I’m starting a new comment here to answer Queue’s and Dan’s 24 January- February comments.

We’ve heard back from the DoD BRS office and we’re going to hear more outreach in the coming weeks. Hat tip to Airmen MilDollar of the MilitaryDollar site for chasing this down. They wrote most of this post and I’ve added some clarifications/links.

Just to reiterate what most people already know, the military is paid in arrears. The January mid-month pay deposit is technically an advance on the full pay deposited at the end of January. When that January LES is published, it’s predicting the end of the month. Those who contribute to their TSP accounts (which is less than half of the military) will also see on their January LES that money is being sent to the TSP. The TSP’s “January” contribution leaves your pay account at the end of January and ends up in the TSP in early February. It’s all reported correctly on tax forms at the end of the year.

For those of you wondering about the January government contributions (1% automatic and up to 4% matching) and why you did/did not receive them:
The BRS training and implementation documents all say something along the lines of “You will receive the Service Automatic (1%) Contribution, and Service Matching Contribution proportionate to your basic pay contributions, on the first pay period after opting in.”
https://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocuments/Combined%20BRS%20Policy%20Document.pdf?ver=2018-01-02-105828-370
Since opt-in was first allowed in January, this would explain why many people didn’t receive January contributions – they should start receiving them in February (with DoD’s BRS matching TSP contributions going into the TSP in early March). However, the NDAA 2016 law actually says:
“The Secretary concerned shall make a contribution…for any pay period during the period that begins…on or after the date the member makes the election.”

The NDAA law means that anybody making their opt in election on January 1st (or Feb 1st, Mar 1st, etc) should receive government contributions for that month **because you made the election ON the day the pay period begins.** Anybody opting in later in the month has to wait until the following pay period.

Hopefully that explains why some people received the January contributions and others didn’t.

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For those of you that think you should have received January contributions and didn’t:
If you match ALL of the following criteria and are interested in having your situation looked at, please contact me or Airmen MilDollar privately. We’ll ask the BRS office to dig deeper into your pay record and fix what’s broken. If you don’t meet ALL of the criteria, this does not apply to you.
1. You think you opted in between 0000 and 2359 EST on January 1st – AND –
2. You have confirmed you did NOT receive government contributions for January – AND –
3. You are willing to pass me your full name, branch of service, and (optional) approximately when you opted in (date and time, with the time zone if not already EST).

Personally, I’m already passing my daughter and son-in-law’s names to DoD’s BRS office.

Great point, Gerald– the goals have to be worth the hassle factors.

Thanks, OSV and Peter, those are great groups and programs!

Thanks for your question, Stephanie. This conversation goes a lot better when it’s started by the person who misses the military, although I appreciate that spouses are concerned– or even tired of being driven nuts by the problem.

The short answer is “No, you can’t return to active duty.” In this case it’s due to age, although all the services have experimented with waivers up through the late 30s. Some retirees have returned to active duty for short stints of 30-90 days for unusual skills like trauma surgeon or electrical utility grid operation in a battle zone. Other times it could be for a few months developing a special program or research project. Although the answer is usually “No”, if he has a unique skill then he can always ask the command or person who needs that skill and let that sponsor help with the waivers.

Another idea is serving the military in another capacity. Contact your local base’s Retired Activities Office, volunteer with a JROTC program at a high school, volunteer as a candidate guidance officer for students considering a service academy, or work with a veteran’s organization like MOAA.

Another idea is volunteer service. Look into disaster recovery with Team Rubicon, or helping with a local wounded warrior program, or volunteering with almost any other community non-profit organization. The key is to figure out what he really misses (leading a group? military camaraderie? mentoring and training?) and then find a way to do it without the military uniform.

A final suggestion is Ernie Zelinski’s Get-A-Life Tree. You can find the form at this link: http://bestretirementquotes.blogspot.com/2009/10/get-life-tree-great-retirement-planning.html (and Mr. Zelinski wrote an outstanding book about it, too). Use it to jumpstart your thoughts and find creative answers that are way better than doing what you’ve always done before. This can also be used by couples and families to come up with shared activities.

I’ve had a copy of the Get-A-Life Tree on my desk for nearly 14 years, but frankly I’ve been too busy to make the time to fill it out. I don’t want to get back in to the military, but I’ve found my own way to continue to pay it forward and mentor while I enjoy the camaraderie. When I’m not writing or talking with military & families, then I surf a lot, too!

Thanks, Peter, good advice!

Sorry about your back injury, Mike. Of course your first priority is to work with your doctor to try to reduce the effects of the damage and slow its progress.

You could ask your doctor whether your current condition is service-connected to the Marine laundry injury. If that incident is documented in your military medical records (or if a fellow recruit or staff can write a “buddy statement” on your behalf) then you may be able to file a claim with the Veterans Administration.

Talk with your doctor and then find a Veterans Service Officer with a vet’s group in your area like the American Legion, the Disabled American Veterans, MOAA, or your local VA office.

Thanks for asking the question, Bill!

The best answer is “Call your local recruiter.” The issue is that you’re considering this during a military drawdown, and you’d also need an age waiver. The recruiter might be able to suggest ANG duties or projects that you could join. That depends on what type of service & camaraderie you’re seeking, and what openings they have.

Thanks, Kevin, good point– I’ve clarified that in the post.

Sorry to hear about the divorce, Kim. If you or your spouse are in the service, then one of you should meet with a military lawyer to figure out your choices. If the military lawyers won’t see both of you, then one of you can get the JAG’s referral to a civilian divorce lawyer who’s familiar with military benefits.

In addition to financial and physical assets, the typical military divorce decides how to divide benefits like a pension, the Survivor Benefits Plan, life insurance, the GI Bill benefits, and child support. Your marriage didn’t meet the 10-year requirement of the federal law, but under state law the divorce court can make their own decisions. (Your children are also eligible for medical benefits as family members of the servicemember.) A lawyer who’s familiar with military benefits can make sure that the agreement accounts for military pay raises, promotions, disability ratings, and applicable medical benefits.

Don’t try this on your own. Get a lawyer who understands military benefits and has handled military divorces.

Good points, Gerald!

If you see new training materials on the blended retirement system, or a calculator to help make the choice, then I’d love to add the links to this post.

Thanks, Andrew!

A minor emphasis on one point– if you maintain a 40% savings rate for 20 years, you might reach financial independence without the pension.
https://the-military-guide.com/how-many-years-does-it-take-to-become-financially-independent-2/
https://the-military-guide.com/how-many-years-does-it-take-to-reach-financial-independence/
The advantage of the high savings rate is that you don’t have to count on gutting it out to 20 for the pension. If you’re no longer challenged and fulfilled by active duty, you can choose to leave for the Reserves at any time. It’s far better than grimly hanging on for 20 years (and sitting on a slightly larger pile of money) after risking your health and burning out.

I’m not sure where your numbers are coming from, and feel free to share them here or e-mail them to me. Frequently this difference arises when the taxable portfolio actually has a substantially different risk/return profile from the TSP. Your first check on your analysis would be to make sure that the taxable accounts are using benchmarks identical to the C, S, and I funds. Your second check would be that the fund performance is assessed over your remaining lifespan (or longer) or at least for the lifetime of the fund. Too many funds will cherrypick the dates for their performance claims.

The reason I suggest this is because a passive equity index fund with low expenses will almost always outperform the vast majority of actively-managed funds (and their higher expenses) over several decades. There are a handful of exceptions to this generalization (like Berkshire Hathaway), but then you have to be able to pick out those exceptions from over thousands of funds.

Here’s a link comparing the TSP’s funds to Vanguard & Fidelity funds:
https://www.bogleheads.org/wiki/Thrift_Savings_Plan

Our TSP portfolios were invested in the S and I funds. (Our contributions were made between 2002-2008, and today we’re in the process of converting them to Roth IRAs). For the last decade our taxable accounts have been >90% invested in equity ETFs at an average expense ratio of about 0.25%/year, at least 8x the TSP’s expense ratio. We paid much higher expenses than that (1%-2%) for over 20 years before that. Yet even at those high expenses we saved enough to reach financial independence– and despite two recessions over our 14 years of retirement, today that’s grown to “way more than enough”. My spouse and I may never touch our Roth IRAs (which will soon include all of our former TSP accounts). Life is definitely cushy.

While you’re younger and on active duty, especially with dual incomes and a high savings rate, I’m a big proponent of investing in a high-equity portfolio. It doesn’t have to be microcap telcom stocks– the TSP’s L2050 fund or any equivalent of the C, S, and I funds will do just fine.
https://the-military-guide.com/tailor-your-investments-to-your-military-pay-and-your-pension/

Admittedly as an O-2 it’s tough to max out the Roth TSP (the $18K limit is nearly 40% of your base pay) plus two Roth IRAs. However if you fail to make the most of the Roth TSP (and the Roth IRAs) every year then that opportunity is lost forever. When you promote to O-3 (and have a 35% pay raise) yet continue to live like an O-2, then you’ll be able to max out those contributions much more easily.

If your spouse’s income includes a 401(k) then you should try to contribute enough to least maximize the employer’s match. 401(k)s have higher expenses than the TSP, but the employer’s match will probably overcome even a higher expense ratio.

So the priority for your 40% savings rate is TSP, 401(k) to the match, Roth IRAs, the rest of the 401(k) to the limit, and then even more in taxable accounts. Your asset allocation can be high in equities in passive index funds with low expense ratios, but your asset allocation also has to help you sleep comfortably at night despite stock-market volatility.

Carl, as near as I can tell Type 2 diabetes is not on the Camp Lejeune list.

Here’s the current list of Camp Lejeune conditions that the VA is awarding compensation for:
http://www.publichealth.va.gov/exposures/camp-lejeune/

Here’s the proposed expanded list:
https://www.va.gov/opa/pressrel/pressrelease.cfm?id=2743

I know of veterans receiving VA compensation for Type 2 diabetes, but it’s for exposure to Agent Orange in Vietnam. Here’s more info on the dates and locations:
http://www.publichealth.va.gov/exposures/agentorange/benefits/registry-exam.asp

Carl, I’m afraid your years of service do not qualify for a military pension. In almost all cases you have to serve for at least 20 years (active duty or Reserve/Guard “good years”). Servicemembers can also be retired early from active duty by a temporary program (like TERA) or for medical/physical disability that occurred while on active duty.

If your health issues are caused by a service-connected condition then you may be eligible for compensation from the Veterans Administration. If a veteran is severely disabled or has minimal assets then they may qualify for additional VA financial support. (https://www.benefits.va.gov/pension/) However that’s a separate program from the Department of Defense.

Thanks, Bridget, you’re absolutely right!

Congress and DoD have to treat that as a revenue-neutral change, and there has been insufficient interest in cutting other programs to fund early retirement for those mobilized between 9/11 and 28 Jan 2008.

Thanks, Peter. Good points about behavioral finance.

Very good point, Vince, thanks for catching it.

I also didn’t specifically break out National Guard mobilizations for disaster recovery operations. And, of course, the 2015 NDAA correction to the 2008 NDAA that allows mobilizations/deployments after 30 Sep 2014 be counted across fiscal years…

These details are getting way too complicated. It’s probably time for me to write another separate wrapup post on early Reserve/Guard retirement.

Thanks, Hawkeye, sounds like you have a great plan!

My 5 AM internal alarm clock is definitely a personal problem…

You’re absolutely right, Vince, and I hope so too.

Based on what we’ve learned from our experience with REDUX, I’d say that we have an educational challenge on our hands…

Derrick, it’s generally permitted by law (if you meet the requirements) and you can always ask for waivers, but the military is in a drawdown and there may only be limited opportunities.

I’d recommend contacting a recruiter to see what’s available.

Mr. Haines, please e-mail me (NordsNords at Gmail) to tell me more about your questions and how I can help.

I like your plan, Jason!

We haven’t had any security issues– it’s a combination of house sitters, living in a cul-de-sac with nosy neighbors, and not having anything worth stealing. No problems in 15 years, although I do bring the longboards inside the house before we leave.

I’m ambivalent on the maintenance. We’d do well with a ground-floor townhouse or garden apartment (and access to a community garden) but I’m always concerned about noisy neighbors. When it comes to fixing a fridge or getting a tech to fix it for me, I think the former is a lot less time (with roughly equivalent hassle). A yard service while we’re gone would avoid a lot of catch-up work when we get back. I think I’m enough of a control freak that I’d prefer to own instead of rent, but we’ll see how I feel about my fierce independence in 20 years or so.

Your financial approach works very well for us. I don’t think I’ve updated our annual budget since our daughter launched from the nest five years ago– there’s no point when we’ve reached financial independence and our wealth keeps rising faster than we spend it. I no longer balance a checkbook (just review the statements) and I’ve almost stopped using Quicken.

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C’mon in, Rob, the water’s fine!

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Thanks, Vanguard! I think you’ll do great with Guam and the rest of the Pacific– let us know how it works out. It’d make a great “Lifestyles In Retirement” post…

Our lodging success is traveling during off-peak times in areas with extra rooms. July and Christmas would be tough. Most military lodging can barely handle a Reserve/Guard drill weekend, and they don’t make special accommodations for Space A travelers. (Except for flag or general officers…) We’re always willing to spend more money at a military lodge to upgrade from a standard room to a suite or VIP quarters, since it’s a short-term stay and not much of a price difference. Otherwise we’d end up catching a cab to the off-base hotels, getting a good night’s sleep, and revising our plan when we have a feel for the next passenger roll call.

We do a lot of last-minute calling ahead because we don’t know our destination (let alone our date/time) until we make the passenger manifest. (We get the phone numbers from the Take-A-Hop app and the AMC base info sheets at the passenger terminals). Many military lodges seem to release their reservations near midnight. Just before we left Rota, the Travis Air Force lodge said “Reserve weekend, sorry, wait list.” When we landed on the Travis runway at 11 PM, the lodge said “No rooms, sorry.” When the passenger van dropped us off there just after midnight (so that we could stay on their wait list and then call a cab to town lodging), the lodge staff suddenly had a suite for us. We were only in it for six hours(!) so it was a great convenience at a good price. If we’d spent Thanksgiving week at Travis then we would’ve reserved the next available day in the lodge and gone out to a town hotel.

I think the financial aspect is that you’re saving a lot on airfare (and commercial hassles) while spending some of the savings on lodging.

I don’t know if this is a new AMC policy, but we’re seeing passenger terminals close at 2200 and re-open at 0400 daily. (Including Hickam & Travis, but not yet Rota.) I think it discourages “campers”. Peoples’ sleeping bags are probably for the aircraft: C-17s and KC-135s are freakin’ cold! But when you can stretch out on the fuselage deck then a sleeping bag (and perhaps a yoga mat) are luxurious.

As for the adventure: Plan B can always be a commercial ticket for the next available flight. Plan C would be a different destination. Many airlines charge the same price for one-way or round-trip when it’s a last-minute purchase. We’re taking a hard look at this for our next trip because we need to be at a cruise port by a deadline date, so we may do part of it with commercial flights.

I wish we could eat green waste! It really annoys me to go grocery shopping for veggies while I’m discarding the grass clippings, bougainvillea stalks, and palm fronds…

Great question, Sarah!

The Reserve/Guard pension starts later in life, so its impact is smaller on the total retirement payout– whether it’s a 50% pay base or a 40% pay base.

The biggest advantage I can see is the continuation pay and the TSP match. The Reserve continuation pay is a lot smaller than the active duty amount, and as you point out it’d be a challenge to make the DoD match on the TSP with drill pay and AT.

However all of those funds would be in your TSP account instead of waiting until age 60 for DoD to pay them out as a pension. I suspect that an aggressive asset allocation (L2050 or the S and I funds) would grow the investment in your TSP account faster by age 60 than it would amount to as a pension payment starting at age 60.

You’re right– there are a lot of factors and it’s a highly individual situation that needs a calculator.

When you have a choice between a TSP and a civilian 401(k), I’d contribute to the TSP first for the maximum match, then the 401(k) for its maximum match, and then back to the TSP– for its lower expense ratio. And yes, it’s a challenge when you have both accounts. A good problem to have.

Thanks for your questions, RL, that’s a good plan after you’re out of uniform!

You can roll over your traditional TSP once you’re out of the military, although you should leave your funds in your TSP account as long as possible (for the low expense ratios). But once you’re ready to make the conversion, that’s the plan. The best “conversion window” for active-duty retirees is in small annual increments before you start Social Security or RMDs. Reserve/Guard retirees would convert before their military pension starts.

Either Vanguard or Fidelity is good (or even both). The former has rock-bottom expense ratios and the latter offers more services (for some higher fees). You’ll find policies and features to like (and dislike) at both firms.

Thanks, Ryan! I’ll keep everyone posted…

Quick note– SoloPro closed out their $1.6M seed round this month:
http://www.solopro.com/press-releases/solopro-duke-strategic-investment

A long-time friend just e-mailed me some commentary on this post. I’ve edited the words to avoid revealing their identity, but I think the sentiments still shine through:

“Unlike you I decided to make my govt pension my primary means of retirement with O-6 and 30 years as my goal. Ironically I ended up as an O-8 but what I didn’t count on is the impact that stress and a sedentary life would yield. Now I have emerging health problems that may be unresolvable. (Hypertension is one of my new chronic diseases.) Sort of dampens the retirement plan. I’m thinking my major focus will be on health and an exit plan maybe in two years if I can swing it.

