Changes to retirement passes first hurdle.

[webmaster]

Here is the IRS chart for contributions per plan if you are interested. As @HAL Pilot mentioned earlier, your employer can contribute regardless of what you put in up to their max amount (if over, then you get a check from your employer, at least that is what the AA contract has).

http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-Contributions

 

[nittany03]

Words

Sage wisdom here.

I would argue that junior enlisted would have enough leftover to invest if they stopped dumping money into things they probably don't need. Cars, large expensive trucks, motorcycles, guns, big TVs, expensive weekend outings, blowing deployment money, and insert a myriad of numerous things they probably don't need (I see it all over base regardless of service).

Young people gonna young. We all did it to varying degrees when we were college-aged. The only difference is, being officers, we were in college then. And probably didn't have as much money to blow on fun things.

 

[nittany03]

Words

I don't disagree. But I think the blended system is, on balance, a good compromise. They didn't shitcan the pension. I believe if you do a full career for one company, you should rate a pension. Heck, I believe that in the civ world, too. I have a personal sore spot with execs mucking with retirement benefits. My dad worked for the same company for 30 years. I grew up in the same house for 18 1/2 years. Out of the blue, the company yanked medical benefits for future retirees in bankruptcy proceedings. So my dad had to take early retirement and move to upstate NY for a new job he could retire out of in 10 years with medical. Total backstab move to fix the higherups' fuckup.

That said, there's also value in getting SOMETHING today. I may not want to work for the same company for 30 years. I would have done it for the Navy, but got a big "fuck you; here's a severance and the door." So a blended plan gives me the option to take my 401(k) or TSP and bail to another company who just gave me a better offer in 5 years. Statistically, people who play their cards right make their biggest pay jumps going company-to-company, not as internal hires.

 

[Machine]

And if people don't contribute enough to get the full match, that's on them. That's free money they're leaving on the table. If they're using the money instead to pay down credit cards or student loan debt, that's understandable and definitely the right call, but if they're spending it on lattes instead...

No. Like you said it's free money, so it's definitely not the right call to pay off debt.

 

[Tycho_Brohe]

No. Like you said it's free money, so it's definitely not the right call to pay off debt.

Oh yeah, good call, the match is a guaranteed 100% return. As I was.

 

[Spekkio]

1) Field grade, company grade, senior enlisted, and junior enlisted are not the same. Therefore BAH should be different as a part of their compensation package.

2) What a particular service member choses to do with his or her home (renting or owning) is none of the military's business until it becomes an issue with regards to readiness and ability for a member to deploy or effectively do his job. We're complaining about service members not being financial literate but start complaining with they make smart financial decisions. If you reduce compensation via BAH - it is going to affect recruiting and retention. $40-45k a year for an 0-1 right out of college is about par with the median salary of college graduate. a $6-8k pay drop is significant when a comparative company will pay (depending on degree) $12-17k above that. You would making recruiting a large number of STEM and Business majors difficult.

To be clear: I come on the side of not touching the BAH system wrt dependents/no dependents. I think that the goal is to provide every servicemember with a dwelling commensurate with his assumed family size and rank, and the system we have accomplishes that. If anything, the 'no dependents' scale has come up high enough that single sailors and JOs collecting BAH can stand to make a good chunk of change off of being frugal, but this 'problem' mostly applies to JOs who get BAH from day 1 and never live in the barracks. I made substantial money off BAH as an O1/O2, as an O-3 with 3 children I expect to pay out of base pay for rent for the first year or two every time I PCS. In my current duty station I would be netting $1500 of tax free money a month if I were single splitting a 3BR with roommates - that's the equivalent post-tax salary of someone making $10/hour. If you set it so that every single JO gets w/ dependent BAH, you are just going to have more instances of people pocketing a lot of tax-free money. It's only a matter of time until John Q. Public catches on and rails against it.

So in lieu of that, it's relatively surprising to me when people who can benefit the most off of milking the system - single people who find ways to cut the cost of living and rake lots of tax free money - complain about an extra couple hundred given to people with families who actually have to use it. Do they really want to overhaul the system so that they can't make that tax-free money just so they can vindicate some philosophical notion of 'fairness?' I think their underlying assumption for this change is that the DoD would raise everyone's BAH to the 'with dependants' rate instead of lowering everyone's BAH so that it only meets some arbitrary bare minimum standard.

All I'm saying that those who argue like villanelle that BAH should be an allowance for housing that is not adjusted to personal choices like marriage and children, then the logical conclusion is that the military stops making assumptions about your family size based on rank like it currently does. You get a stipend that would cover a small apt and that's it, similar to the way BAS works for providing for the servicemember's food. Personnel of varying ranks are already compensated for the difference in responsibility in their base pay and special pays. The median price of a home in an area doesn't change because you wear railroad tracks or 3 chevrons and a rocker, unless you are renting on base housing. You could even go a step further and say that the only 'free' housing in the military is the barracks, anything else is paid from your pay and you get rid of BAH entirely. You adjust for higher cost of living in places like San Diego through COLA.

3) I would argue that junior enlisted would have enough leftover to invest if they stopped dumping money into things they probably don't need. Cars, large expensive trucks, motorcycles, guns, big TVs, expensive weekend outings, blowing deployment money, and insert a myriad of numerous things they probably don't need (I see it all over base regardless of service). Is it a lot? No, but they're still well ahead for the comparative peers in the civilian workforce who are not college graduates.

I think that's an unreasonable expectation, and you're forgetting the logistics of what it's like to move out with just the clothes on your back. The military also doesn't provide the level of financial literacy training required for most sailors to be able to take full advantage of this system, which is probably a hidden cost in itself that wasn't analyzed for in the panel's report.

 

[robav8r]

That said, there's also value in getting SOMETHING today.

I think we're all a bit too willing to accept the "something" in lieu of the current plan. I've been doing this for 34 years now and I know LOTS of folks who made major career decisions based on the knowledge they could retire after 20. And I'm talking about warfighters who have done some remarkably difficult and challenging jobs. I agree with you that the proposal has some "good" ideas in it, but I think it will radically change the fabric of the force down the road. As always, just my .02c

 

[exNavyOffRec]

The problem I foresee with the match is the lack of financial literacy.

Bingo! I feel every person should go through a financial brief right when coming in, then again a year later to follow up, just a few hours can provide a wealth of information to get the wheels turning.

 

[e6bflyer]

Haven't posted here in a while, but this thread is full of differing opinions, many based on zero perspective. A bit about me:
Retired O-4, 20 years and 26 days. Prior enlisted. Transitioned to airline career. A wife and four kids.

The BAH system is as fair as its gonna be. Is it perfect? No. It does, however, take rank and location into account in deciding how much to pay someone. Fair enough. The whole with and without Dependents argument is silly. Having 4 kids doesn't increase your BAH a nickel. Being married in the military is not the same as being married and working a civilian job. My wife has embarked on a variety of careers and finally settled on full time mom because it didn't make sense to keep starting over. The extra BAH for having Dependents helped.

Saying that enlisted guys have enough money to save and that they spend it all on X-Boxes and cars really shows a lack of understanding and perspective. Yes, there are some who spend foolishly, but the majority are just trying to pay their bills on a limited amount of money and keep afloat financially. Walk a mile in their shoes before you make blanket statements.

There are always the 1 or 2 holier than thou financial guys who are trying to educate the masses on the time value of money and compounding interest. Look, dudes. We get it. Life happens. Debt happens. Sometimes people make choices that aren't in their best financial interests. Maybe they buy a boat. Maybe they lose their ass on a real estate deal. You don't have to educate everyone on how to save and retire a billionaire. Discussing retirement planning with these guys is like going to the gym with a crossfitter.

I am happily a member of the check of the month club. Know what? It is pretty danged nice. Now I am saving feverishly for my next retirement. Will I be a billionaire? Probably not. I will, however, have lived my life on my terms, provided for my family, and will not be a burden to my kids when I get old. Life is a journey, dudes. It ain't all about the end. My dad saved like a madman his entire working life, retired when he was 60, bought a sailboat, and died within two years of cancer. Think about that.

 

[Recovering LSO]

Discussing retirement planning with these guys is like going to the gym with a crossfitter.

Post of the year.

 

[vxc961]

I don't disagree. But I think the blended system is, on balance, a good compromise. They didn't shitcan the pension. I believe if you do a full career for one company, you should rate a pension. Heck, I believe that in the civ world, too. I have a personal sore spot with execs mucking with retirement benefits. My dad worked for the same company for 30 years. I grew up in the same house for 18 1/2 years. Out of the blue, the company yanked medical benefits for future retirees in bankruptcy proceedings. So my dad had to take early retirement and move to upstate NY for a new job he could retire out of in 10 years with medical. Total backstab move to fix the higherups' fuckup.

That said, there's also value in getting SOMETHING today. I may not want to work for the same company for 30 years. I would have done it for the Navy, but got a big "fuck you; here's a severance and the door." So a blended plan gives me the option to take my 401(k) or TSP and bail to another company who just gave me a better offer in 5 years. Statistically, people who play their cards right make their biggest pay jumps going company-to-company, not as internal hires.

People may have seen me complaining about IRR guys getting "screwed" for lack of s better term. But, your post gives me the chance to say that defined benefit plans are dinosaurs, and I think we all need to accept s little responsibility and capitalize on the flexibility of defined contribution plans.

 

[Spekkio]

People may have seen me complaining about IRR guys getting "screwed" for lack of s better term. But, your post gives me the chance to say that defined benefit plans are dinosaurs, and I think we all need to accept s little responsibility and capitalize on the flexibility of defined contribution plans.

They aren't that uncommon for civil service jobs. Both my dad and brother are in law enforcement and their pension plans put the military's to shame. The military doesn't even pay you 50% of your compensation in retirement, it's more like 25-33% once you remove all of the allowances and special pays. That's one little snippet that I wish more people would throw out there when debating this in a public forum, i.e. Congress.

 

[exNavyOffRec]

They aren't that uncommon for civil service jobs. Both my dad and brother are in law enforcement and their pension plans put the military's to shame. The military doesn't even pay you 50% of your compensation in retirement, it's more like 25-33% once you remove all of the allowances and special pays. That's one little snippet that I wish more people would throw out there when debating this in a public forum, i.e. Congress.

Yep, all the add on pays can lead to a real decrease in what you are used to getting, a nuke sub CPO retiring off sea duty is going to get much more of a shock than a surface CS CPO retiring off shore duty at the local galley.

 

[Hotdogs]

I think that's an unreasonable expectation, and you're forgetting the logistics of what it's like to move out with just the clothes on your back. The military also doesn't provide the level of financial literacy training required for most sailors to be able to take full advantage of this system, which is probably a hidden cost in itself that wasn't analyzed for in the panel's report.

I could go down a couple paths here Spekkio, but I'll just agree to disagree. The military provides a lot of opportunity to those who normally would not, and ultimately it is the individual's decision if he wants to take advantage of the programs (....and mentors) offered to him. To say that one does not have the ability, is an insult to those who have joined the military and gotten out, and have bettered themselves after "moving out with just the clothes on their back."

Saying that enlisted guys have enough money to save and that they spend it all on X-Boxes and cars really shows a lack of understanding and perspective. Yes, there are some who spend foolishly, but the majority are just trying to pay their bills on a limited amount of money and keep afloat financially. Walk a mile in their shoes before you make blanket statements.

Point taken. Maybe I was little jaded from my experiences and perspective of having to deal with it at the squadron level. I've witnessed a lot of poor financial decisions made after the fact from the E-5 and below crowd. Conversely there are a good chunk who do not have these issues.

 

[wlawr005]

I'd argue a good majority of JO's make terrible financial decisions...more than the junior enlisted ($500 bar tabs anyone?). However, they make more than enough money to keep them outta the poor house after one of those kinda weekends.