Thread: Lack of matching funds for the military

I've had a discussion regarding this with a few of the more experienced soldiers in our platoon. None of us can think of a good reason for the military TSP contributions not being matched.

I intend to write my local representative and a senator (Senator Warner defense comittee chairman) about this issue.

*yoda voice*

Deploy you must, for within you will master the tax-free growth opportunities.

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All comedy aside, I think no matching sucks.

Give it a couple of years, after everyone is 'maxed out' on hi-tempo days, we should see the incentives start to rollin.

I can understand everyone's concern about the military not matching TSP. And it socks(misspelled intentionally). However, you need to look at the whole scenario here and why our civilian counterparts are matching some of the employers contribution and why the military doesn't. Our military has the best retirement plan there is. There is no other entity out there that can match it. Giving us the TSP is an incing on the cake.

Now, the reason why civilian employer or government techs are getting matching contribution is because their retirement benefits have been reduced drastically. This is why there was a switch from CSRS to FERS. With the civilian employer, they found out that it is cheaper to match people's contribution than to provide them the Defined Benefit plans (DB). They instead have switched to Defined Contribution plan (DC). With DC they let their employee worry about their retirement plan. I am not sure if you've read that GM, Ford, and other major airlines were hurting. It was all over the news a couple of weeks ago. Itis because their retirees were under the DB plan. Well they found out that decades after their employees retired, they are still foring hundred of millions of dollars to the retirees. Thus, lowering down their profit to this day. Please read more about the difference between the DB and DC plan. Once you've read the history of how these two came about, you will all understand why the military does not offer matching contribution.

In fact, I challenge anyone here to find me a major corporation that still offers a DB plan. I can't think of anyone now. They've all switched to DC plan long time ago.Just do the numbers and put them in excel. Paying a percentage now, usually about 5-10% matching is alot better than paying a retiree for 30-40 years of their remaining life. This is why they are more than willing to pay those matching contribution... Just my .02.

P



PS... Oh by the way, not all employees in the DC plan contributes to the plan so the employers gets away of putting any money into their retirement. FERS employees gets a platry 1% for those who decides not to contribute to their TSP.

Be careful on where you place the "blame" for the injustice of the military not providing TSP matching contributions. All Service Secretaries have the ability to provide matching funds. That was written into the law. It's rather obvious to discern why they don't, as pyriel mentioned. Due to the current status of the retirement programs the military offers, it would cost the Services a fortune to offer the additional funding.

I do foresee, however, in the near future, an alternative. I could see themilitary offering a choice to the new people when they enter service. You could either have the current 50% at 20 (75% max at 30 yrs) plan, or,matching TSP contributions.After retiring with nearly 27yrs, if I had to do it all over again and had a choice, I'd take the TSP in a flash! The size of the retirement fund with that much time in, assuming "average" earnings, is substantial... not to mention the ability to control allocation of my contributions. IMHO.

pyriel wrote:

Our military has the best retirement plan there is. There is no other entity out there that can match it. Giving us the TSP is an incing on the cake.

Pyriel,

The military retirement plan is only the best their is if you do 20 years on active duty. If I decide to pursue other dreams and become an educator then I get absolutely nothing from that retirement plan.

I don't have hard facts to support this but I assume that most military members do not stay in for 20 years. It wouldn't be possible for even a majority of people in the military to stay for 20 years as advancement and retention opportunities are dependant upon how many people get out and retire.

I have not yet solved the great mystery that is reserve retirement.

retiredcg wrote:

Be careful on where you place the "blame" for the injustice of the military not providing TSP matching contributions. All Service Secretaries have the ability to provide matching funds. That was written into the law. It's rather obvious to discern why they don't, as pyriel mentioned. Due to the current status of the retirement programs the military offers, it would cost the Services a fortune to offer the additional funding.

Sir,

Just because it is the cheaper alternative doesn't mean that it is the right thing to do. I am fortunate that because of my status I was allowed to live off base and collect BAH that allowed me to buy a house. I have had NCOs who because of silly rules had to live in a small room with 3 people. He was mature enough to live on his own and if the 3 of those NCOs were allowed to live off base they would be able to buy 1 and a half of my houses with the money they would receive with BAH so they are forced to miss out on that investment opportunity and further their financial futuredue to not much more justificsation thanit is cheaper for the government. I don't view myself as a better person than they are and they should have the same rights.

Those are very good points. Gotta admit, didn't even think of that; however, I think I would still prefer them to match the TSP though.

Although the military retirement plan is pretty easy to understand (stay in for 20 and you get x percent of your base pay) I don't know if many service members really see that as an attainable goal.I keep jumping on and off the idea of retirement with the reserves.

At least with TSP, I know that those funds are mine when I do decide to retire from everything. And if the government matches it, then even better.With the military's standard retirement if you make it to 18 years, too bad, if you make it to 19 and some change, too bad (unless you can get some waiverto allow you to retire early).

I do like what was suggested by the cg about giving troops an option of how they want to initiate their retirement plan. They should probably also receive a mandatory class on the different types of plans and how they work or heck, just a general finance classwould do.

shiftomnimega wrote:

With the military's standard retirement if you make it to 18 years, too bad, if you make it to 19 and some change, too bad (unless you can get some waiverto allow you to retire early).

I do like what was suggested by the cg about giving troops an option of how they want to initiate their retirement plan. They should probably also receive a mandatory class on the different types of plans and how they work or heck, just a general finance classwould do.

From time to time, as the Services "purge" some of the "old-timers", they offer incentives for personnel to accept "early" retirements, say, at 15 years. I have seen offerings of 20-30,000 to take the money, early retirement and run. In the long run (assuming the retiree lives long enough), it doesn't make sense, unless the individual has solid plans for another career or life function. The monies "lost" by taking the early retirement can be substantial. The longer you live, the more Uncle has to shell out. (Me - I'm planning to live to 125 y.o. so I canmake Uncle pay, and pay, and pay!) Sometimes, the sight of all that money (which is fully taxable) can slant a person's perspective.

I also happen to teach our "young" folks (active, reserve and civilian) some about their financial life's foundations as a (volunteer) Command Financial Specialist. I love talking about various topics ranging from identity theft to credit cards and investments, but one of my favorite topics is the TSP. What a fabulous plan. I, for one, would wholeheartedly support alternatives to the current retirement system by getting matching funds like I currently do as Civil Service. But even without it; it still is a great system. And remember, that active duty as well as reserves on active duty are able to contribute up to 100 percent of their special and bonus pays, on top of the current 10 percent of their base. For some folks, that can be a substantial amount.

One other thing I recently found out about was the Retirement Savings Contributions Credit that the IRS has given out for the last couple years (and will continue through the next taxable year). That tax credit can be as high as $1000 or $2000 depending on how you file and your income. This works with the TSP. And as a tax credit, that is so much more valuable than a tax deduction.:^
For more info:http://www.irs.gov/newsroom/article/...107686,00.html

Shiftomnimega, you made an excellent point. Aclose relative of minewho is an active duty Staff Sargeant received a Retirement Savings Contributions Crediton IRS Form 1040 of $.50 for each $1.00he contributed to the TSP in 2004.

Active duty gets a great deal for putting in 20, but being in the National Guard, I have to wait until I am 60 to see anything. I have just over 18 in, and could retire at 37, but that's 23 years of waiting. Deploying helps bump everything up, to include TSP. 10% of an active duty check is much more than 10% of a weekend drill check.

Just my .02

I am only E-3 with 2 years in. I have been putting the max in TSP for 11 months and have come up with $5300 so far. If the govt matched that it would be all gravY!