Thread: Boghies Account Talk

Following your link to this pension plan I find The American Interest quotes Financial Times

As well as the overall financial burden, the system is controversial because only 17 per cent of personnel actually serve the required 20 years needed to qualify.

Following that link I find I must sign up and pay money to read the article. Not gonna do it.

I would like to see some factual data about that statement. What does the number actually include?

I'd hate to think that 83% of my fellow annuitants got over somehow and didn't have to do 20. I would have thought they would have let me know so I could join them.

About that rose garden, I have seen stuff over the years claiming that TSP participants would be millionaires after 30 years. How has that worked out for you 30 year people?

PO

Originally Posted by PessOptimist

Following your link to this pension plan I find The American Interest quotes Financial Times



Following that link I find I must sign up and pay money to read the article. Not gonna do it.

I would like to see some factual data about that statement. What does the number actually include?

I'd hate to think that 83% of my fellow annuitants got over somehow and didn't have to do 20. I would have thought they would have let me know so I could join them.

About that rose garden, I have seen stuff over the years claiming that TSP participants would be millionaires after 30 years. How has that worked out for you 30 year people?

PO

PO,

Just the opposite concern. The absolute vast majority of those in the Armed Forces serve four years - not twenty. We are talking about 80%+ in the Marine Corps serve a single four year term. Those people get no retirement benefit and they can transfer no retirement assets to their new employer's 401(k) program. As far as retirement, their four years in the Corps are dead weight - but, realistically speaking, 20 years old really don't invest for retirement no matter how hard we push them. I have repeatedly been told that less than 20% of those who have served receive a pension while the rest do not serve the required 20 years.

The pension in question - and ours as well - is not an annuity. It is a budget line item. You can annuitize your TSP, but your TSP pension and the CSRS pension and the pension mentioned are line items in the Federal budget. It would be politically dangerous to cut that spending line item, but hedging the inflation formula or something like that might be something a cash flow starved government might try. That is why I want a frugal government. And, that is why I don't want current politicians promising me stuff they don't have to pay for. At some point the punch bowl runs dry and the promising politicians have already staggered home.

Lastly, most of us will work 40+ years in our lifetime. Clearing a million in 30 years would be difficult - especially considering the wages a 25 year old makes. I should be somewhere around a $600K at the 30 year mark and I didn't really start investing for retirement till I was 10 years into my career. See above for early career retirement funding dumbness. At 60 I should have that million. At 65 a million and a half. Politicians cannot directly touch it. Actuaries cannot touch it. Central planners cannot touch it. However, higher income taxes can make a grab - but there are ways around that.


P.S. I don't think the Financial Times is a pay site. I'm too cheap for that. Maybe I signed up before it became one, but...

Originally Posted by Boghie

P.S. I don't think the Financial Times is a pay site. I'm too cheap for that. Maybe I signed up before it became one, but...

I read it just fine and I can't say I've been there before. I certainly don't subscribe.

Cactus, this is where I get when I try to read the FT article: Pentagon faces a rebel yell over pensions - FT.com

They want money to view it. I am not talking about the link to american interest, I am referring to their link to financial times.

On to Boghies post

My concern is with the statement in the quote of the FT article

As well as the overall financial burden, the system is controversial because only 17 per cent of personnel actually serve the required 20 years needed to qualify.

I perceive the above quote to be pertaining to all military retiree annuitants and not all having served. The FT site is asking for money to read the entire article.

Originally Posted by Boghie

PO,

Just the opposite concern. The absolute vast majority of those in the Armed Forces serve four years - not twenty. We are talking about 80%+ in the Marine Corps serve a single four year term. Those people get no retirement benefit and they can transfer no retirement assets to their new employer's 401(k) program. As far as retirement, their four years in the Corps are dead weight - but, realistically speaking, 20 years old really don't invest for retirement no matter how hard we push them. I have repeatedly been told that less than 20% of those who have served receive a pension while the rest do not serve the required 20 years.

Yeah, OK. Most in all services do a one and done. What they get is education benefits, home loan benefits, if they become Fed civilians a chance to apply those years to time served. Referring to four years in any service as "dead weight" is a little wrong IMHO. If you fall in to that category look in to "buying back" your military time. The longer you wait the more it costs. The article above leads one to believe that only 17% of military annuitants served 20 years. If it refers to all who served it is probably near correct. It is somewhat ambiguous.

Originally Posted by Boghie

The pension in question - and ours as well - is not an annuity. It is a budget line item. You can annuitize your TSP, but your TSP pension and the CSRS pension and the pension mentioned are line items in the Federal budget. It would be politically dangerous to cut that spending line item, but hedging the inflation formula or something like that might be something a cash flow starved government might try. That is why I want a frugal government. And, that is why I don't want current politicians promising me stuff they don't have to pay for. At some point the punch bowl runs dry and the promising politicians have already staggered home.

Um, TSP pension? Yeah you can choose to take your TSP balance as an annuity when you qualify. CSRS, FERS and military retirement are annuities. TSP isn't a pension. It is a retirement account. Sort of like a 401k under tax laws.

Originally Posted by Boghie

Lastly, most of us will work 40+ years in our lifetime. Clearing a million in 30 years would be difficult - especially considering the wages a 25 year old makes. I should be somewhere around a $600K at the 30 year mark and I didn't really start investing for retirement till I was 10 years into my career. See above for early career retirement funding dumbness. At 60 I should have that million. At 65 a million and a half. Politicians cannot directly touch it. Actuaries cannot touch it. Central planners cannot touch it. However, higher income taxes can make a grab - but there are ways around that.

Yes, most of us will work 40 years or more at one job or another. The million dollar thing was something OPM or TSP put out a long time ago. Do not worry about past investments, take care of now. You seem to be a little confused about retirement money. Look things up.

Originally Posted by Boghie

P.S. I don't think the Financial Times is a pay site. I'm too cheap for that. Maybe I signed up before it became one, but...

They wanted me to subscribe for money to see the article referenced.

Best of luck to you.

PO

No one has been in the TSP for 30 years yet. It was established in 1986 (according to the TSP.GOV website) However, I started working for the government in October 1985 and started in FERS... I could have sworn I was in the TSP as soon I started work. But, that said, I should have roughly $2M when I retire after 38 years. I am pretty sure I will not have $1M by 30 years though. I probably would have been able to if I had taken money out of the S and I funds during the drops around 2001 and 2008. I lost a lot then. Also remember though, $1M won't be worth what it was when I started contributing in 1985(6?). When I started as a GS-3, my salary was $9,458/yr and a split-level on 1/4 acre around DC went for around $90K.

Strange thing about that link. I think they must have cookies or something because our resulting links are different. Yours has an 'Authorized=false' in it. My guess is that I (and NiteFlyer) probably 'subscribed' before it became a pay site. Sorry about that. Here is the pertinent quote:

Service members are entitled to half salary after 20 years, which was reduced to 40 per cent in the Reagan administration, but returned to 50 per cent under President Bill Clinton. As well as the overall financial burden, the system is controversial because only 17 per cent of personnel actually serve the required 20 years needed to qualify. Most of the people who fought in Iraq and Afghanistan will end up with no pension at all. The system is “unfair, unaffordable and inflexible”, the Defense Business Board, which advises the secretary of defence, said last year.

It definitely pertains to 17% of the entire military population attaining a military pension.

I, too, find the benefits provided our military (even junior enlisted who serve four years) to be quite good. The education benefits are worth there weight in gold. Literally. If used and not abused or ignored. The VA loan program is amazing.

I meant FERS Pension, not TSP Pension. If the pensions are annuitized at retirement than there can be no issue of changing the benefits. Why then is there so much smoke? Why then are there line items in Federal expenditures? Can one look at an account in his/her name at some financial institution and watch the balance? I do not think it is annuitized. Could be wrong. Hope I am.

Are we at a market top?

From what I am reading around here we probably are at a technical market top. The lines are moving in wedges and patterns - whatever, I am too dumb to figure all that our. Dumb Money is starting to roll into equities and out of bonds. However, is that really a dumb move by dumb money or will those folks be right like a broken clock.

I think the important questions are: Are we nearing a large correction or a collapse? Is this market frothy?

Personally, I don't think so. The market will correct this year, it almost always does - see last year which was a very good year. Timing a short term adjustment is quite yummy and helps with the alpha, but avoiding corrections that require multiple years to recover from is the key for me. You have to be in to win. If you expect a once in a lifetime collapse every year you will not be in the market enough to win. Kinda like a basketball team that cannot shoot the ball and plays a tight zone. Gotta have a balance. I have lost growth by living 2008 in 2010, 2011, and 2012. That may come back to haunt because that lost growth will buffer the next big correction. Oh well...

First of all we probably have to guess at what a reasonable correction in 2008/9 should have been. The market was obviously frothy in 2007, but what was the reasonable correction to bring it in balance? My guess is that 57% was a bit outside reason. Since the market recovered a huge chunk of that by the end of 2009 I think that assumption safe. The returns from 2010 onward are in the normal range. Thus, I will use the value of the S&P500 at 2009/12/31 to be the proper value for 2007. Say a nice round 1100 is where we should have been at the end of 2007 - that is, a correction of 30% or so.

Now, we have to look at today - five years after. The S&P500 just breached 1500 for the first time since 2007. That is an average return of 7.3% from the normalized 2007 value - which is a little lower than the norm. So, this very SWAGy super-scientific model tells me we are ok. And the reduced growth is probably the result of government induced uncertainty. We will probably continue on this crappy return curve for the next few years. Probably a 14% year followed by a -2% year followed by a 12% year and so on. All survivable.

Where, then, is the danger.

I think the real danger right now in a normalized market is The Black Swan. I got crapped on in September of 2001 after I smarmily avoided the Dot.Com bust. I got crapped on again in October 2008 after a period of recovery and a lack on negative news pulled me into equities. In both cases, a Black Swan took flight. In one of the cases the Black Swan should have been a known entity. Oh well. So, what is the Black Swan over the horizon?

Could it be Sovereign Debt? Maybe, but everyone sees it. Is that really a Black Swan. Maybe my everybody is Smart Money and the vast majority of folks are living in bliss. Ready to invest. Regardless, where is the safe harbor in our retirement fund if the F Fund crashes and the gubmint raids the G Fund? Just asking. My best guess there will be very choppy C and I Funds. Hold on and plow money into them. Don't know about the S Fund. Is it the big corporations or the small corporations that will be affected most by interest rates and government taxation raids?

Could it be a federal spending collapse? That will definitely hit the C and S funds, my guess it will hit the I as well. Lots of government contractors will be hit hard. Lots of government employees will be hit hard - anyone else read the article where the DOD is talking about once a week unpaid furlough days. However, my best guess is that this will result in a correction and not a panic. We would have to watch our choices and act accordingly. However, if spending collapses as a result of Bond Vigilante or Soros style arbitrage than we will be in full flight. That would result in a sudden collapse. Best move there would be to bail to the G and then step back into C/S/I while ignoring the F.

Could it be a continuing of Federal debt growth? That would end in Bond Vigilante and/or Soros Arbitrage. We would not know when it would occur. My guess is that the G and F Funds will tell the tale to some extent - hopefully they will warn big spending politicians of their action. However, what is a bond fund to think of when folks are seriously talking about Trillion Dollar Pennies. Anyway, when big money rolls out of Treasuries and into cash or equities than Houston has a problem. Is that occurring now? The C/S/I would be the safe harbors - excepting that the grasping hand of the one entity that did not adjust to reality would grab into the pockets of the private sector. Again the safest harbor would be anywhere else than sovereign debt. Very rocky.

What else?

P.S. This actually brings up a problem in our retirement account options. We actually have no cash option. Oh well.

Regretfully folks, there is at least one other Black Swan...

While this article is impressive, the important stuff is in the comments...

You want something for the archives? Here it is. As time goes by it will become acknowledged by historians that Iraq was the right strategic place for America to be and Afghanistan entirely the wrong one.

...

An American force in Iraq could indirectly cast its shadow on Syria, Saudi Arabia and Iran. But a decision was made to reverse the position entirely; to put America’s ground force in Afghanistan where it was landlocked by Pakistan, Russia, and Iran. From surrounding them America went to being surrounded.

...

As if modern pluralistic state can be magically brought into existence by purple fingers or Hamas elections.

You might well be right and it may prove ultimately impossible to bring anything like modernity and rationality to the Islamic world. But think of what this means. It ultimately means the world of the Three Conjectures. That is a world where Iran gets the bomb, the KSA arm up buying stuff from Pakistan, the regimes fall and terror groups get the nukes and biologicals and chemicals and remain unreconstructed jihadis.

Total War is usually part of a 4th Turning.

That could be the Black Swan Event, eh. Kinda hard to avoid.

Boghie,

My friend you seem wound pretty tight - sit back and ride this wave. Soon you'll hear the cries of get me in at any price. The great rotation we've been waiting several years for has begun and stocks are a generational buy. Don't play on the tracks while the Grand Trunk approaches. The MCSUM has exceeded escape velocity.

Originally Posted by Birchtree

Boghie,

My friend you seem wound pretty tight - sit back and ride this wave. Soon you'll hear the cries of get me in at any price. The great rotation we've been waiting several years for has begun and stocks are a generational buy. Don't play on the tracks while the Grand Trunk approaches. The MCSUM has exceeded escape velocity.

Escape velocity. I like that. That means we are escaping that old pull of 1500 S&P. This Summer we'll see 1550 or higher. We'll look back on that old platform from which we jettisoned from and say, "Why were we there for so long?"
I think we're going to do just fine in this market.

JimmyJoe,

I was looking at the ratio adjusted NYSE A/D line and that thing is parabolic at an 80 degree angle - not going to slow down anytime soon. Bank earnings and the relative performance of banks in 2012 tells me that this rally is probably closer to its beginning than its end. I believe that BAC and equities are heading much higher in 2013. The Fed is going to continue printing to the tune of $85 billion a month until the Dow reaches hell who knows.