“By the way I tell your story to my daughters. At the end of the day life is about, well, enjoying life. Sitting behind a computer at the beck and call of the bosses is not my idea of the stress free life I was hoping to achieve.

“Please feel free to let your readers/subscribers know that rank does not equal quality of life. Quality of life is the absence of insane stressors and enjoying life while you have health to do so. While I’m fairly certain I could retire and be a professor or an administrator, I think retiring and teaching kayak lessons is more my speed.”

Great comment, Mel!

I don’t have the answers to those questions– we’re still assessing them ourselves. In our case, passive investments and automation seem to be more important than tweaking every last percentage point of performance. My spouse has also volunteered to take over the financial duties when I reach age 60, just so that she’s more familiar with the accounts & logins.

Good point about taxes, especially with many universities beginning to offer in-state rates to military residents stationed there.

While servicemembers are on active duty, I think they should attempt to become residents of states that don’t tax military pay– but there may be other factors affecting that decision. After the military I think that there are many more important criteria for choosing where to live. Taxes should be a part of the overall decision, but I don’t think that taxes should be the most critical part of the decision.

As to Hawaii taxes, Hawaii’s real estate prices are higher than most of the country. However the property tax rate is roughly 3.5 mills. This puts me in the position of owning property that’s assessed at a value of 3x-4x some Mainland properties, and yet I’ll still pay as little as half of their property taxes.

Andrew, read the text at the paragraph titled “Army National Guard Retirement Calculator” and click on the second link:
https://www.hrc.army.mil/Calculators/RetirementCalc.aspx

You can also do your own (manual) calculation at this post:
https://the-military-guide.com/calculating-a-reserve-retirement/

Good point, Bill, thanks. I’ll pass that on to him, although I don’t know if it tracks with his officer promotions.

Thanks, Marvin!

I hear that comment a lot these days, especially from people who would have been close to 20 years by now. But family is one of the best reasons for making a retention decision.

Good question, Stephen!

Federal law includes a section called “sanctuary”: any servicemember, active or Reserve/Guard, who reaches 18 years of active duty must be continued on active duty to 20 years (and an active-duty retirement). The Reserve/Guard services want to avoid inadvertently letting their members reach sanctuary (and an active-duty retirement), so they track everyone with more than 16 years of points and restrict their mobilization opportunities.

If a servicemember left active duty at 17 years for a Reserve/National Guard career, they’d already be on sanctuary tracking. They would be permitted to do drill and AT (for up to 29 days) but longer stints of active duty would require approval by the service’s personnel HQ. It was rarely approved during the last 13 years of war, and in a drawdown it would be extremely unlikely.

Instead a Reserve/Guard member would drill (and do AT) for at least three more years to reach 20 “good years” of service, and then would be eligible for a Reserve/Guard (“non-regular”) pension. They would start that pension at age 60 or (depending on combat deployments) possibly a few months earlier.

Great suggestion, Ryan! I’ve been e-mailed by another O-3E in this position who’s not eligible for retirement (not even TERA), and he says the Reserves/Guard are happy to have him.

Here’s a comment by reader Kay that was apparently lost during a technical glitch:
“Great article!

Another dual military retired couple here . . . I remember agonizing over the term/SBP/VGLI decisions, and at the time we crunched all kinds of numbers.

What we finally decided was to opt for “child only” coverage on both of our pensions. This was a very cost effective way for us to insure. We had our last kid late in life — so this coverage would carry either one of us into our 60′s. Yikes! By then the survivor would be close to collecting whatever SS we qualify for after a couple of decades of retirement.

Hopefully we won’t need it, but it would provide enough of an income stream through our last kid’s college years that neither one of us would have to return to work.”

Thanks, Kay! That’s a very good choice for retirees with kids.

Thanks, Kate!

I know that if I don’t check the numbers first, one of our alert readers will check them for us…

Thanks!

For those who haven’t seen it yet, here’s the link:
http://finance.yahoo.com/blogs/daily-ticker/how-these-average-joes-retired-millionaires-142631833.html

Thanks, Matthew, and congratulations on your wedding!

You’re correct– the USDA’s numbers are real (adjusted for inflation) and my numbers are nominal. However it may be distracting you from the main issue, and there are better ways to adjust your estimate.

Inflation is not as high as you might think. The “child-raising price index” is lower than the Consumer Price Index. The USDA’s infographic (the PDF link at the end of this post) says that their cost estimate has only risen 23% since 1960– that’s less than 0.4% annually. Child-raising tech and safety has made quite a few leaps since then, so the hedonic adjustment has been well worth the price.

Although you could rigorously adjust your calculations for inflation, it’s (hopefully) only for two decades (unlike retirement). In the meantime, your personal child-raising costs are going to be very different from the median. The data is a huge bell curve with very fat tails from garage sales to Gucci. Inflation adjustments pale in significance next to your consumer choices.

Instead of looking at the statistics, consider how you’re going to keep your family costs on the lower end of the bell curve while keeping quality at the top. For example, you could have a blowout $25K wedding– or you could have a more affordable $5K wedding with $20K left over to buy two decades of childcare and babysitting. You could pay full retail for baby gear, or you could start visiting the garage sales now. Read more here: https://the-military-guide.com/book-review-all-the-money-in-the-world/

I’m not suggesting that you go cheap– just frugal. Ideally you’ll choose a neighborhood with good public schools, nearby parks, and public libraries. A private school may deliver value, but you may find far more value in homeschooling or tutoring services like Kumon. You’ll cook healthy (inexpensive) meals instead of dining out. You’ll choose outdoor activities instead of the Fun Factory. You’ll borrow library books instead of buying video games. It’s all a matter of matching your spending with your values and balancing your own financial independence with your kid’s quality of life. Frankly, they’d much rather have your time than your money.

Thanks, Deserat!

The statistic about Reserves costing 25% of active duty is all too easy to believe. It also explains why major commands like PACOM fill a third of their active-duty billets with Reservists, who sometimes have more experience at that billet than an active-duty servicemember.

“Streams of income” is right. A Reserve deferred annuity makes it a lot easier to save for retirement, but I question its ability in a “new” retirement system to retain people on active duty. Like REDUX, I fear that in the next decade the DoD will decide to try out the new system to learn what effect it really has on retention.

A commissary closure in Hawaii would be inconvenient, but we’d make it work. We could do a lot with local grocery store loyalty programs along with bulk buying at Costco. Farmer’s markets would take more time but less money, and we still have room in our backyard for a few more fruit trees…

Thanks for the great questions, Tom! The answers are “sort of”.

This post doesn’t cover all the details of every situation. Every time I write about the TSP (or IRAs) the caveats and exceptions and footnotes would triple the length of the text and make it read like the tax code.

As you know, servicemembers make their contributions to the Roth TSP (or the conventional TSP) through payroll deduction– either from active-duty pay or from drill pay. The difference is that the Roth TSP contributions are after-tax dollars (servicemembers pay taxes separately on their contributions) while the conventional TSP contributions are pre-tax. And, of course, contributions from a combat zone are completely tax-free (but that’s a caveat for another post).

The “over 50 catchup” provision allows an extra $5500 contributions, but admittedly that doesn’t apply to very many active-duty servicemembers. However I see a lot of Reserve/National Guard readers in their 50s, and the TSP is a much lower expense ratio than a civilian 401(k). Reserve/Guard servicemembers could do very well by contributing their drill pay & active-duty pay to the TSP. After their civilian employer’s 401(k) match (if any), that $5500 catch-up goes further in the TSP.

Retired servicemembers can make contributions to the TSP if they’re back on duty and receiving earned income from a military salary (a very few elect to do this on occasion). Retired servicemembers can also roll over their conventional IRAs to the TSP. Now they can even roll over their Roth 401(k)s and other after-tax tax-deferred retirement accounts to the Roth TSP. See this chart:
https://www.tsp.gov/whatsnew/roth/compareRoth.shtml
A military pension is not earned income, so that couldn’t go into any retirement savings plan. A military retiree in federal civil service could certainly contribute their civil-service pay to their civil-service Roth TSP account. But I’m not sure that any military retirees could contribute directly to their military Roth TSP from civilian earned income. They’d have to use the rollover tactic.

The Roth TSP withdrawal rules are similar to TSP withdrawals. Take a look at this link:
https://the-military-guide.com/is-the-roth-thrift-savings-plan-right-for-you/

I’m not familiar with TSP or Roth TSP withdrawal provisions for kid’s college expenses, but I know that you could withdraw Roth IRA contributions at any time for any reason. Beyond the basic advice in this post, you’d want to chat with your financial adviser (or one of USAA’s CFPs). Aside from the tax code rules, I think any financial adviser would hesitate to recommend cannibalizing retirement assets to pay for a kid’s college degree.

Let me know if these answers clear up your questions or just muddy the waters even further. I could turn this into several more posts on the topic…

Thanks, Mike!

The good news is that progress is quick when you’re motivated by the third step…

You’re welcome, Jeremy! We’ll both have to adopt a 20-year view of our lifestyles…

Thanks, Spencer!

I’ve done my share of rate chasing, and I think I’m batting about .500. As I simplify my finances, I’m finding out that customer service is a lot more important to me than having to ride herd on a less-competent company. The challenge is avoiding the need for customer service in the first plsce.

Maybe us DIY finance people are not USAA’s key customers. I think they cater to “trust” & “one-stop shopping”, and members are willing to pay a little more for the peace of mind.

Good points, everyone, I’m going to have to take more notes on our next trip…

I logged in to find 68 coupons (way down from last week’s 115):
24 “general” (including condiments, supplements, & skin care)
2 produce
3 beverage
1 dairy
3 frozen
11 grocery
6 meat/seafood
1 packaged meat
4 snack
5 health/beauty
4 baby
1 cereal
1 international
1 home
1 baking

I’ve “clipped” coupons for a buck off toilet paper and 50 cents off packages of frozen fish. We’ll still save 2-3% this time, although not every time.

Mike, it’s mostly convenience/processed foods and brand names. No fresh foods, although Dole canned pineapple made the list and I’ve bought bagged salads before. I noticed this time that there are no cleaning products but hair care is popular (and pricey). The cereal brands do not seem to be on board yet.

I agree that it’s still cheaper to shop the generics and healthier to buy local fresh/raw. Coupons almost never inspire an impulse purchase, either– we only use them for items already on our list. However we’ve been using more of the rewards card coupons than the printed ones, and compared to paper it takes me a fraction of the time to manage the website.

Good point about the military bases, Rob, and this card would also be useless for retirees far from a base. Our local grocery stores (even with loss leaders and their own rewards cards) can’t beat the commissary or Costco. Local stores are less than two miles from our house but it’s literally over a year between our trips there. Even just shopping loss leaders would take more time/gas than going straight to the commissary.

Spencer, I’m going to have to check whether our commissary even has coupons on the shelf by the product anymore. They used to but I’ve stopped looking. I don’t know how much a manufacturer spends processing paper, but the rewards cards have to be a significant savings for the stores and the corporations. And if people have the card number on their grocery list or in their smartphone, they don’t even need to remember to bring along the card.

Thanks, Jerome, Romeo, this needed to be said.

I’ve told my daughter just about every one of my sea stories, too, so she has full disclosure…

You’re absolutely right, Romeo– just under 5000 words– and worth every one of them. This story is too powerful to break up into two posts. Judging from the traffic, it’s going to turn into a “pillar post”.

Yes, the author is in the Army. He contributed the post with that information and I “sanitized” it to help readers of the other services identify with his situation. It applies to everyone.

Thanks for the HARP advice! It always surprises me how many setbacks and mistakes we’ll see during our service, yet our finances can still recover. And I’m with you on the boredom part– after a decade of early retirement I feel busier than ever.

Thanks Chris, Romeo, I couldn’t have said it better!

Thanks, Jay, in a few weeks I hope to have the AdSense October revenue numbers from Google. I also need to get off my lazy assets and turn the “Recommended reading” list into a collection of affiliate links for Amazon.com purchases.

I’ll have to ask the law firm if they want to sign a direct advertising contract with the blog… maybe they think military readers will bring in a lot of business?

It’s funny that you should mention 3DHawaii.com for iPads. Craig Carapelho will have some news on that in a month or so…

Here’s another calculator to help estimate how long it takes to reach financial independence:
http://networthify.com/earlyretirement

Give it a chance to load. The website’s very busy.

Heh– nice to see that we all suffered some of the same plebe experiences… at the time I didn’t exactly appreciate how that skill would pay off.

My mistake; I didn’t mean to skip over the details. When NFCU said (perhaps mistakenly) that I’d still be subject to the $600/day ATM limit, I didn’t try to use it at the bank. Instead I used a credit card– for a 3% fee.

I’ll lay it all out in the Wed 9 May post. But the bottom line is that if NFCU and I had understood each other then I would’ve tried to use the NFCU debit card first… and it probably would’ve worked, with no cash-advance fee.

Just got a note from the author– very cool!

Name: Tom McBride
Email: mcbridet [at] beloit [dot] edu (not dot com)
Website: http://www.beloit.edu/mindset
Comment: Thanks ever so much for your review of our book, THE MINDSET LISTS OF AMERICAN HISTORY! If any of your visitors would like an autographed bookplate, free of course, just have them get in touch with me.
Best, Tom McBride (and Ron Nief)
Time: Tuesday April 3, 2012 at 6:48 am

I wish I’d thought of doing this for “The Military Guide”!

My trauma, er, memories have faded… I couldn’t remember whether it was you in there, or Samaha, or Carlson. You probably each deserve the troubleshooting credit from one time or another!

Gosh I miss those sea-duty days. NOT.

Thanks, guys– e-mails and “contact me” are running evenly split too. It’s also interesting to note that the servicemembers & veterans are much more critical of the graphic.

Thanks, Jay! Real estate has been pretty good to us over the years, but I think we’ve seen enough of fixer-uppers for a few decades. I’m way behind on surfing.

Neighbors have been very understanding. “This Trophy House” overlooks Kipapa Gulch. We’re on a cul-de-sac with one neighbor being a sewage-pumping substation. The neighbors across the turnaround circle never hear a thing since the familyroom’s all the way at the back of the property. The other neighbors just went through their own renovation from hell (new wood floors in the entire house, new kitchen) so they’re quite sympathetic.

I can’t imagine doing this with kids in the house, although they’d be awful handy for getting a nailgun and a paint brush into those little nooks & crannies…

From the comments of DoD and Congress, I think there’s a commitment to preserve the current system for those who are serving. Benefits changes would only affect those who join the service after they’re implemented.

I’m also beginning to think that the DBB study will not be supported by the new SECDEF, although it certainly started a discussion.

The TSP aspect of the proposal would shift military retirement from a defined benefits pension (which, like Social Security, DoD can only invest in government securities) to a defined contributions system (the TSP, which servicemembers can invest in other assets). This would allow retirees to control their own funds (through the TSP) for a hypothetical higher return. But most significantly of all, it would also reduce DoD’s pension obligations.

I think most servicemembers would much rather choose a bigger TSP after their service obligation rather than wait for a 20-year pension vesting. It’s quite possible that DoD would offer new servicemembers (and perhaps even those currently serving) a choice between a much bigger TSP or the current defined benefits pension.

It’s a logical extension of the existing Career Status Bonus/REDUX system, which offers a tempting choice but which we all know is not such a good deal for the servicemember. It’s also similar to the civil-service retirement system.

How would that proposal affect everybody’s retention decision?

Jan,

Thanks for letting me know– I don’t have an iPad and you’re the first to call attention to my blissful ignorance.

This blog’s theme, WordPress’ Twenty Ten, has an iPad utility that lets me set some of the display features. It says “Onswipe displays a beautiful app-like experience to visitors browsing with an iPad.” It lets me select the “Cover Display”, “Cover Logo”, and the “Launch Screen Image”. I don’t have anything chosen for those and I’m not sure you should care about them, but now you know they’re options.

The final option is “Display Font”, and there seem to dozens of them. If you have an iPad font that works well for you on other blogs or sites then I’ll set it up here.

Here’s the support page for these settings: http://en.support.wordpress.com/onswipe-theme-for-ipad/

By March I suspect you’ll really be ready to visit here! Let me know if you have questions or if you’re looking for suggestions. A relatively new way to explore Oahu is 3DHawaii.com…

You know what they say about sea stories: every one starts with the disclaimer “This is a no-sh!tter”, when in fact it turns out to be the main subject…

Thanks!

We’ll get guardianship & conservatorship, although the courts make it a bit complex to have conservatorship from a different state. I might be able to do the court hearing by phone or by Skype, but I’m supposed to sign an extradition waiver with Dad’s state…

Before you start “the talk” with your grandfather, it can be a tremendous help to hit it off with a geriatric care manager in his neighborhood. We ended up using three of them (in my town, Dad’s town, and my brother’s city) and I couldn’t have done it without them. They’ve seen it all, and they’re thrilled to get a request for help before it’s a crisis. They’re able to walk through ideas for your talk with your grandfather, and they’ll be standing by if he wants help.

Thanks for pointing out the budget’s million/billion typo. That’s been corrected. You’re the first reader to notice that error, and I appreciate the scrub.

I think DoD has always expected that military veterans will “complement” their service with bridge careers, even if it involves Wal-Mart. That’s why we wrote the book– to show how most servicemembers can achieve financial independence without having to tackle a bridge career. The “walking out the door” scenario you describe is exactly what DoD expects Reservists and National Guard retirees to do now. When servicemembers become financially independent before leaving the military then Wal-Mart is an option, not a mandate. I hope you can continue to serve on your terms, but if the military doesn’t cooperate then I hope the book and the blog will help you to retire on your terms.

I agree that military specialties don’t compare to civilian jobs, and the DoD’s last couple of retirement experiments in that area (REDUX and NSPS) didn’t work out very well. The 10 August post presents more info from the DBB brief. If it still leaves you feeling that there’s more to be covered then let me know what you’d like to see in a future post.

Good to know– thanks. It sounds like you did exactly all the right things to come out ahead.

One of the DoD’s other examples of “coming out ahead” is the E-9 who stays for over 30 years. But at 15 years of service, that’s a tough prediction to make.

Thanks, I enjoy Paycheck Chronicles too!

Note the update at the end of the thread with links to a spreadsheet where you can enter your own assumptions and calculate the results.

I’ll keep tracking it. I don’t report the breathless blow-by-blow updates of Military.com’s Terry Howell or Tom Philpott. However when both Armed Services Committees agree then it’s probably going to happen.

In the meantime, can I research a specific question? You could post it here, or use the “Contact” box, or send me an e-mail. Most of my posts come from reader questions!

Sorry to hear that, G. An unsupportive command can turn the best of retirements into the worst of nightmares.

Jan, I’ve been back for a couple days of research on this one, and I have to admit that I’m stumped. There might be few enough dual-military retirees for us to count them all by listing our acquaintances!

I’m pretty sure that this info (let alone any mutual support) was practically non-existent when spouse and I married in 1986.

Seriously, though, the data is lacking. My usual DoD statistics & demographics PDFs seem to be silent on the subject. I’ve found a couple links that I’m still digging into:
http://cs.mhf.dod.mil/content/dav/mhf/QOL-Library/Project%20Documents/MilitaryHOMEFRONT/Reports/2008%20Demographics.pdf
including the comment that “Out of the 1,387,674 Active Duty members, 6.7 percent are in dual-military marriages”,
and
http://drum.lib.umd.edu/handle/1903/10880

And, much to my surprise, here’s a Facebook group:
https://www.facebook.com/home.php#!/pages/Association-of-Dual-Military-Couples-ADMC/117567518323623
I think I’m going to strike up a conversation with COL Knighton…

Guilty. Seems so simple, doesn’t it?

Here’s yet another update on Tricare fees.

Last week the House Armed Services Committee forwarded an endorsement of the first Tricare fee hike in 15 years. (https://www.military.com/military-report/house-committee-okays-tricare-increase?ESRC=miltrep.nl) “If approved the committee’s budget bill would allow DoD to increase premiums by $30 a year for individual coverage and $60 a year for family coverage. The HAS defense budget would also allow DoD to raise the TRICARE Prime premium on an annual basis, but not at the rate they requested.”

There’s months of legislative process and political wrangling to go before this turns into law and a DoD implementation. I’ll keep an eye on it with updates to this post or a new Tricare post.

Thanks, Scott. I’m just working through the John Hancock bureaucracy to make the claim on my father’s long-term care policy. It’s not a very enjoyable process but it seems to be going OK so far.

Thanks, Scott, good to know.

I’m calling John Hancock this week to start my Dad’s claim.

I don’t have any solutions here, Jan, but one possibility is to keep alert to another open enrollment period for the SBP. But that’s unpredictable.

When we first retired I kept a pretty tight grip on the purse strings. My spouse was fine with that because her frugality makes me look like a spendthrift. However nearly nine years later after coming through two recessions with an intact portfolio, we’ve both become a lot more comfortable with loosening up a little. We know we can always fall back on our black-belt frugal skills if it becomes necessary.

After I’ve had a few years to reflect on submarine design, you’d think that by now we’d have figured out (1) how to build a waterproof electrical pump, and (2) how to put it away from hatches and other water sources. We certainly didn’t save any money from skimping on those two criteria.

For those of you arriving from a search engine, please tell me what terms you used! This post had double the blog’s usual daily traffic, and three days later it’s still at the top of the list.

Man, I can’t believe the spam that this post has inspired.

WordPress’ “Akismet” utility does a pretty good job of screening it out, but there’s a whole new wave of “Groupon”-style spammers who make their comments look more like an announcement. Somehow that gets through the filter, although I hope it’s learning.

It might be a while before I put up another post on this subject. Please comment or “Contact” me or e-mail me if you have questions.

Keep saving as much as you can while active duty is still fun, and you guys will win the game. You’re already well on the way.

My spouse and I found that our priorities began to conflict with the “active duty lifestyle” when we started a family.

Thanks! And wow. Good questions.

I guess the first answer would be that I don’t see any big changes coming. Congress tried “big changes” in 1986 with REDUX and retention plummeted steadily over the next decade. There were other factors contributing to the drop, but the only factor to consistently correlate with retention (in both directions!) is money.

The rest of the answers will be long enough to make an excellent post. Let me look up some references and put together a better answer for next Monday. And thanks again for asking!

Asset allocation when you’re getting a military pension: the military pension is the equivalent of a lifetime of inflation-adjusted income from TIPS or I bonds. We’ll calculate how big that asset class would have to be to throw off that much income, and then talk about how to diversify it with other asset classes.

Thanks, Janet!

You’ll have to keep us posted on how things work out. You’re turning into one of the retirement mentors now…

Janette,

I’m looking forward to when I’ve been retired 14 years!

We own a home and a rental property. We’re DIY & HGTV home-improvement enthusiasts, so in 1989 we were able to scrape together the down payment on a “quaint fixer-upper”. In 2000, after looking at dozens of homes, we were also able to scoop up another “handyman’s special” bargain during the pit of Hawaii’s decade-long real-estate recession. The sweat equity has been a substantial investment.

Today’s prices are eye-popping, and we’ve improved our homes to the point where they’d be out of our reach if we had to buy them again. (I envy anyone who could live on the North Shore, especially during winter surf!) When I retired in 2002 we were carrying an 8% mortgage on our home but a couple months ago we were able to refinance down to 3.625%. That’s helped our financial situation quite a bit.

Rental property cash-on-cash returns are particularly pathetic here and it ties up a lot of equity– 3-4% APY is common but it was a good hedge during the 2008-09 recession. Our rental is between Schofield and Hickam/Pearl Harbor so military tenants have been great.

Although Hawaii’s real-estate prices aren’t for the faint of heart, there are bargains. Condo & townhome prices have been especially soft for the last couple years and they offer good ways to build equity over the next decade. I’ll have to work up a post on retiring in Hawaii, but feel free to comment or e-mail me with questions. Thanks!

Same here, and I think most ERs struggle with it. I try to turn the conversation back to them.

When new acquaintances see the way I dress and learn about my surfer-bum lifestyle, though, I think they’re afraid I’m going to ask to borrow their money. So they’re happy to talk about something else…

I’ve really enjoyed your blog over the years. I think you deal with the personal & emotional issues that most financially-oriented bloggers never get around to. (Those issues also seem to keep a lot of military veterans in the workforce even if they don’t have to be there.) It’s even more impressive with your background of accounting & venture capital, where very few seem to ever feel compelled to retire!

Thanks! So far so good…

Thanks! We have one in college on a Navy ROTC scholarship, so these subjects are getting a lot of discussion & practical application.

Well, you can also tap the Roth for first-time home purchases and education expenses! But you’re probably done with those categories.

I need to finish estimating my 2010 income so that I can squeeze in a little bit more of a Roth IRA conversion. It seems easier to write blog posts than to chase down all the details of the income and deduction numbers.

The biggest advantage of a Roth is NOT having to take distributions. A conventional IRA may grow so large by the time you turn age 70 that the required minimum distribution could be a huge tax hit. Instead that would be one of the first things you’d tap (definitely after age 59.5 and perhaps even earlier with 72(t)) to smooth out the tax bill over the years.

After eight years of early retirement I’m beginning to wonder if frugal habits will ever change, although I still enjoy the challenge. Our spending habits have started to change, especially if the alternative jeopardizes safety or a bigger expense. For example I’ve reluctantly concluded that car tires on Oahu are pretty much worn out after six years, no matter how few miles we’ve put on them.

Good comment about the spreadsheet– I need to put up a post about “lifetime consumption-smoothing” retirement calculators like ORP and ESPlanner. Those of you who want to explore on your own can check the retirement links in the sidebar.

Thanks! The next three posts are on Reserve/NG healthcare, pension comparisons, and handling those multiple streams…

Thanks to Jerome and everyone else who nominated cover designs over at Early-Retirement.org, Facebook, and e-mail! We have some pretty talented graphics artists out there.

The publisher made the selections from our nominations and the contest is now over. I’ll post the results on the blog as soon as the press releases go out.

Jerome, I’m afraid they didn’t go for the flaming financial house. I like the image, though, and I’m going to figure out a way to get some use out of it somewhere…

Yep, and I learned an epically awesome foreign language too!

Thanks, Dan, and I appreciate your help in spreading the word!

You’re welcome! I’m glad it’s helping.

You make a good point, Brian! The answer is “only a handful, unless they do more orders”.

Even an E-9>38 earning $8242/month in 2019, and reaching 78 points (48 drills, 15 days of AT, 15 participation points, not considering any limits on annual points) would only have base-pay earnings of $21,429.20. They might have specialty pays or bonus pay as well.

However the TSP contribution limits ($19,000 in 2019) are set by federal law for 401(k)s and not by DoD. A Reservist who wanted to hit those contribution limits from their drill pay would have to do some extra orders or mobilize.

Keep in mind that those contribution limits are tracked by Social Security Number, so a Reservist with a civilian career would have that $19K limit apply to the total of their contributions to their civilian 401(k) as well as their TSP. That’s in a footnote to the contributions table on the TSP website:
https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/contributionLimits.html

You’re absolutely right, Kate, and the BRS office has specifically avoided talking about these financial planning and estate planning topics.

As I say in the post, BossyDude, $3000/month is “a relatively large pension”. Now that you’ve seen three different ways to put a value on a military pension, you can use numbers which you feel are more reasonable.

I’m not sure where you’re getting your base pay from, but you’d want to use the >20 column at a minimum.
https://www.dfas.mil/dam/jcr:ccc8e348-187d-4bff-9e39-b113ad7fa67d/MilPayTable2018_4.pdf

I agree that it seems high, Michael. We’re waiting on a more detailed breakdown but (at a minimum) it includes both eligible active-duty and eligible Reserve/Guard servicemembers.

The BRS office might also have been speaking for the Coast Guard, NOAA, and the USPHS as well as all the people who’ve joined the uniformed services in 2018.

Good questions, Harry.

DFAS calculates a pension using the DoD Financial Management Regulation (DoD 7000.14-R) volume 7B chapter 3.
https://comptroller.defense.gov/Portals/45/documents/fmr/current/07b/07b_03.pdf
You’d follow along in paragraphs 030201, 030203, 030205, and 030208, and 030209. Maybe you’re also covered under 030204.

First, you’d want to make sure that you’re indeed eligible for Final Pay (a Date of Initial Entry on Military Service on or before 8 September 1980). 33 years implies that you joined in 1984 (High Three) but you may have joined earlier and had some interrupted service. More importantly, you want to make sure that DFAS also has that information in your record, or else they’ll default to High Three.

Next, verify that you and DFAS are using the same point count (3837 points?). If they’re using a different number then you’d have to correct that with your drill records and your DD-214s.

Third, what year did you start your retirement? For the vast majority of Reserve & Guard retirees eligible for Final Pay, it’s your 60th birthday year. If your Reserve pension starts at age 60 and your 60th birthday was in 2017, then you base your pension on the 2017 pay tables. If your 60th birthday is in 2018 then you start with the 2018 pay tables. (A few Reserve/Guard members deployed for at least 90 days in a fiscal year to a combat zone or for a national emergency, and they’d start their pension at least three months sooner. More info on that is at:
https://themilitarywallet.com/national-guard-and-reserve-early-retirement-age/ ) You’re also right that you start with the years of longevity as though you’d been on active duty all the way up to the start of your pension. At the E-7 paygrade, that tops out at E-7>26.

Finally, the Final Pay formula is
(Points / 360) x 2.5% x base pay = $/month
According to the rules in the FMR, the first division is carried to three places and rounded to two. The formula’s resulting dollar figure is rounded down.

If you started your pension (60th birthday) in 2017 then your deposit would be
(3837 / 360) x .025 x $5167.50 = 10.66 x .025 x $5167.50 = $1377/month.

If you started your pension in 2018 then your deposit would be
(3837 / 360) x .025 x $5291.40 = 10.66 x .025 x $5291.40 = $1410/month.

Let me know if I’ve made any incorrect assumptions.

Good question, Jonathan. You should be covered under federal law by going over 30 years of combined Guard service and “retired awaiting pay” status.

The “10 years of commissioned service” rule is in federal law. The Army version is here:
https://www.law.cornell.edu/uscode/text/10/3911

Also by federal law (Title 10 U.S. Code section 1407(e)), DFAS will use the highest enlisted rank to determine the high-three pay at the time you file for retired awaiting pay:
https://www.law.cornell.edu/uscode/text/10/1407

However after a combination of 30 years of active duty and retired time, retirees are eligible to be advanced on the retired list to the highest grade they served on active duty.
https://www.law.cornell.edu/uscode/text/10/3964
I realize you’re Guard, not active duty, but stick with this for a few more paragraphs.

When a Reservist “retires awaiting pay” (not just “discharged” or “separated”) then they’re hypothetically available for recall. (This last happened during the country’s total mobilization of WWII.) As an incentive for this status, their pension is calculated from the pay tables in effect when they start the pension (usually at age 60) and… at the longevity in their retirement rank as though they’ve been on active duty the entire time.
https://the-military-guide.com/reserve-retirement-calculator/

You retired awaiting pay in 2011 with 21 good years as an E-5>20.

At age 60 you’ll start your Reserve pension. You might start the pension sooner if you deployed at least 90 days in a fiscal year to a combat zone or a national emergency, per the NDAA 2008 legislation and its 2015 amendment. Military blogger Ryan Guina covers that topic with this post:
https://themilitarywallet.com/national-guard-and-reserve-early-retirement-age/

Nine years after retiring awaiting pay, you’ll reach E-5>30 longevity. However by that federal law section 3964 you’ve also reached eligibility to be advanced to the highest rank you satisfactorily held. That means you’re an O-2>30.

Please let me know if you have more questions!

I think you’re doing everything right, Jeremy, but you’re always welcome to e-mail me at NordsNords@Gmail.com.

It’s possible that the TSP computers have ignored the combat zone deployment because you didn’t exceed the $18,500 elective deferral limit during the deployment. One way to test that would be to try to contribute to your Roth TSP (and get up to $18,500 in just the Roth TSP). That seems to be possible from the contribution example obtained from the FRTIB and the spreadsheet that I built from it, although that spreadsheet example exceeds the traditional TSP’s EDL during the deployment.

Another option would be to have your finance office request that the TSP restore your ability to contribute to the Roth TSP. I’m not sure whether that’d take effect in time for more than the December TSP contribution. That contribution would be deducted from your pay at the end of December and sent to your TSP account during the first week of January.

My contact at the TSP has been reading this post (and a Facebook group discussion of the same topic). She’s committed to improving the public availability of the training materials about the contribution limits. I’ve also sent an update of the entire discussion to the DoD BRS office. They’re focused on the BRS program, but the TSP policy affects both BRS and High Three contributors.

I get that question a lot, Hank. I guess I should highlight the irony that the very first comment on a post titled “It’s Not About The Money” is… about the money.

Speaking of DoD’s calculator: several of us bloggers (members of the DoD BRS Roundtable) extensively beta-tested it before release. It doesn’t include the effect of your own personal TSP contributions (a hotly-debated topic at the BRS office). It doesn’t account for financial planning (income taxes) or estate planning (SBP and passing on the TSP account). You’ll have to correct for those omissions in your own spreadsheet.

Of course that spreadsheet should also include other omissions from the DoD calculator: career flexibility and quality of life.

If we’re going to discuss (once again) the numbers, then we have to do probabilities & statistics as well as compounding math. Let me point out the flaw in your logic: you’re unlikely to reach military retirement. Only 15% of the people who join the military make it to 20 (1 out of 6).

In other words, you’re proposing to make a High Three bet which pays off only 1 time out of 6. Even worse, 5 out of 6 times you receive nothing… not just the dollar difference between the High Three and BRS but literally zero pension.

Meanwhile with BRS you know that 6 out of 6 times you’ll leave the military with DoD’s agency/matching contributions in your TSP.

Let’s go back to High Three cliff-vesting at 20. If you happen to be the 1 out of 6 who survives the career events beyond your control (medical issues, training accidents, operational mishaps, combat, downsizing, lack of promotions, family crises, quality-of-life burnout) then the question is whether the additional payoff is worth the risk.

Another blogger has done multiple runs of the BRS calculator without accounting for Continuation Pay.
https://militarydollar.com/2017/05/15/brs-part-3-comparing-systems/
Let’s say that the biggest difference between High Three and BRS at retirement is $440K, the case of the O-4 at 11.5 years. (It’s reasonably close to your $500K figure.) Maybe the O-4 takes the CP bonus ($21K) and also compounds it for another 26 years at 7% (like the rest of their TSP) for another $122K. Now the High Three calculation of that post yields roughly $320K more at age 59 over the BRS.

That retiree is likely to live another 20 years, which yields roughly $16K/year out of locking themselves into a bet which only has a 1 out of 6 payoff. Five out of six times it’s zero, and the sixth time it’s a lottery win of $16K/year. The expected payoff is $2667/year.

But this is not a poker game where you can play 40 hands a night. This is a military career that you can only do once, and the High Three poker table requires you to gut it out to 20 years. With the BRS you could quit after any hand and walk away with some house money.

Let’s go back to the DoD calculator. The BRS office did not add financial planning or estate planning to the BRS calculator. Your High Three pension has a few issues:
– It’s taxed every year, while the Roth TSP pays lower taxes and the traditional TSP can be gradually converted to a Roth IRA at a lower income-tax bracket– and that income-tax bracket is largely under your control.
– The pension dies when you do, unlike the TSP account which can be passed on to your heirs.
– The High Three SBP premiums are 20% higher, while with BRS (and an inherited TSP) you might not even want SBP.
https://the-military-guide.com/tricky-details-military-blended-retirement-system/

Finally, if we’re going to assume that you’re the 1 out of 6 who earns a High Three pension, I think it’s fair to assume that many servicemembers would be lucky enough to score a Continuation Pay bonus contract multiple of more than 2.5 months of base pay. That’s also a four-year commitment, which is a lot easier than gutting it out to 20.

Back to the point of the post’s title: are you really willing to bet your career on a pension which forces you to cliff-vest at 20 for a speculatively higher amount of money? Or would you rather take the sure bet of career flexibility, quality of life, and more money in your TSP?

Dan, you’ve asked a very pertinent BRS question, and I just received the TSP’s response.

If you’re still in the combat zone at the end of 2018, then you can contribute to the Roth TSP just short of $18,500 (as specified on the TSP’s 2018 contribution limits page) and to the traditional TSP for the rest of 2018’s $55K annual additions limit. (That would be another $36,500.) Note that you’ll have to leave room in the traditional TSP for the DoD’s BRS agency/matching contributions, so your personal contributions will be short of that $55K total. Put your own numbers in the spreadsheet which is linked to this post.

In 2019 you’ll still have to keep your Roth TSP below the 2019 limit of $19K. You can stuff as much as you’re allowed into your traditional TSP– up to the 2019 AAL of $56K, which still includes DoD BRS agency/matching contributions. As soon as you return home, however, the TSP interprets the 401(k) law to mean that your traditional TSP account limit also reverts to the elective deferral limit ($19K for 2019). That means anything above $19K in your traditional TSP when you come home would lock you out of the traditional TSP for the rest of 2019.

The 2019 solution is to leave room in your Roth TSP for 5% base pay contributions for all 12 months of 2019. Then contribute to the traditional TSP until you’re home. If you’ve contributed >$19K to the traditional TSP by the time you return home, then you’ll be locked out of more contributions to your traditional TSP.

However you’ll still have room in your Roth TSP for the rest of the year’s 5% base-pay contributions, which will enable the DoD BRS matching contributions to be added to your traditional TSP.

In short, follow the example spreadsheet (with your own numbers) which is linked to this post– note that all 12 months of the BRS 5% base-pay contributions are all in the Roth TSP.

Thanks for your question, Bee– that was an epic research project with the TSP. I’ve quoted their response above and edited the post to clarify what limits apply to which situations.

Great question, Ann. The VA will assign an effective date to your claim, which is typically the first day that you’re no longer on active duty. If you file your claim after leaving active duty then the effective date is generally the date you submitted the claim.

The payments start when the VA has processed the rater’s decision and has your banking info for an electronic payment. (If applicable, they’ll also need your family information.) Ideally you entered your banking info (and your family info) into your eBenefits account when you submitted your claim. If that info is correctly processed from your eBenefits account then your payments should start a month or two after you receive your decision letter.

The amount of the claim will be paid (in arrears) all the way back to the effective date of the claim.

Christian, if you already have 19 good years (not just 19 years of service but 19 actual good years) then federal law protects you from being separated:
https://www.law.cornell.edu/uscode/text/10/1176

If you’re going to a Medical Evaluation Board then the most likely results are either a disability pension or continuation to a National Guard pension. (Assuming that you can complete 20 good years to receive a Notice Of Eligiblity for your pension.) It’s possible that you’d reach 20 good years before the MEB process was finished.

Again, posting the details of your situation to PEBForum.com can help you figure out what’s more likely.

Danielle, if you already have a Notice Of Eligibility for retirement with at least 20 good years, then the most likely option is that you’ll be offered a disability retirement.

That’ll give you the option of retiring under whichever National Guard pension calculation gives you the most money– your point count or the MEB’s disability rating.

In both cases when you retire awaiting pay then you’ll continue to receive your VA disability income until you reach age 60. (You might start your pension a few months earlier if you deployed to a combat zone or were mobilized for national emergencies after 28 January 2008.) At age 60 you’ll start your pension.

If you have more questions about the MEB then I strongly recommend posting the details to PEBForum.com. It’s founded by a JAG and includes hundreds of members who’ve been through MEBs and PEBs. They know all of the timelines and processes and can help you figure out the details of your pay & benefits options, not just the decisions.

Jim, I’d suggest talking with your Reserve unit’s personnel staff or with ARPC. Each service can have its own policies (exceeding the minimums of federal law) for satisfactory time in grade to retire at that rank. Two years may be the Air Force’s rule, not the federal law.

A High Three pension system is just the average of your highest 36 months of pay for determining your pay base (which is different from base pay) in the pension calculation. For Reservists, it’s calculated at the rank from which you retired, using the pay tables that are in effect when you turn age 60 (or whenever you receive your pension, if earlier), and at the longevity as if you’d been on active duty the entire time up to age 60. If you want a pension at the MSGT rank then you’d have to comply with the Air Force’s rules to “retire awaiting pay” as a MSGT.

As far as I can tell, time in the IRR counts toward time in grade. We don’t know whether that requires you to earn enough points for a good year, and we’re having a difficult time finding a reference which confirms that. If you can find a way in the IRR to earn your 35 points and get a good year then that absolutely counts for time in grade.

Sorry to read about this, Shar. The VA has not made (yet) any presumptive connections to the eruption or the cleanup.

The only other suggestion I have is to work with a Veteran Service Officer (from the VA, or the American Legion, or the DAV, or MOAA) to attempt to establish some sort of service connection (Pinatubo or otherwise) from your military records.

Douglas, you’ve asked a question that we haven’t been able to answer yet.

If you transfer in “retired awaiting pay” status to the Retired Reserve then you will not be eligible to promote and you won’t earn time in grade.

If you go to the IRR then you’re still eligible to promote. (That’s unlikely compared to the promotion opportunities in the Selected Reserve, but you’re eligible even in the IRR.) The “problem” with going to the IRR is that it’s very hard to get a good year– especially now that points have mostly been shut off for correspondence courses.

If you don’t get a good year then I don’t know whether that still counts as satisfactory performance in the O-5 rank. I’ve asked some Reserve and FTS officers to look into it, and those answers may have to come from BUPERS.

Again, the biggest value of a Reserve pension is the Tricare healthcare and the annual cost-of-living adjustment. Before you decide to go to the IRR, do the math for the pension as an O-5 versus an O-4. If it’s not a big difference to you then go to the IRR or the Retired Reserve (whichever you prefer). If the O-5 pension is a priority then I’d recommend staying Selected Reserve until you meet the time-in-grade requirements.

If we find out a different answer from BUPERS then I’ll update this post.

I’m not sure, Dee. Every state has different insurance laws and what applies to me in Hawaii might be different in your state.

The servicemember would be covered by military healthcare, but family members might face the same issues of Tricare paying after insurance. UM/UIM coverage might also lead to a settlement which could fund lifetime care for family members who were permanently disabled by the accident.

I’d suggest following the same process that I did in the post: call your Tricare rep and your insurance company with the questions. You could also talk to an insurance broker (not just a sales agent for one company). The calls will also give you a feeling for the quality of the insurance company’s service, which might factor into your decision of whether the cheapest premium is really the best choice.

The “good” news is that UM/UIM insurance is relatively inexpensive, and you may decide to carry it just to offer this additional layer of protection against long-term injury.

Doris, I’m not sure what question you’re asking. The site comes up fine and asks for a login:
https://my.commissaries.com/customer/account/login/

It looks like they’ve set up a new login system that lets them collect e-mail addresses instead of logging in with the card number: “Patrons with a Rewards Card already registered are required to set up a customer account and re-register their card through the new customer portal.”

EDIT:
Here’s more info: https://www.military.com/spousebuzz/2018/10/02/commissary-launches-first-part-website-upgrade.html

Thanks for your feedback, Jim. I’m not sure what the median military pension may be, yet I know several readers who are living on $1800/month.

I don’t think we have to worry about misleading the civlians. Most of this site’s readers are military, and I’ve written before that people should not join the military to get rich.

As you’re probably keenly aware, the COLA is based on the same one used by Social Security. I hope the calculation can be made more relevant, but it’s the best measure we currently have.

For other readers of this comment, the 2018 pay tables show that an E-7>24 earns $4940.40/month base pay. The High Three pension for 25.5 years of active duty works out to about $3000/month.

Here’s an update from Jason. Jared, you’re absolutely right. I’ve added minor edits in [brackets].

“I hit 7305 at the of May and qualified for active duty retirement. I asked for a 1095 waiver and got that, so that I could stay another year since I am waiting for a specific job. RPAs are extremely critically manned (24/7 combat ops with no end in sight). I do not foresee MPA orders running out anytime soon. One of the guys I worked with who just retired received a second 1095 waiver (I guess it’s a 1460 waiver) and was able to fly five years with no break as a TR on MPA.
I think there isn’t a notification. [Of eligibility for an active-duty retirement.] At least I can’t find one. I was just told that when I go to MyPers and apply for a retirement, I select active duty and the personnelists gonk it out. The only way I think I can check is on PCARs. I can see that I have over 7305, and all of my points are listed as 1 (active duty) since I have always been on MPA. I’ll figure it our soon. I’m going to apply for retirement next June so I should be able to do it when I get back from leave since I’m now a year out.
We have a ton of people in our unit doing exactly what I’m doing. A bunch of TRs are riding full time MPA orders for 1095 days to get active duty retirements. From my perspective it’s better than AGR. I have all the benefits of a TR (i.e. I can say no), I fly the line, and I earn an active duty retirement. The only downside is you never know what the budget will be or when it will be passed. It hasn’t been an issue other than a bit of pain. I’ve had to be VOCO’d [given verbal orders] twice because the budget wasn’t done on time. But it has always come through.”

Got it, thanks– see the above comment.
Jared, can you link to that AFI sanctuary waiver paperwork or send me a copy (NordsNords at Gmail)?

Waiving sanctuary means giving up the active-duty pension, but if it’s a program like AGR then it might qualify for an active-duty pension.

You’re right, Keith, Reserve & Guard servicemembers have a lot of edge cases in a very complicated pension system.

First, make sure you get at least 35 points before December 2020. That should earn you the 15 participation points for a good year, but of course it’d be even better if you earned 50 points on your own before December 2020. As usual, you’ll have to meet all of the unit’s other requirements to be awarded that 20th good year.

Second, make sure now that your official service records are accurate. By December 2020 you’ll ideally have everything in your official Army National Guard database and updated, waiting only on your 20th good year and your Notice Of Eligibility letter. Guard units are notorious for not having the earlier Army service dates in their database.

Third, you have more than 10 years of commissioned service so you’re eligible for an O-3 pension. (That’s in federal law.) In addition your pension is calculated from the High Three average of the pay tables in the year that you reach age 60 (2020 in your case) and at the longevity as though you’d been on active duty the entire time. This is more than 37 years since February 1983, which is the >34 and >36 columns in the O-3 pay tables (for 2018, 2019, and 2020).

Finally, I’d apply for a continuation on drill status until April 2021 in order to reach 20 good years. Your Guard unit will either approve the waiver or coordinate with the Army’s National Guard Bureau to make sure you have your 20 good years logged by December 2020.

It’s worth your time to have a JAG review your service records and your waiver plan to make sure that I’m not missing any details.

Please let us know how this works out.

As you know by now, Joseph, the Navy didn’t have the Army’s records on file and DFAS went only by the Navy’s service record.

What should be reflected on your LES right now is your Pay Entry Base Date (and Date of Initial Entry on Military Service) of July 1992. When your PEBD or DIEMS is set to that date then you’ll be paid for your current rank— and with over 26 years of longevity.

The Navy should indeed add in your six months and 26 days. Once your Army records are included in your Navy record, then BUPERS should forward the information over to DFAS.

In addition, you may have been paid at the wrong longevity rates for the last 17 years. When you joined the Navy in 2001, BUPERS and DFAS should have adjusted your PEBD and DIEMS to July 1992 and immediately started paying you at the >8 years rate. In July 2002 you would have gone >10 years. I don’t know whether there’s a statute of limitations on that. You could ask a PSD supervisor about it, but you may need to consult a JAG to find the rules and the legal references. I think the JAG could be more helpful than DFAS.

You may already know that if you have at least three good years from your Reserve service then you’re now eligible for a Reserve pension at age 60. You could hypothetically resign from active duty now, file for “retired awaiting pay” from the Reserves, and receive a pension at age 60. You can read more about that at this post:
https://the-military-guide.com/reserve-military-retirement-for-active-duty-veterans-with-previous-reserve-or-national-guard-service/

If you deployed to a combat zone after 28 January 2008 then you may be eligible to receive a Reserve pension three months earlier for every 90 days in a fiscal year.
https://themilitarywallet.com/national-guard-and-reserve-early-retirement-age/
Regardless of when the Reserve pension starts, Tricare would still only start at age 60. You’d have to find other health insurance (like Tricare Retired Reserve) to cover the gap to age 60.

But before you make a retirement decision, I’d talk to a supervisor at PSD about adjusting your PEBD/DIEMS and correcting your back pay. If they can’t show you the references to explain what they should do (as described above) then your next step would be a visit to the JAG. It’s painful to fix these problems now (while you’re on active duty) but it’s even harder doing the BCNR when you’re a retiree.

Outstanding, Mike, thank you!

Great question, Marcus, and it’s a confusing topic.

I sent this post’s deployment timeline to the DoD’s Blended Retirement System office, and they coordinated the response with the TSP staff. Note that the quotes and the spreadsheet numbers come directly from the TSP, and they said that info is used as training material for their employees. Feel free to quote the TSP’s response in this post to the TSP reps.

First you’d want to check that your unit indeed meets the DoD and IRS requirements for a combat zone in 2019 and is not simply in transit from the zone. (This is especially important for Navy deployments.) Then you can test the TSP’s software by treating your 2019 contributions as eligible for the annual additions limit. Of course your tax-exempt pay ends as soon as you leave the combat zone but you’ll still have your remaining base pay, special pay, and any other bonus pay for your TSP contributions.

The best way to test this in 2019 would be to contribute more than $18,500 to the traditional TSP. When that works then you could decide where you want to put your remaining 2019 AAL contributions, but you’d have to stay short of the $18,500 limit in your Roth TSP. Keep in mind that the DoD BRS agency & matching contributions are also part of the AAL’s $55K total, so you’ll want to edit the post’s spreadsheet for your 2019 plan to make sure it all works out.

Of course if the TSP shuts off your traditional TSP contributions when you reach $18,500 then please let me know. I’ll query the DoD BRS office and the TSP’s legal staff.

Thanks, John, I appreciate the help spreading the word!

T, your description of Title 10 U.S. Code section 12646 of the federal law is accurate, and it’s a completely different topic.

You’re absolutely right that any servicemember with 18 years (or 18 good years for Reserve/Guard members) can continue in their active-duty, Reserve, or National Guard status until 20. Failure of selection for promotion when you already have 18 years essentially guarantees continuation to 20.
https://www.law.cornell.edu/uscode/text/10/12646

This post debunks the myth that 18 years of active-duty points entitles a Reserve/Guard servicemember to an active-duty pension. The post’s title emphasizes that sanctuary (based on Title 10 U.S. Code section 12686 of federal law) can only be declared if the Reserve/Guard servicemember is on active-duty orders at the time. They can’t try to declare sanctuary simply because they have 18 years of active-duty points.

Thanks for asking the question, Travis, you’re absolutely right to check that you have it covered.

Fortunately a Roth TSP is one of the easiest cases of the early-withdrawal bunch. It’s a category of the Roth 401(k), also known as a “designated Roth account”.

Once you’ve hung up your uniform (separated or retired) then you simply roll your Roth TSP over to a Roth IRA. After five tax years have passed then you can tap the amount of the Roth TSP rollover (but not the new gains in the Roth IRA!) tax-free and penalty-free.

If you want to dig into the tax code with a financial advisor then I’d recommend this outstanding detailed post from CFP Michael Kitces. Read the section titled “5-Year Rule For Designated Roth Accounts Under A 401(k) Or Other Employer Retirement Plan” at:
https://www.kitces.com/blog/understanding-the-two-5-year-rules-for-roth-ira-contributions-and-conversions/

If you’re one of many servicemembers who have combat zone tax-exempt pay in their Roth TSP, then check with your Roth IRA custodian to see how they’ll handle the tax-free portion. Many of them will not track the basis of that portion of the contributions in a Roth IRA, and a few of them won’t even accept tax-free contributions.

Great question, Godwin! When the TSP’s higher contribution limits kick in, there’s still a limit on Roth TSP contributions. Here’s the information from the table on the TSP website:
https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/contributionLimits.html
“If you are a member of the uniformed services, you should know that Roth contributions are subject to the elective deferral limit ($18,500 for 2018) even if they are contributed from tax-exempt pay. If you want to contribute tax-exempt pay toward the annual additions limit, you will have to elect traditional contributions for any amount over the elective deferral limit.”

As long as you’re below $18,500 in the Roth TSP, you can continue to contribute to the traditional TSP until the end of the calendar year and up to the total annual additions limit ($55,000 in 2018). If you’ve exceeded $18,500 in the Roth TSP, however, then the TSP’s system computers lock you out of further contributions.

Beyond the annual additions limit, you’re also eligible for catch-up contributions:
“The maximum amount of catch-up contributions that can be contributed in a given year by participants age 50 and older. It is separate from the elective deferral and annual addition limit imposed on regular employee contributions.”

Janet, this post is intended for members of the military’s Reserve and National Guard who are also federal civil-service employees. They can earn a pension in both the military and the federal civil service.

If your spouse simply left the military and has no intention of joining the Reserve or National Guard (or returning to active duty with another service), then he can’t qualify for a military pension. However if he joins the federal civil service (and possibly some state civil services) then he could use his military time to buy his military service credit deposit from the civil-service retirement system.

Once he’s joined the federal civil service then he can learn more about the military service credit deposit from former civil-service employee (and submarine veteran) Eddie Wills:
http://gubmints.com/2013/03/26/gubmints-comprehensive-military-service-credit-deposit-guide/

Thanks, MK, I hope to see everyone there!

Of course they could also make the thousand-mile trek from Florida to Little Rock for the 7-10 September CampFI South, but I’ll write a separate post about that.

You’re welcome, Keegan, I’m trying to give people permission to think about their exit strategy!

I’ll e-mail you my contact info, and if you’re inport Pearl Harbor we can just get together for a cup of coffee near you.

If you’re looking into the Health Services Collegiate Program then I’d also recommend the website Vet2MD.ORG.

Tim, it’s hard to tell whether your appeal is still working through the system or whether it’s stuck in a backlog.

You could discuss it with a local Veteran Service Officer from your VA clinic, the American Legion, the Disabled American Veterans, the VFW, or even MOAA. They have the resources to look up your appeal and figure out the next step.

You could also post your questions to PEBForum.com. It was founded by a JAG and has hundreds of vets whose disability claims have also gone through the appeals process. They might have more suggestions on how to track it down and speed it up.

Here are two things to keep in mind between our different situations, Rob:
1. Insurance laws vary by state, and your state may allow USAA to charge a premium for a teen driver– even an occasional one.
2. In our household we had three drivers for two cars, and our daughter did not own her own vehicle. USAA chose to consider her an occasional driver, and it’s probably because Hawaii state law allowed this.

I’d encourage everyone– especially active-duty military– to check their state’s laws and USAA’s premiums whenever they’re in a new state.

Good question, Henry, I’m sorry to say that you could have started your Reserve pension over a year ago. The good news is that you can have it paid retroactively to your 60th birthday.

The first step is applying for your pension through your military service:
http://www.moaa.org/Content/Benefits-and-Discounts/Pay-and-Benefits/Military-Pay-Issues/Guard/Reserve-Retirement-Benefits.aspx
You’ll need your Notice Of Eligibility for your pension, your point count, and your approved retirement request.

You can apply through the service’s websites (or by a phone call). If you’re near a Reserve Center or a military base then you could stop by their personnel center to start the process.

Once you have your retirement package from your service you can apply to the Defense Finance and Accounting Service to start the deposits. In your case they should also pay you for the months you’ve already missed back to your 60th birthday.
https://www.dfas.mil/retiredmilitary/apply/how-to-apply.html

You can calculate your retirement pay using the information in this post and your point count. (DFAS will also do this calculation for you.) You’re a Final Pay retiree because your Date of Initial Entry into Military Service was before 8 September 1980. Your pension will be based on the 2017 pay table (the year you turned age 60) at the longevity of your rank as though you’d been on active duty all the way up to 2017. (It’ll probably be a column like “>30”.) Because your pension system is “Final Pay”, you do not have to worry about High Three.

By the way you’re also eligible to apply for Tricare health insurance, either Tricare Select or Tricare Prime:
https://tricare.mil/

Thanks, WSPP, VA benefit appeals are a frequent problem. I hope you’re also able to tap into the healthcare that you need to cope with your symptoms.

First, I’d recommend talking with a Veteran Service Officer from the Disable American Veterans, the American Legion, VFW, or even MOAA. They might uncover additional information in your medical, dental, or service records– or spot errors in the VA’s claim file.

Next, I’d post more details about your claim at the PEBForum.com. It was founded by a JAG and it’s filled with hundreds of military vets who have had VA problems similar to yours. They’ll be able to tell you more ways to approach the solution.

Casey, as Penny says, your service will almost certainly approve your retirement request at your enlisted rank. Be aware that your pension will be calculated at your last enlisted rank before commissioning.

The processing time varies by service. You’d have to check that with your personnel branch.

When the sum of your years of active duty and your years of retirement reach 30 years, you’ll be automatically advanced to the officer rank which you held at retirement, and your pension will be recalculated (going forward) at the pay of your commissioned rank. For example, that federal law for the Air Force is:
https://www.law.cornell.edu/uscode/text/10/8964

Good question, Laura, and you might have a misunderstanding of the sanctuary program.

You’re only able to declare sanctuary when you’ve already been mobilized on active duty and authorized to continue those orders past 18 years of active-duty days. At that point you stay on active duty at the same command and retire (on an active-duty pension) as soon as you reach 20 years.
http://the-military-guide.com/sanctuary-in-the-reserves-only-on-active-duty/

While you’re at your mobilization duty station getting to 20 years, you can apply to be augmented to your military service for an additional tour. That would make you a part of your service’s personnel (not a Reservist or National Guard member) and you’d be eligible for worldwide assignment. You’d fill out a duty preference worksheet and see what your assignment officer could do for you.

However continuing beyond 20 would depend on your service wanting to move you from sanctuary to integrate you with the rest of your service’s active-duty personnel headcount. You’d count against their end strength, and they’d have to need your skills somewhere else after your sanctuary duty. I’ve only seen that happen once.

This is way outside my circle of competence, ThatMom.

If you’re not getting any help from the VA then I’d suggest contacting a Veteran Service Officer from a local chapter of your Disabled American Veterans, or the American Legion, or the VFW, or even MOAA. Their VSO services are free and they’re typically used in filing VA disability claims, but they might be able to help with the Navy Reserve pension as well. They’ll want to review all of the Navy records & paperwork you have for your father, even if it’s only the letter. If you’re not near one of those chapters then you could also contact your state Veteran Services office to meet with one of their staff.

As a long-shot possibility, you could contact Navy BUPERS about his 20-year Notification Of Eligibility letter to see whether you’re able to obtain a set of retirement orders and process the application for the pension:
http://www.public.navy.mil/bupers-npc/career/reservepersonnelmgmt/ReserveRetirements/Pages/default.aspx

If your father is within the low-income limits then he might also be entitled to a VA “Aid and Attendance” pension. (The VA calls it a pension, but it’s actually a stipend.) That’s completely separate from the Navy and DFAS.

Thanks for asking, Rina!

The rough-draft schedule is here:
https://milblogging.com//agenda/
and that’ll update over the next few months.

The only weekend events are on Sunday 23 September– nothing on Saturday. Sunday includes golf in the morning, workshops in the afternoon, and the kickoff dinner that evening. There’s plenty of time for networking and talk story.

I no longer golf but I’ll be at the resort all weekend (and the following week) and I’ll be happy to get together to answer questions!

Mike, your understanding is not quite correct. Since you have less than three years’ time in grade as an O-5, then you’ll have “Major” on your retirement certificate– and your pension will be based on the O-4 row of the pay tables in effect in 2034 (when you turn age 60).

However if you have at least two years as an O-5 when you retire at that 21 years, then you can apply for a waiver from your service to retire with the rank (and the pay tables) of an O-5.

The applicable sections of law are in Title 10 U.S. Code section 1370 paragraphs (3)(A) and (5)(A).
https://www.law.cornell.edu/uscode/text/10/1370

Let me recap:
1. If you apply to “retire awaiting pay” with three years in rank as an O-5, your retirement rank is O-5.

2. If you apply to “retire awaiting pay” with at least two years in rank as an O-5, and a waiver from your service to retire at that rank, then your retirement rank is O-5.

3. If you apply to “retire awaiting pay” with less than two years in rank as an O-5, then your retirement rank is O-4.

Once you’re retired awaiting pay (gray area) then your rank longevity accrues as though you’re on active duty until the day your pension starts, and at the pay tables in effect when your pension starts. At the O-4 and O-5 ranks, for the vast majority of Reserve retirees, this is the maximum pay for those ranks.

In your case, 16 years later in 2034, that would be as an O-4>36. If you had at least two years as an O-5 and were granted the waiver from your service to retire as an O-5, then your column in the pay tables would be O-5>36. In the 2018 pay tables, O-4 pay tops out at >18 and O-5 pay tops out at >22, but Congress and DoD could change the pay tables again (like they did in 2007) to reflect more pay raises beyond those years of service.

When your pension starts (usually at age 60, perhaps a little younger from deployments qualifying for an earlier pension) then DFAS looks back at all your pay tables in effect over the years that you were in uniform and in gray area. They take the highest 36 months of pay and calculate your High Three pay base by averaging those months.

If you retired as an O-4, then in 2034 DFAS would note that you received O-5 pay in 2016-1018. If that O-5 pay in 2016-18 was higher than the pay for an O-4>36 in 2034 then they’d include the O-5 numbers in the high three calculation.

If you retired as an O-5 then in 2034 DFAS would just pick out the highest 36 months of O-5 pay in the pay tables up through 2034. Hopefully military pay continues to rise every year (or at least stay flat) and highest O-5 pay would have occurred during the 36 months of 2031-2034.

Bottom line for O-5s and above: If you’re not going serve for three years in grade, then get the waiver for two years or retire at the lower rank.

Thanks, MERJ!

Eddie and I are both submarine vets, so our shared background offers a balanced perspective on this perpetual debate.

I don’t know whether we’ll change anyone’s minds, but we’ll definitely make sure that prospective homeowners understand their risks.

Great question, Scott.

If you’re already “retired awaiting pay” (gray area) and your commissioning date gave you nine years & two months at the date you started gray area, then you’ll stay an Army Reserve CPT.

When you retire awaiting pay, your longevity continues to accrue as though you were on active duty during the gray area years. Eight months after you retired, you would have reached 10 years of service as an O-3.

Your longevity will continue to accrue until the day you start receiving your pension (probably at age 60, maybe a little earlier for combat deployments after 28 January 2008). When your pension starts then it’ll be from the future pay tables in effect during the year that your pension begins. If you were enlisted for more than four years of active duty (or had more than 1460 points in the enlisted ranks) then you’d use the O-3E pay tables.
https://www.dfas.mil/dam/jcr:ccc8e348-187d-4bff-9e39-b113ad7fa67d/MilPayTable2018_4.pdf

Here’s another little-known feature of the federal law: even if you’d retired from active duty under those conditions starting in 2011, you would have been approved for a waiver to retire with only eight years of commissioned service. That authority expires in September 2018.
https://www.law.cornell.edu/uscode/text/10/3911

Here’s a third little-known federal law: even if you had been disapproved for that waiver, when your total years of military service (active duty, Reserve, and retired awaiting pay) reached 30 years then you would have been advanced to the highest rank held during your time in uniform: Army Reserve captain.
https://www.law.cornell.edu/uscode/text/10/3964

By the time you start your pension you’ll probably meet all three of those situations.

If you want help calculating your actual pension (estimated in today’s dollars) then feel free to let me know more details. You’ll need your point count and your rank at retirement (O-3 or O-3E). You’ll also need to know the dates of any combat deployments after 28 January 2008 (or possibly some national emergencies). Finally, you’ll need to know whether you’re Final Pay (Date of Initial Entry into Military Service before 8 September 1980) or High Three (DIEMS after 7 Sep 80). You can comment here, or use the “Contact me” form on the blog, or e-mail NordsNords at Gmail.

Here’s the post to calculate your pension:
http://the-military-guide.com/reserve-retirement-calculator/

And here’s the post with more details about any combat deployments after 28 January 2008:
https://themilitarywallet.com/national-guard-and-reserve-early-retirement-age/

Thanks for listening, Joe, I enjoyed guesting on Brandon’s podcast!

Congratulations on your commission, and let me know if you have any questions on the posts.

Elizabeth, you’d qualify for a Reserve pension as soon as you had 20 good years (the five good years in the drilling Reserve plus 15 years of active duty). You’d qualify for an active-duty pension if you stayed to 20 years of active duty, or a total of 25 years in uniform.
https://the-military-guide.com/reserve-military-retirement-for-active-duty-veterans-with-previous-reserve-or-national-guard-service/

I’d be good with that too, Troy– I’m still waiting on K-1s before I can finish prepping my return.

Sounds good to me, Peter, and not just around tax time!

Joy, I don’t have the legal knowledge to offer a recommendation on this.

Perhaps your lawyer could talk with a military JAG, or maybe you could have your ex-spouse provide copies of his electronic Retiree Account Statements.

Emy, you’ve asked a good question, but I’m the wrong guy for the active-duty answers. I don’t know enough about the military’s 1970s pension or compensation systems. In general I’d suspect that he is not eligible for any pension benefits.

However he’s certainly eligible to request that the Veterans Administration evaluate his health for a disability rating. If he has any disabilities which have been caused by his military service then he can have the medical exams which could lead to a disability rating and some financial compensation or other benefits. If his income is very low then he may also be eligible for other VA financial assistance.
https://the-military-guide.com/file-veterans-disability-claim-not-just/

You should contact a Veteran Service Officer near you. They’re usually found with a local chapter of the DAV, the American Legion, the VFW, or even MOAA. Their services to you are free, and they know how your spouse’s time in uniform can be compensated with the VA disability rating rules.

I’d also research your state veteran’s benefits.
https://www.military.com/benefits/veteran-state-benefits/state-veterans-benefits-directory.html
It’s not just license plates and discounts at Home Depot but possibly lower property taxes and other state support.

Philip, you’ll need a couple more details when you do your calculation.

As the post says, when you retire awaiting pay then your longevity in your rank will continue to accumulate (just as though you were on active duty) until your pension starts at age 60. E-7 pay tops out in the >26 years column of the pay tables, so if you’re an E-7 retiree then you’ll probably earn the maximum pay in that retirement rank.

You’ll have to calculate your own High Three average of the future pay tables that will be in effect when you reach age 60. If you want to do the calculation in today’s dollars then just take roughly 96% of the latest pay tables for the maximum pay in your retirement rank. (That 96% assumes two years of 2% raises.) If you’re already close to age 60 (or starting your pension early) then you might be able to calculate your High Three average from the current pay tables and assume a 2% pay raise for next year.

Your deployment dates cross over a fiscal year. Your pension will start three months earlier for every 90 days during a fiscal year that you spent deployed to support combat operations in accordance with the 2008 NDAA requirements. You already know that you have 90 days before 30 September 2010, and you probably have another three 90-day periods before the end of the deployment. You’ll also have to check that your orders comply with the deployment requirement to support combat operations. If your orders were written correctly then you’ll be eligible to start your pension at age 59.

You can look at the example calculations I’ve done for David J. and Sophia below and follow the format with your numbers.

Keep in mind that although your pension could start at age 59, Tricare will still only start at age 60. You’ll have to cover your own health insurance all the way to your 60th birthday.

I agree, Peter, flipping is a tough way to make money.

Franchising probably works a lot better for most people… and that’s pretty challenging too.

DB, the criteria is “active duty”. Drill points don’t count because they’re for training, and neither does ADT. However the AFI 36-2131 goes into considerable detail in sections 2.1 and 2.2:
http://dopma-ropma.rand.org/pdf/AFI36-2131.pdf
That’s dated in 2011, and you may have a more current version on an Air Force website.

Once you get past 16 (or 16.5) years of active-duty points, the personnel tracking systems should kick in to notify your chain of command about the procedures to be followed for voluntary orders and for waiving your rights to sanctuary. The only sanctuary declarations I’ve heard of in the last four years have resulted from long-term database errors.

Great questions, Matt, and here’s some more thoughts.

The first benefit of the BRS is the one that everyone overlooks: the possibility that you won’t make it to 20 for reasons beyond your control. It doesn’t matter how good you are. The military could go through another large downsizing. Your specialty could be declared overstaffed or even obsolete. You might already have the skills & performance of an E-8, but a decade from now there might only be one or two E-8 openings per year. (Not even the assignment officers can project a decade of career promotion rates– let alone the rest of us.) You could suffer a career-ending injury or a medical crisis.

Statistically, those enlisted who make it to 10 years have only a 50% chance of staying to retirement.

The BRS offers flexibility (and more money in your TSP) than taking the risk of making it to 20 (or getting nothing). It’s cheap insurance against the risks that you can’t control.

Next, the BRS matching contribution, invested aggressively in your TSP, can grow faster than the amount of High Three pension you’re giving up. Run the BRS calculator with various long-term return assumptions from the TSP’s C, S, and I funds to see how long it takes for the BRS matching contributions to exceed the difference between the pensions. DoD actuaries have made the BRS a revenue-neutral decision, and the longer you live then the more the odds shift in your favor.

Third, the Continuation Pay bonus is a retention contract. All of the services are currently using 2.5x monthly base pay, but in October 2018 those multiples will start to rise as the community managers use them for mid-career retention incentives. You have to sign up for CP before you reach 12 years of service, and it still carries a four-year obligation, but you could wait for two more Octobers before you make a retention decision. If you’re going to stick around to 20 anyway (if you can!) then you might as well invest the CP bonus in your TSP. That will also compound faster than the part of your legacy High Three pension which you’d give up for BRS. Run the BRS calculator with an assumption that you receive 2.5x for CP and see how much more quickly the BRS return exceeds the legacy High Three pension.

To be excruciatingly correct, when you opt in to BRS you’re losing 20% off the legacy High Three pension because the pension multiplier drops from 2.5%/year to 2.0% per year. At 20 years of service your BRS pension drops the same 20%, but it’s 10 percentage points (from 50% to 40%) of the 36-month average of your base pay. When you add in the BRS matching contributions of 5% of your base pay (not a 36-month average but just your base pay at various ranks from now until 20) then it’s not a straight 5% equivalent of your pension. Better yet, the BRS matching contributions are compounding in your TSP instead of waiting for you to cliff vest at 20 years.

Both types of military pensions will be adjusted for inflation for the rest of your life (and for your Survivor Benefit Plan, too) but the TSP can be invested in funds which will grow faster than inflation.

Better still, your TSP funds can be passed on to your heirs no matter how short your life might turn out to be. Your survivors will have their own assets, and you could decide that you don’t need to buy as much of the SBP.

Finally, your military pension will be taxed each and every year at the federal level (and possibly at the state & local levels). When your BRS matching contributions are invested in your traditional TSP, they’re only subject to income tax once (at withdrawal). If you’ve converted your traditional TSP to a Roth IRA (after the military) then the funds were taxed once (in the conversion) and never taxed again.

Thanks, Crew Dog, those are great points. And I hate paying full retail on sales fees & commissions, yet the FSBO alternatives are trading money for time & stress.

I hear that, Sallie. The Reserve/Guard retirement system is so complicated that this has been the blog’s highest-ranked post every month for over five years.

The good news is that you didn’t really have a “choice” on Final Pay or High Three. Final Pay is only for those who joined the military before 8 September 1980 (with a Date of Initial Entry into Military Service before then), so you’re most likely on the High Three pension calculation.

As Dave mentions, Combat-Related Special Compensation is different from Concurrent Retirement and Disability Pay. DFAS will choose the higher amount for you when your pension starts.
https://www.dfas.mil/retiredmilitary/disability/comparison.html
Until your pension starts, you’ll continue to receive your VA disability compensation.

Since you’re retired awaiting pay, you’re also eligible to purchase Tricare Reserve Retired health insurance until your Tricare starts at age 60. TRR is not subsidized like Tricare Reserve Select so the TRR premiums are higher. You might do better with employer health insurance or from the ACA health exchange, although you can continue to seek treatment from the VA for conditions that are related to your disability rating.

Even if you’re eligible to start your pension earlier than age 60 (due to combat deployments or national emergencies of at least 90 days in a fiscal year), Tricare starts at age 60.

Thanks for the update, Greg– do you happen to have a link to that reference for others to use? Would that be in the Financial Management Regulation or somewhere else?

I still get the question every few months.

It’s a tough decision, Troy.

When you reach 18 years of service, federal law guarantees that you’ll be allowed to continue on active duty until 20. If you leave active duty for the Reserves or National Guard you’ll still be able to serve up to at least 20 good years, but you may also have a six-year commitment to the unit. (Talk with your Reserve recruiter to verify this.) You’ll also want to know that you have a Reserve/Guard unit near you, and that you can get a drill billet.

If you have more than 16 years of active duty when you transfer to the Reserves or National Guard, then your service’s sanctuary policies will limit the active duty which you can take.
https://the-military-guide.com/sanctuary-in-the-reserves-only-on-active-duty/

You’ll also want to reassess your financial situation. If you’re near financial independence then you have a lot more flexibility. (Your savings/investments only have to cover the gap between leaving active duty and starting your Reserve/Guard pension at age 60.) If you’re still pursuing FI then you’ll have to consider the employment prospects for you and your spouse. A Reserve/Guard career offers more of what you enjoy about the military and less of the not-so-good parts, but you’ll still have to focus on work-life balance.

If you still feel challenged & fulfilled by active duty, then maybe your goal is finding a billet in a location where your family can thrive– while knowing that you’d move back to your current area in a few years. That’s not an easy decision either, and you’ll have to have lots of long discussions with your family.

Thanks, Jan, I appreciate your retirement moving experience!

I appreciate your comment, Rebecca, and I’ve reached out to USAA’s Communications team.

Another option is contacting the Member Relations team through the USAA app/website and a supervisor.

Sophia,

I’m happy to help with those numbers, although I depend on the manual calculation instead of those point charts.

I’m going to assume that you did not deploy to a combat zone after 28 January 2008 for at least 90 days during a fiscal year. If you had, that would entitle you to start your pension three months earlier for each of those 90-day segments. If that might be an issue, though, you can read more about it at this post from my friend (and ANG officer) Ryan Guina:
https://themilitarywallet.com/national-guard-and-reserve-early-retirement-age/

You could wait to start your Reserve pension on 1 January 2019, but it works against you with High Three. It can work with the Final Pay pension system (it’s usually less than a 10-year payback), which is applicable to those who started active duty before 8 September 1980. However High Three averages the final 36 months of pay tables before you start your pension. If you delay the start of that pension while the older base-pay numbers are dropping out of the 36-month average, you could be missing thousands of dollars a month in pension deposits which would take decades to make up.
https://militarypay.defense.gov/Pay/Retirement/reserve/

When you start your Reserve pension in November 2018, the 36 month average uses 11 months from the 2018 pay tables, 12 months from the 2017 tables, 12 months from the 2016 tables, and December 2015. You probably retired awaiting pay with at least three years time in grade as an O-6 (or a waiver down to two years), so your pension is calculated from that rank.

If your Date of Initial Entry into Military Service is 17 March 1985 then (for pay longevity purposes) your DIEMS date puts you as an O-6>30 in March 2015. I happen to know that the pay tables top out for O-6 at 30 years (it’s the same pay for O-6>32) so it’s a little easier to look up the numbers.
https://www.dfas.mil/militarymembers/payentitlements/military-pay-charts.html

Here’s the numbers I’m using:
2018 O-6>32: $11,599.80
2017 O-6>30 and O-6>32: $11,328.00 for both
2016 O-6>30 : $11,094.90
December 2015 O-6>30: $10,952.40

The November 2018 High Three average is:
[(11 x $11,599.80) + (12 x $11,328.00) + (12 x $11,094.90) + $10,952.40] / 36 = $11,322.91

4833 points / 360 x 2.5% x $11,322.91 = $3800/month.
(The Financial Management Regulation requires DFAS to truncate the result to the lower dollar.)
https://www.dfas.mil/retiredmilitary/plan/estimate.html

If you start your pension in January 2019 and there’s a 2.0% pay raise (which seems like a reasonable compromise on the 2.6% proposal), then your High Three average would drop December 2015 and January 2016 while adding December 2018 and January 2019’s 2% pay raise.

The January 2019 High Three average would be:
[($11,599.80 x 1.02) + (12 x $11,599.80) + (12 x $11,328.00) + (11 x $11,094.90) ] / 36 = $11,361.36
and your new pension amount would be $3813/month. However you lost the entire month of December ($3800) and some days in November. Making up >$3800 at a higher pension of $13/month would take over 24 years. (It’d be an additional $126.67/day or 9.75 months per day for whatever you lost from your November birth date). Maybe you’d win that bet (it’d motivate me!) but I’m not sure it’s worth the payoff.

Regardless of when you decide to start your pension, you can sign up for Tricare Prime or Tricare Select on your 60th birthday.

Chief, the amount of the DoD BRS TSP contribution for each month is determined by the amount of base pay which is contributed by the servicemember that month. It’s 5% of a month’s base pay for active duty because they’re on duty all month long and they contributed (at least) 5% of their base pay. For a Reserve/Guard servicemember, it’s 5% of the amount of base pay earned during that time period, assuming the Reserve/Guard member contributes at least 5% of the amount of base pay they earned.

If the only military duty performed by a Reservist that month is the weekend drill, and they contribute at least 5% of that drill weekend’s base pay to the BRS, then the DoD BRS match would be 5% of the base pay earned during the drill weekend– not 5% of an entire month of base pay.

As you said, it’s set by the base pay for both Reserve/Guard and active-duty servicemembers. The active-duty members worked all month. The Reserve/Guard members worked for a drill weekend.

If the Reserve/Guard members were on active-duty orders of at least 30 days (and contributed at least 5% of their base pay to the TSP) then their DoD BRS TSP contribution would also be 5% of a month of base pay– the same amount of money the DoD BRS contributed that month to an active-duty servicemember’s TSP account.

However you can still contribute up to $18,500 of your Reserve pay to your TSP every year, and the DoD BRS match is not included in that $18,500 elective deferral limit.

DFAS’ MyPay software will allow up to 92% of all pay (specialty & bonus as well as base pay) to be contributed to the traditional TSP. (7.45% is reserved to pay FICA.) The various DFAS pay systems will allow about 60%-65% of all pay to be contributed to the Roth TSP. (Again the rest of the money is supposed to be set aside for tax withholding and FICA.) If I remember correctly, MyPay is set at 60% and Marine Online is set at 65%.

When you do a drill weekend (four drills) as an E-7>12, that’s $558.24.
https://www.dfas.mil/dam/jcr:4a30221a-c554-4f01-b9f4-9e22378aa0ef/MilPayTable2018_2.pdf
If you contribute at least 5% of that to your TSP then the DoD BRS contribution will be 5% of $558.24 or $27.91. Over a year of 10 drill weekends that adds up to $279.10. If you do two weeks of AT (14 days of pay or 14 drills) then the BRS contribution is $139.56 x 14 x 5% = $97.69. The entire year’s DoD BRS contribution is $376.79. Over eight years that would be roughly $3200 (from DoD) because you’d continue to accrue seniority and receive annual pay raises.

Meanwhile those 10 drill weekends and 14 days of AT earned 54 drills or 54 x $139.56 = $7536.24. You could contribute 92% of that to the traditional TSP ($6933.34) or 60% to the Roth TSP ($4521.74). Over eight years your contributions would add up and the entire account would compound in the TSP’s investment funds.

For a Reserve/Guard member to contribute $18,500 to their traditional TSP account, they’d have to gross at least $18,500 / 92% = $20,108.70. For an E-7>12 earning $139.56 base pay per drill that’d be 144 drills– 10 drill weekends and 104 days of active-duty orders, or 12 drill weekends and 96 days of active duty.

You can check your TSP balance in your TSP account (both traditional and Roth TSP). You can check your percentage contribution settings in MyPay (MOL for Marines, Direct Access for USCG and NOAA). Each month’s LES will also have fields reflecting the DoD BRS 1% agency automatic contribution, the DoD BRS 4% agency match.

The TSP only accepts contributions from federal government pay (federal civil service and military). You can’t contribute civilian corporate pay directly to the TSP, although your employer might have a civilian 401(k) plan. (The TSP is based on the same Section 401(k) of the tax code.) You could also contribute self-employment income to similar retirement accounts like a Solo 401(k). The DoD training materials don’t include this information because it’s outside of the scope of the BRS and the TSP programs.

However the TSP website mentions that you can roll a 401(k) account into the TSP (https://www.tsp.gov/PDF/formspubs/high14d.pdf). You can even roll a traditional IRA into the traditional TSP.

As for the quality of the explanations on the government websites, I can forward your (anonymous) feedback to the DoD BRS office for them to clarify the Reserve/Guard portions of the curriculum.

Good points, Peter!

I still get a lot of unhappy e-mails from Norfolk-area homeowners who are long-distance landlords.

Thanks, Rich, and I appreciate the Grant Cardone advice!

It’s a tough decision, Michael, but when one spouse retires from active duty (and you’re financially independent) then the other spouse has more choices.

The Reserve difference is just like any other community: the availability of billets and the promotion opportunity. Assuming she’s still feeling challenged & fulfilled (and especially if active duty has the higher probability of promotion & retention) then she’d stay with active duty. If she’s ready to go Reserve/Guard now, then some billets are more scarce at the senior ranks or might even require competitive selection. Not being in a pay billet can make it difficult to get enough points to meet the requirements for a good year, and correspondence courses are no longer an option for earning points. It might make more sense to get into a Reserve billet now so that she’s more competitive for other Reserve billets later.

If she goes to the Reserves at 14 years then there’s the possibility of being mobilized for a deployment during the next six years. If she goes to the Reserves at 17 years that would be less likely (but still possible).

You’d have to talk with other Reservists in her community (and with a Reserve recruiter) to parse the billets at each year (and at each prospective rank).

I don’t think that the discussion is selfish– it just reflects that she has more options. Challenge and fulfillment are the entering arguments. There’s certainly no mathematical reason to raise your net worth from “enough” to “way more than enough”, but the extra margin of financial security (and behavioral financial psychology) might help her sleep better at night. How does she want to balance career, family, and quality of life? How will she feel 20 years from now when she looks back on her decision?

For those readers with very long memories, there is no longer any requirement to finish a 20-year Reserve career with 6-8 years in a Reserve unit.
https://www.law.cornell.edu/uscode/text/10/12731

Patterson James, you might be referring to these clauses in the FERS Handbook:
“On account of a service-connected disability incurred in combat with an enemy of the United States; or

On account of a service-connected disability caused by an instrumentality of war and incurred in the line of duty during a period of war…”

This is a good time to consult with your OPM rep and talk to a JAG. These sections of the Handbook may be referring to a disability retirement (Chapter 61 of Title 10 U.S. Code) which is different from an active-duty retirement and also different from receiving compensation for a VA disability rating.

In other words I’m not sure about the civil service interpretation of the word “disability” in the FERS handbook, and I strongly recommend checking with a lawyer.

Good points, Peter, and I think the Reserves and active-duty counterparts are much better integrated since 9/11.

I hear you on the senior ranks in the Navy Volunteer Training Unit for all the wrong reasons. Many many senior enlisted and senior officer Reserve/National Guard servicemembers think that they have to continue drilling for the longevity raises. As you know, federal law guarantees that Reserves/Guard who “retire awaiting pay” will have their longevity continue to accrue (just as if they were on active duty) up to the start of their pension.

Once those O-5s/O-6s reach time in grade (three years by law, two years with a waiver) they can apply to retire awaiting pay and they don’t have to drill for the longevity.

Sean, that’s a very good question and the answer is outside my circle of competence. You need to consult with a JAG (or a civilian lawyer) who understands OPM regulations. You could also e-mail Eddie at GubMints.com (http://gubmints.com/contact/) to see if he’s heard the question before.

Of course you can receive two federal pensions. You’ve earned both of them. The question is whether you can continue to receive the benefit of the military service credit deposit in your federal pension without having to waive a portion of your military pension.

I see three possibilities:
1. OPM regulations give you the credit for the first 10.5 years (because you were entitled to it at the time) and you elect not to take the credit for the latter 9.5 years (because you’d have to waive your military pension). You’d still apply for your additional FERS credit for annual leave:
http://gubmints.com/2013/04/15/military-service-credit-deposit-retired-from-active-duty/
You’d retire to both pensions. It might be perfectly legal under OPM regs, although it’s certainly rare. The question is whether OPM actually has any regs to address this situation.

2. OPM regulations determine that you’re no longer eligible to benefit from your military service credit deposit for the first 10.5 years and they return your money. You’d still apply for whatever FERS credit you can get for annual leave (the same post linked in #1).
You’d retire to both pensions, although your FERS pension is smaller because you were no longer able to use the military service credit deposit.

3. OPM regulations determine that you’re now going to have to waive a portion of your military pension in order to keep the military service credit deposit from the first 10.5 years. You’d have to negotiate a solution, because I think that an active-duty pension now is worth more than buying a larger FERS pension later.
You’d retire to both pensions, although your military pension is smaller because you had to waive a portion of it.

You might possibly find some way to apply for a waiver to enable #1.

Again, please consult Eddie and a lawyer who understands OPM FERS regulations with military service.

Thanks, FIndependentOne!

Mike made a good point about those who have been involuntarily separated.

Glad to help. Please let us know how it goes.

Thanks, Peter.

“You will know when it’s time to go.”

Thanks, Military Dollar!

The Reserve/Guard pension system is probably one of the world’s most complicated. I regularly have to quote the federal law and the CFPs from the military-association websites.

Gwendolyn, I’m very confused by the facts you’ve stated.

If you have an ID card stating that you’re a retired Army Reserve veteran then yes, you’re presumably awaiting a pension.

If you have 14 years of active duty and four good years in the Reserve then you’d have a total of 18 good years. When your Form 249 point count shows 19 good years, though, it means that you have a total of 19 good years.

A typical Reserve/National Guard retirement is based on reaching at least 20 good years, regardless of the the point count or the mix of active/Reserve years. However if you’ve indeed been medically retired then you have a disability retirement, which is a different section of federal law. It’s also based on your Reserve medical disability rating and does not require 20 good years.

Here’s a couple of options:
– Check your retirement letters from the Army Reserve and Army HRC and let me know more details. The first question is whether you’re “retired awaiting pay”, or whether you’ve been given a disability retirement. (It’s also possible that the Army Reserve has given you a “separation” or “discharge” type of retirement, but those are very rare.) You could comment here or e-mail NordsNords at Gmail.
– Post your questions at the PEBForum.com. It’s founded by a JAG and has hundreds of disabled veterans who’ve been through the medical evaluation board process. They can walk you through all of the issues of both your medical disability retirement and your VA disability compensation.

Thanks, Queue, I hope your accounts are updated (or “backdated”) on Monday 5 February!

Thank you, Vikyat. I hope it keeps spreading.

As others have mentioned, Austin, I think we’re using different words for the same concepts. It looks like DFAS and the TSP are giving early-opt-in BRS members their January DoD match, and another week will produce more evidence.

First, military pay (and pensions) are in arrears. We have to stick around for an entire month before we get the full pay (mid-month pay is just an advance) and an LES. People who opted in to BRS in early January are getting the match at the end of January, and it’s showing up in their LES. DFAS will probably deposit the DoD match to TSPs around 2 February, and we’ll be able to check that on TSP account activity. The 2018 end-of-year match (deposited on 2 January 2019) will probably show up in 2018 summaries and tax forms.

Second, I think the different services are showing the DFAS transactions at different times. There shouldn’t be a cutoff between an Air Force servicemember who signed up at 6 AM EST 1 Jan and an Army officer who signed up six hours later, despite the lack of LES evidence. Most of the services process their payrolls during the second half of the month (~20th) so I’d opt in as soon as possible.

Thanks for the question, NLDekker, but the whole point of the sentence (in the intro to the post) is that most of the Reserve calculators aren’t accurate. (Even when they’re available. *) This post goes into all the details necessary to determine an accurate estimate, and (more importantly) to understand how the rules affect your pension.

[* I think you’re referring to the DoD calculators at https://militarypay.defense.gov/Calculators/ . We at The-Military-Guide are never going to try to fix that problem. You might find a service-specific calculator behind a CAC login, at a Reserve center, or at a Guard armory– but of course a lot of Reserve/Guard servicemembers don’t have CACs and might not have convenient base access. Yet everyone can do a manual calculation.]

Good retirement calculators are hard to create. (I share your frustration. I’ve been using them for over 30 years.) Accurate Reserve/Guard retirement calculators are even more difficult because of the incredibly varied and highly individual career parameters. That’s why this post shows you how to make sure that your estimate is accurate.

This has been the blog’s most popular post nearly every day for almost six years, and it’s because the manual method works better than any existing calculator.

If you want help verifying your numbers then feel free to comment here, use the “Contact me” form, or e-mail NordsNords at Gmail.

Gwen, I’ve just sent you an additional e-mail from NordsNords at Gmail. You might have to look for it in some other folder.

That’s certainly an issue, Gwen. I can believe that PERS-9 has made a horrible mistake, but it’s very unlikely that they missed the officer going over 16 years in their tracking system.

Let me check some numbers with you.

First, sanctuary has to be declared while the servicemember is still on their active-duty orders. They’ve met that requirement.

Next, the 18-year threshold is based on active-duty days and not drills. In other words, it’s not just 18 years of points but rather 18 years of active-duty points. The sanctuary point count subtracts out drills and other points which did not qualify as active duty.

Finally they’d need to check their active-duty orders and make sure that they have not signed a waiver of their sanctuary rights. This frequently happens with voluntary mobilizations but the significance is not always appreciated by the servicemembers.

Unless those requirements are met, then the Reserve officer is not in sanctuary. They’re someone who has over 18 years of points (>6480 = 18 x 360), but not enough active-duty points for sanctuary. There are a handful of those servicemembers in the Reserves and National Guard, and many of them have well over 7500 points. I’ve met most of them through the blog, many via e-mail after reading this post.

When the updated (corrected) point count is submitted to the Reserve personnel branch, if the officer is over 18 years of active-duty points then all sorts of alarms will go off. If your review indicates that they may have reached sanctuary then the officer should immediately fill out their sanctuary declaration and send it to BUPERS.

If the updated point count has over 16 years of active duty then they’ll be tracked in the PERS-9 system. Further active-duty orders will be restricted to make sure they either demobilize short of 18 years or have signed a waiver of sanctuary.

Once someone declares sanctuary, they’re moved from the Reserves or Guard to their active-duty service. They’re given a new set of orders to take them to 20 years (for their active-duty pension) but no further. They could be eligible for worldwide assignment but they’re usually left at the command where they declared sanctuary (due to their short time remaining on active duty). On the other hand they’re certainly able to deploy with their active-duty command (or on temporary duty).

The active-duty officer could request a conversion to FTS (or any other community for which they’re qualified) but selection is up to the other community. The decision is probably based on their potential for long-term service in the new community, and that’s unlikely if they’re retiring at 20.

Thanks, Peter, that’s a great long-term perspective!

Smitty, I’m not sure what “a Guard/Reserve junkie” means. Please let me know if that’s a specific term or program, or whether it’s your description of someone who continues drilling (and doing active duty) even after they’re eligible to retire awaiting pay for a Reserve/Guard pension.

If a Guard/Reserve member has enough days of active duty to reach 18 years of active-duty service for an active-duty pension, then they meet one of the requirements for sanctuary. However to receive an active-duty pension they have to be actually on active duty at the time they reach 18 years, and they have to continue to serve until 20 years of active duty. The program is also heavily monitored by the services to make sure that they know who’s approaching that 18-year tripwire.
https://the-military-guide.com/sanctuary-in-the-reserves-only-on-active-duty/

The short answer to your question is “Generally not.”

That’s an interesting question, Michele, because Tricare’s website doesn’t show an expiration date like “3 January” or “the first month after dropping out”. However the young adult loses their Tricare eligibility the minute that they stop being a full-time college student. (https://tricare.mil/LifeEvents/College/Graduating) For your question that would presumably be when they formally withdraw from the college. It could also be the first date that they stop paying their fees or don’t show up for attendance.

A young adult (dependent child) is dropped from the DEERS database on their 21st birthday– unless the sponsor provides a “letter of attendance” from the college to verify enrollment (“full-time in an accredited college in pursuit of an Associate’s Degree or higher”, https://tricare.mil/Plans/Eligibility/Children). This DEERS drop happens even if the young adult is a full-time student taking 22 credit hours on a ROTC scholarship. Let’s not get into how I know this.

The next tripwire would be college graduation or their 23rd birthday (whichever happens first), when they age out of Tricare for college students and have to purchase their own health insurance. (https://tricare.mil/Plans/Eligibility/Children)

If a young adult drops out of college between those two birthdays, they’ll still have to have an updated address in DEERS (https://tricare.mil/LifeEvents/College/HealthCarePlans). Tricare will only have a reason to formally verify their attendance if they seek medical care. And, of course, if they claim medical benefits when they’re not eligible for that insurance policy then it’s considered fraud. Tricare would probably pay the claim but then check attendance letters and mailing addresses and start asking questions.

The answer to your question: when your young adult reaches age 21, they have to be a full-time college student to retain their Tricare eligibility. If they decide that they’re no longer a college student or if the college drops them (whichever happens first), then they’re no longer eligible for Tricare health insurance.

Good question, Phil, and a very frequent one.

This post explains all of the ways to tap IRAs and TSPs before age 59.5. All of those methods are penalty-free, and most of them are free of taxes.
https://the-military-guide.com/early-withdrawals-from-your-tsp-and-ira-after-the-military/

A number of readers have retired on their military pensions, although they prefer financial independence to caviar & champagne. FI is based on saving up at least 25x your projected net expenses, which is the tripwire for the 4% Safe Withdrawal Rate. That can be reached within 20 years (even without a pension) by a high savings rate of at least 40% and an asset allocation high in equities. If a servicemember is among the 1 out of 6 who make to a pension then their FI portfolio survival is amply protected by an inflation-fighting lifetime annuity and cheap healthcare.

Warner, the “oft-cited less than 20%” number comes from the Defense Manpower Data Center and has also been backed up by RAND studies. I’ve pulled those details from the DoD BRS office and from the RAND database. A number of us military personal-finance bloggers have asked for a breakdown by rank, service, & specialties, and we may have to put in Freedom Of Information Act to get it. In the meantime there’s the thrill of wandering around the RAND archives for hours searching for the same info.

One of those RAND numbers is an estimate that officers have a much higher retirement probability of nearly 49%. That number is spread across all the services, and I suspect it’s lower for infantry than aviation. If you have data showing that Army officer exit points are extremely bimodal then I’d appreciate a link to whatever is publicly available.

Whether the retirement odds are the roll of a die or a coin flip, there are still risks of not reaching 20 years due to factors outside of our control. I’ve personally experienced it, my spouse personally experienced it in her active-duty career, and I’ve seen similar stories from many readers. This is why so many servicemembers (and their families) requested the BRS.

You describe the risks in terms of houses and college educations. Others see the risks in terms of life energy, health, and family harmony. All of those perspectives are rooted in behavioral financial psychology (not so much in math or logic), and that complicates apples-to-apples comparisons.

I’ve moderated a comment which could be interpreted as an ad hominem response. You’re also welcome to send over a guest post presenting your side of the debate. I’m at NordsNords at Gmail.

Thanks for pointing that out, Randy! You’re right, and it just makes the retirement date even more complicated (in a good way). Ryan’s linked post at TheMilitaryWallet explains all the changes since 2008.

Thank you, Julie. I completely understand the “living in the present” part.

Peter, I think you’re also describing the financial counseling available at military bases and the lifetime employment for personal-finance bloggers.

Another way to look at the question would be where civilian corporate employees get their professional advice and financial counseling. I doubt that most companies do more than offering a video about their 401(k) benefits. Maybe DoD’s financial-responsibility counseling to its military servicemembers, as rudimentary and flawed as it may be, is better than most corporate programs.

As SITM says, absolutely. You’re still contributing $18,500/year but DoD is kicking in another $2000 of free money that does not count against this lower limit.

When you’re in a situation for the annual addition limit (combat zone or direct support), then the math gets more complicated. However several active-duty military personal-finance bloggers are already doing this during their deployments, and I know several more readers who are working through it. When you approach a deployment, contact us to go through the details and make it work for you.

Thank you very much, Eva!

Financial independence has completely changed the culture during the last couple generations. That’s a very good thing.

Thanks, Mel, I appreciate your thoughts.

If there’s anything good about my father’s finances, it’s that we had over six years to organize them after he entered the care facility.

You know that we have a “Death Folder” in our family too.

That’s partially correct, Phil. If you wanted to maximize the 2017 TSP contribution of $18,000 then you’d need to figure out the percentage of $1500/month in base pay. (Because $1500/month x 12 months = $18K.) In 2018, with a TSP contribution limit of $18,500, it’d need to be $1541.67/month.

The good news is that $1541.67/month is far more than 5%/month for everyone. (Even for an admiral or general it’s still nearly 10%.) Every servicemember putting in at least 5% of their base pay will still maximize their BRS match from DoD without going over the contribution limit. (The matching contributions do not count toward the $18,500 annual limit.) However a servicemember putting a re-enlistment bonus, an annual incentive bonus, or a Continuation Pay amount in their TSP would have to make sure that they leave enough room for a full year of contributions in order to earn a full year of DoD matching contributions.

And yes, that contribution percentage needs to be checked every year to make sure that the servicemember is going to reach the limit. The good news is that if the member goes over the limit then the TSP will accept part of the contribution (up to the limit) and then kick back the rest to DFAS. We’ve verified this several times through personal experience with other milbloggers in various services.

The reason that the TSP contributions have been changed to percentages (instead of fixed dollars) is to allow enough remaining income to pay federal & state income taxes. Traditional TSP contributions are limited to 92% (the other 7.45% goes to FICA) and Roth TSP contributions are limited to about 60%-65% (varies by service) to allow for regular income taxes (because Roth TSP contributions are made before taxes).

Another reason that the TSP contributions are in percentages is to make it easier for servicemembers to “set and forget”. Even if they get a pay raise, a longevity raise, or a promotion then they’ll still contribute the same percentage (yet a higher dollar amount) to the TSP. Sadly, many TSP account owners have never changed their contribution percentages from the day they signed up.

I understand the access problem of being at a FOB. (During my submarine sea duty I would be locked out of communicating for up to 90 days at a time.) On the FOB, however, this is a situation requiring the command to send message traffic or an e-mail to a finance office to have them take care of the servicemember. It’s not a problem with the TSP or the SDP– it’s a problem with the leadership.

Thanks, SITM, exactly.

As for the rest of your comments, Peter, I don’t think that future servicemembers’ financial behavior can get much worse than that of todays’ servicemembers. At least those new young adults will *have* a TSP account and some actual contributions. Today’s hope of cliff-vesting at 20 is not a plan.

You’re welcome, Matt!

First, you should read Rich’s blog posts about his real estate. Next you should read all of Bigger Pockets’ free material (and maybe buy a book or two). I know the founders well and they have one of the nation’s largest networks of real estate investors.

It’s not just the time and the work (and the hassle). How well will your roommates take care of your place? How about total strangers after you move on to the next duty station? It’s also the risk. Will you be adequately compensated for the money you invest, and could you have achieved a higher return somewhere else? Or could you at least achieve the same return with less risk?

At this point in your career, you don’t have a lot of time. However you have a relatively high income and you can easily contribute more to the Roth Thrift Savings Plan. Pay off your consumer debts. Try to save at least 15% in the Roth TSP (in the L2050 fund or more aggressively in the C, S, & I funds). Continue to maximize your Roth IRA contributions. Get 99% of the market’s return (with diversification) and about 1% of the effort. Live with roommates and save your excess housing allowance (in a money market or CDs) for the first down payment on your first property.

Now spend your time getting qualified. O-1s don’t have a lot of time (or qualifications) and you’ll earn far more from practicing your craft than from managing real estate on the side. Choose your investing asset allocation by deciding how much you’ll invest in passively-managed index funds and how much you’ll invest in real estate. Learn more about real estate while you’re getting qualified, but don’t jump in until you finish your military training.

By the time you’re qualified you’ll be much better at picking out distressed & discounted rental properties and analyzing their cash flow. That’s the real “head start”.

Any time you find a big fat return from an asset, invert the question and find the asset’s hidden risks. Make sure the price you pay accounts for the risk you’re taking on.

Thanks, MM!

Great question, Donald.

The C&P doctor works from a VA website that’s supposed to contain the relevant documents. However there’s no guarantee that the VA’s doctor website has everything, and a 781a could be absent from the documentation displayed for the doctor.

You should take copies of the 781a, the supporting statements, and your Disability Benefits Questionnaires to the C&P exam and offer to give the doctor their own copy. Ideally the doctor would review them all and factor them into their report. The doctor’s report back to the VA might even include the copies you gave them.

The doctor’s report goes to the VA’s rater, who actually determines the disability rating for that issue. The rater would ideally have your entire claims file, including the 781a and attached statements. There’s no way for you to contact the rater (or provide additional copies) so you have to initially trust that they have everything they need to do their job. Once you receive your VA disability rating you can request a copy of your full claims file (everything the VA used to determine your rating) and check that the documents were in the file.

Congratulations on putting the money to good use, Clayton, but there are two issues with your logic:
1. It’s totally unreasonable to ask someone at 15 years of service to make assumptions about staying for another 5-15 years, let alone getting promoted to the top of their rank structure. Good work, and I know you worked hard for it, but I doubt anyone (least of all you) saw that coming at 15.

2. When you compare the cost of those years of a percentage point of COLAs that you gave up in exchange for $30K, your home is a very expensive purchase. You’re going to be paying that “interest rate” for the rest of your life.

It’s a very good thing that REDUX will end with 2017.

I’m sorry to read about the problem, Billy.

The best approach is for the VSO to keep asking the VA to confirm receipt of the documents. (If you and your VSO aren’t getting along then I’d suggest trying a new VSO.) In addition, when you go to your C&P exams, take along copies of whatever records you have for the doctor. They can include those records in their report to the VA.

I’ve read that if the VA receives an inquiry from a member of Congress, then the VA ceases working on the claim until the Congressional inquiry receives a satisfactory response. That may or may not be correct, but I’d try to work through the VSO and the C&P doctor before using a Congressional inquiry.

Thanks for your comment, Steve, that’s an interesting change. Do you happen to have a reference for being required to pay 360 months of RCSBP premiums if you had the coverage during retired awaiting pay and wanted to withdraw in the 25-36 month window after starting your pension?

Dave, you’ve asked a very logical question, but there’s a different rulebook.

The military High Three pension averages the highest 36 months of the base pay scale, not the average of the amount of the pay you’ve earned. It just goes straight by the pay tables in effect for your type of pension, not by your total earnings. But you can see how this question rises from the military’s plagiarizing of the civilian high-three pension system.

When you “retire awaiting pay” from the Reserves and National Guard, that base pay scale also includes the pay tables for the years up until your pension starts *and* at the longevity for your rank at the age your pension starts. In other words the Reserve/Guard pension starts at the pay tables in effect at the future date, just as if you’d been on active duty the entire time you were waiting for that first pension deposit. If you turn age 60 in 2026 (or three months earlier for the right mobilizations of at least 90 days), then your High Three pension will look at the highest pay scales during the years of 2023 – 2026 as well as all of the pay scales back until the year you joined the military. It’ll also be at the longevity for your rank, which (if you joined at age 18 and by the time you turn age 60) could be 42 years. For the vast majority of Reserve/Guard retirements, the pay scale is at the maximum longevity pay of that rank.

If you go on a year of active duty then you’ll rack up 365 points (another 2.53% for your pension) and you’ll also have a year of additional pay, savings/investments, and active-duty benefits. But the only numbers that count for your High Three Reserve/Guard pension are the numbers on the pay tables.

Thanks, MrInTheWheat, at this point I’m barely attracting any attention on the issue.

I’d love to know a better way to show people how compound interest works for them!

Thanks, Peter, those are all good points.

Consolidation, convenience, trust– and understanding that servicemembers (& families) might be calling from anywhere in the world at any time of day.

Good questions, Tom!

“Retired awaiting pay” is the status chosen by almost all retiring Reserve/Guard servicemembers. It means that they’re retired from Reserve/Guard duties (and waiting for the pension to start) yet have agreed to remain eligible for a total mobilization (which last occurred in WWII). In exchange for retired awaiting pay (instead of resigning or discharge) they’ll continue to accrue longevity in the pay tables as if they were on active duty, and their pension will be based on the pay tables in effect when they start drawing it.

You’ll be in retired awaiting pay status, and then a few months before turning 58 years old you should receive the paperwork to start your pension deposits.

The penalties for early withdrawal of 401(k) accounts (like the TSP) still apply. However there are several ways to tap your retirement accounts (penalty-free and possibly even tax-free) before age 59.5. This post has more details:
https://the-military-guide.com/early-withdrawals-from-your-tsp-and-ira-after-the-military/

Thanks, Mark, and I agree with your ceremony perspective about honoring (and thanking!) family & friends.

The author of this post is a personal acquaintance, and I know that they preferred not to have their command devote a week (or more) to the planning & execution of a retirement ceremony. In their rank & billet at the time, it would’ve tied up quite a group of people and presented a significant backlog of visitors at the base gate.

Personally, my family & friends didn’t care for the planning & logistics. (My spouse was also active-duty military.) During my attendance at submariner retirement ceremonies I’d seen too many steely-eyed killers of the deep break down at the podium, and I wasn’t going to risk that in my case. Instead, the people with whom I worked the most closely devoted our time to a Friday-afternoon BBQ farewell ceremony, where I had the chance to say thank you personally and in front of our peers. It was way more relaxing, fulfilling, (and fun!) than a formal ceremony.

15 years later, many commands still seem afraid to let a servicemember retire without formal recognition. Maybe it’s because the command “knows better” that the retiree will appreciate the closure, or the command is making a major effort to recognize their contribution. (A few commands want to make sure that there’s no complaints later about not getting a ceremony.) Yet a significant minority of servicemembers tell me that they don’t need the formal recognition, and their families & friends have already been honored & thanked without the command’s traditional ceremony. I hope more servicemembers get their choice, guided by the wisdom and experience of comments like yours.

Thanks for the update, Charles. We’d heard about the appeals but I missed that final announcement.

In case BUPERS changes that link, here’s an excerpt of the text from the FAQ:
1. How did the policy for Midshipman cruise credit for retirement pay change?

In 2009, after a legal review by both Navy Personnel Command and Defense Finance and Accounting Services (DFAS), it was determined that Title 10 U.S.C. § 2107(g) actually prohibits the awarding of any credit for NROTC midshipman time, including summer training cruises for those officers who entered the NROTC Program after the enactment of the 1964 Reserve Officers Training Corps Vitalization Act (ROTCVA).

3. How will I know if I am personally affected?

All personnel affected by this change will receive individual letters from Navy Personnel Command notifying them that their official record has been modified to indicate the correct retirement credit and/or points, as applicable. In addition, DFAS will notify each individual by separate letter of how much their retirement pay will be affected.

4. How much credit is being taken away from my retired pay calculation?

The amount of time deducted from your total active duty creditable service or retirement point credit will be equal to the time you served on active duty for training during midshipman cruise periods. The average time credited was approximately 30 days each summer.

7. What do I need to do to not have to pay the money back? I owe less than $10,000.00.

The Secretary of the Navy has requested, on your behalf, a waiver of indebtedness if less than $10,000.00.

You’re welcome, Fred!

Your math agrees with another post:
https://the-military-guide.com/present-value-estimate-of-a-military-pension/

Thank you!

Thanks, Peter, I’m open-minded about the commune but I’m not sure whether my spouse is interested…

I haven’t stopped writing but most of my output was going toward book manuscripts and reader questions.

Those three key points are straightforward in principle & logic, yet the emotions are a tad more difficult.

BRS is strongly focused on giving more assets to the 85% who don’t make it to a military retirement. Among those who beat the 1-out-of-6 odds and retire, I suspect it’s revenue-neutral for most. It’s more profitable for those who aggressively invest their matching DoD contributions, and it’s almost certainly more profitable for those who have a large continuation pay multiple in their specialty..

Thanks Darren!

I think you’re right about having spouses on board. That’s not a financial problem– it’s a communication problem or even a marital problem.

Your spouse could be showing you exactly where the line needs to be drawn between frugality and deprivation. Frugality is challenging & fulfilling while deprivation is not sustainable. You might have been FIREd sooner but you probably would’ve been unhappy. Especially, as you’ve noted, if your spouse is unhappy.

No need to fear the next recession when you’re improving on the 4% SWR with the techniques of a two-year cash stash and variable spending. (4% SWR computer models are still struggling with that simulation code, but it’s working just fine for the humans.) And I like your idea of being FI from having to work, not necessarily from wanting to work. That makes a great 140-character meme!

Penelope, you can request the waiver and reference the federal law, which should be enough for even Army HRC. Or maybe the Army MILPER message refers to keywords like Title 10 U.S. Code Section 3911:
https://www.law.cornell.edu/uscode/text/10/3911

Here’s the text:
(a) The Secretary of the Army may, upon the officer’s request, retire a regular or reserve commissioned officer of the Army who has at least 20 years of service computed under section 3926 of this title, at least 10 years of which have been active service as a commissioned officer.
(b)
(1) The Secretary of Defense may authorize the Secretary of the Army, during the period specified in paragraph (2), to reduce the requirement under subsection (a) for at least 10 years of active service as a commissioned officer to a period (determined by the Secretary of the Army) of not less than eight years.
(2) The period specified in this paragraph is the period beginning on January 7, 2011, and ending on September 30, 2018.

Note that although you’ll have more than 20 years of service, you’ll reach eight years of commissioned service in August 2018 and the waiver legislation expires in September 2018. The issue will be whether the Army is willing to waive your commissioned service down to eight years, or whether they’re trying to retain officers in your specialty and want you to stick around for a couple more years.

Great point, Ranger Vic– thanks!

I’m glad to read your comment, Steve! You’re the first CSB/REDUX retiree I’ve read about who’s succeeded with it instead of using the money to deal with debt or losing it in a business.

For everyone else reading this post, you won’t be tempted much longer. The CSB program (and its REDUX retirement) will end on 31 December 2017. That applies to everyone in the military now, not just to those who join after 2017. Servicemembers will only be able to sign up for the rest of 2017.

The details of the death of REDUX are in paragraph 10 (at the end) of the implementation guidance document for the Blended Retirement System:
https://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocuments/FINAL_BRSImplementationGuidance.pdf?ver=2017-02-27-084532-740

I’ve never heard that rumor before, Frank! You probably have credit for a good year during that time and have not lost any longevity.

You could check it by reviewing your point-count records. If your anniversary date is still based on when you joined the military, then being in the IRR did not change it. If you have credit for a good year during that first year since your anniversary date (after active duty) then the IRR didn’t affect your good year. If you obtained any drill points while you were in the IRR and those are on your point-count record, then they transferred correctly into the system.

If you check more details then we can figure out what else may have happened. Maybe you already had a good year when you left active duty for the IRR. For example, if you leave active duty exactly on your anniversary date (no extensions or stop-loss or other delays) then you enter your first Reserve/Guard year (drilling or IRR) with zero points. However if you stayed on active duty past your anniversary date (longer than exactly three years & zero days) then your days of active duty after that anniversary date would be credited toward your point count in the first year of Reserve/Guard duty.

IRR is still a bad deal if you’re trying to reach 20 good years. All of the services have recently made it very hard to obtain points in the IRR, especially for correspondence courses. In addition if you transfer to the IRR from drill status, even for a single day, then you lose eligibility for Tricare Reserve Select health insurance. You have to be a drilling Reserve/Guard member to maintain TRS coverage.

I’m not sure about badges or conduct awards. All of the services have different rules for those, and I’m not familiar with the details.

Mark, I have an e-mail in to DoD. Our milblogger huddle hasn’t come up with any answers yet. This question is on my tickler list and (as many of my XOs used to tell me) it will be tracked to completion.

However there’s speculation about the calculator’s assumptions and their cumulative effect. (https://militarypay.defense.gov/Blended-Retirement/BRS-Comparison-Calculator-Technical-Reference/) You may have already seen this, but for the rest of the readers here’s a few of the non-intuitive ones:
1. Basic Pay Table and Growth Rates
As of December 2016, the Board of Actuaries’ annual across-the-board basic pay assumption is 3.25% per year. [Note: this assumption excludes promotion and longevity increases]

5. Thrift Savings Plan (TSP) Elective Deferral
The calculator assumes the annual cap is increased, on average, $500 annually to account for anticipated IRS cap increases. In reality, IRS maximums are not increased at a set rate each year, but have averaged approximately $500 annually since 1996. The cap will be adjusted accordingly each year, no later than December 31, based on the actual IRS elective deferral set for the following year, resulting in subsequent adjustments to all future years as a consequence.

7. Thrift Savings Plan (TSP) Continuously-Applied Rate of Return
The default rate of return for the BRS Comparison Calculator is 7% (in nominal economic terms). This is based on the TSP C-Fund average 10-year annual return, which is currently 7.36% after expenses.

(and, since that’s a nominal return,)

2. Cost of Living Adjustments (COLA)
As of December 2016, the Board of Actuaries’ annual inflation assumption is 2.75% per year.

(So DoD appears to be assuming that annual pay raises (3.25% in #1) will exceed inflation.)

9. TSP Withdrawal Age
TSP withdrawal age is set to age 67, the federally-defined full Social Security retirement age for the majority of current Service members.

15. Continuation Pay Contribution to Thrift Savings Plan
The default is set to 0%. Total user contributions, including individual contributions from basic pay combined with the continuation pay, cannot exceed the annual IRS Elective Deferral limit.

16. Continuation Pay Installment Payments
The default is set for continuation pay to be paid in one installment.

That’s a good question, Em, because you’re considered 100% disabled by the military and the VA.

I think you’re eligible to make a penalty-free distribution, but some conditions apply. The best way to handle this question is to consult a fee-only CPA or tax preparer. If you’re near a military base then you could also consult their VITA office (during tax-prep time), but that only helps for deciding what to do next year.

Let me answer your question for both the Thrift Savings Plan and IRAs.

Here’s the IRS rules for permanent disability:
A person is permanently and totally disabled if both 1 and 2 below apply.
1. He or she can’t engage in any substantial gainful activity because of a physical or mental condition.
2. A qualified physician determines that the condition has lasted or can be expected to last continuously for at least a year or can be expected to result in death.”
https://www.irs.gov/instructions/i1040sr/ar01.html#d0e111

The TSP website says: “Permanent Disability – For the purposes of determining whether Roth earnings are qualified, the TSP cannot certify to the IRS that you meet the IRC’s definition of a disability. You must provide this justification to the IRS when you file your taxes.”
https://www.tsp.gov/sitehelp/content/glossary.html
That’s also in the TSP withdrawal instructions.
https://www.tsp.gov/PDF/formspubs/tsp-77.pdf

You probably meet the conditions for a TSP withdrawal, and the TSP will probably give you the money.

The IRS Pub 590-B handles disability withdrawals:
“Disabled. If you become disabled before you reach age 59 1/2, any distributions from your traditional IRA because ofyour disability are not subject to the 10% additional tax. You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.”

“A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements:
1. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and
2. The payment or distribution is:
a. Made on or after the date you reach age 59 1/2, or
b. Made because you are disabled (defined earlier)…”

You’ll also need the correct distribution code on the 1099-R that your IRA custodian issues for tax returns:
“Number codes. Some of the number codes are explained below. All of the codes are explained in the instructions for recipients on Form 1099-R.
1—Early distribution, no known exception.
2—Early distribution, exception applies.
3—Disability…”

That’s on pages 21, 25, and 30 of this PDF file, and the flowchart on page 32:
https://www.irs.gov/pub/irs-pdf/p590b.pdf

Good questions, Paul!

Once you have your NOE in hand then you can start planning your service options. (Wait for that NOE, because sometimes the services have problems with auditing days of duty and point counts.) The retirement rules are a little confusing and there have been a number of changes in the last few years.

First, you only need three years time in grade for O-5 and above. Here’s the federal law for officers:
https://www.law.cornell.edu/uscode/text/10/1370
Note that the three years can be waived down to two years.
And for National Guard enlisted:
https://www.law.cornell.edu/uscode/text/10/3963
With more details here:
https://the-military-guide.com/reserve-retirement-time-in-rank-and-high-three-pay/

Once you have the appropriate time in grade for your rank, your first option is to simply “retire awaiting pay”. You’ll continue to gain longevity in your retirement rank (just as if you were on active duty) but you’ll no longer have drills or military duties.

Another option (once you have time in grade!) is to transfer to the IRR and wait until later to file for retirement. You’ll no longer have to show up for drills or AT. Mobilizing from the IRR doesn’t happen very often, so you won’t have many duty obligations. However good years can be a problem in the IRR, because the Reserves and National Guard have made it difficult to earn points in the IRR. (There are very few correspondence courses which are still approved for Reserve/Guard points.) You might be able to get points (by volunteering or by finding the funding to pay for your orders) but you might not get enough points within 12 months to receive credit for a good year.

When you’re in the IRR you’re also competing for promotion with all of the Reserve/Guard members who are still drilling and completing more achievements than you, so IRR promotions are relatively rare. Even if you manage to get leadership schools and brief mobilizations, you’re still competing against drilling Guard members.

To answer your specific questions:
(1) I’m not aware of any laws or programs which allow filing for retired awaiting pay and then continuing in the IRR. Some services allow retirees to volunteer for no-cost orders to earn points (not pay), but those opportunities are rare and they’re not considered IRR. If you have a program name or a link then I’ll research it.

(2) Leadership schools are generally funded by HRC (for service-wide career development) or by individual commands (out of their own operating funds, for their billet needs) or on no-cost orders (at your expense). In general, if you can find the funds (or pay your own expenses) then you can get the school– if they have space available. Again, you’d get points for attending the school, but it doesn’t necessarily lead to a promotion or even a good year.

(3) I know that many Reserve/Guard members have been promoted for their performance during mobilizations, but I’m sure it depends on the type of duty and the length of the mobilization. I wouldn’t assume that a mobilization would lead to a promotion any more often than for servicemembers who are doing drills and training.

Jon, we don’t have any recent data on payment times. You might want to e-mail or call every few weeks so that the company doesn’t “forget” about their policy.

Kevin, that seems like a brilliant insight! I’m also going to pass your thoughts on to other milbloggers and on social media… as well as back to the BRS staff at DoD.

Excellent question, Ben!

The amount that you sent from the Roth TSP to the Roth IRA is just a rollover. It’s not a contribution to your IRA because it was contributed to your Roth TSP. (You could still contribute $5500 to the Roth IRA for that year.) The amount of the rollover is indeed a combination of the Roth TSP’s contributions and growth, but it’s still counted as a rollover. (There’s no tax due on the gains.) The TSP will send a 1099-R to the IRS (and a copy to you) classifying the move as a rollover, with no penalties or taxes due.

After five tax years you can withdraw the amount that you rolled over into that Roth IRA, and that amount is free of penalties & taxes. You can’t give the same treatment to any gains in the Roth IRA which happened during the five tax years, but the rollover amount is free for you. Click through that link to Michael Kitces’ “Nerds Eye View” site for the details of the tax code which allow this great move.

Good question, LTC!

Federal law requires three years’ time in grade above the rank of O-4. The service secretaries can waive that requirement down to two years. (https://www.law.cornell.edu/uscode/text/10/1370) It’s not clear whether that law requires a Reserve/Guard member to earn good years for their time in grade, but the specific answer seems elusive. