who serve less than 20. The TSP, Thrift Savings Plan, is the Federal 401k type of plan, following the same rules, is portable, etc. Go to www.tsp.gov
Though the current Blended Retirement System (BRS) is not as generous as the previous plans, it’s still very good, especially when you add in the medical, dental, pharmacy, military exchange and commissary benefits, etc. As with any employer, personnel costs are usually a big chunk of the budget. Retirees started living a lot longer past retirement date, so you saw corporate America start the move away from defined benefit pension plans, about 20-30 years ago. There are still many people on active duty eligible for the most recent three retirement plans. I retired at 46, and will be blessed to receive half of my base pay as an O-6 the rest of my life (Final Pay Plan, since I came into the Navy when that was in effect, and then served 26 years, watching two more plans come into effect) - think how many are like me, potentially receiving plus or minus 40 years of half-pay. The plan now in effect for those entering the military tempers that much more for Govt personnel accounts down the road, using a different formula to arrive at the pension amount. There are, of course, still many who will be on the other plans, but those will eventually dwindle. No doubt there will be another plan down the road.
Some links from an unofficial but reliable source:
Military Retirement Systems, Final Pay, High 36 | Military.com
Military Retired Pay Overview | Military.com
Computing Retired Military Pay | Military.com
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The change in 1979 was from retirement pay based on highest pay received to retirement pay based on average of your highest three years pay which is also the way that some civilian police retirements work. Changes that were much more recent bring in some more civilian-type options but you can still do 20 (or 30) and receive a substantial pension starting immediately. There is also a "Thrift Savings Plan" which is similar to a 401k which is a substantial improvement for current servicepeople.
St.Katherine
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Thanks for the information. It’s so long ago that I just wait for 75% pension every month.
dutydidnotwait98
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I think it can be wise to have at least two retirement plans, one from the Army and the other for all the myriad of reasons that can get you out before you get that pension. I had a separate line of investment that has served me well now that I also have my Army pension. Just food for thought. You're young, use time to your benefit.
High 3 is no longer offered. Everyone joining now will get BRS. Between 2016 and 2018, those currently in could choose either High 3 or BRS.
High 3 was 2.5% x years of service. It was also all-or-nothing. You would still be eligible to make an account and contribute to TSP on your own, but there's no additional benefits if you don't hit 20.
For BRS, instead of 2.5% x years of service, it's 2%. You get the added benefit of up to 5% matching for TSP (where the "401K" association comes from)--so those not looking to do 20 or not sure can still reap some kind of benefit for years of service.
You still get highest paygrade you were in for at least three years (comes into play for Officer-to-Enlisted/Warrant Officer reversions, if you were O3E for at least three years, but had to revert to E6, you still get 40% of O3E pay at 20 years).
I had a (nuke) buddy that did the math in a complex excel spreadsheet. High 3 was the better option--at 20 years, the 40% plus payments from maxing out the 5% matching contributions still didn't catch up to the 50% you get with High 3--but the catch was committing to at least 20 years, all or nothing.
It was a fun discussion to have at the time. Doesn't matter now, everyone gets BRS.
High 3 was 2.5% x years of service. It was also all-or-nothing. You would still be eligible to make an account and contribute to TSP on your own, but there's no additional benefits if you don't hit 20.
For BRS, instead of 2.5% x years of service, it's 2%. You get the added benefit of up to 5% matching for TSP (where the "401K" association comes from)--so those not looking to do 20 or not sure can still reap some kind of benefit for years of service.
You still get highest paygrade you were in for at least three years (comes into play for Officer-to-Enlisted/Warrant Officer reversions, if you were O3E for at least three years, but had to revert to E6, you still get 40% of O3E pay at 20 years).
I had a (nuke) buddy that did the math in a complex excel spreadsheet. High 3 was the better option--at 20 years, the 40% plus payments from maxing out the 5% matching contributions still didn't catch up to the 50% you get with High 3--but the catch was committing to at least 20 years, all or nothing.
It was a fun discussion to have at the time. Doesn't matter now, everyone gets BRS.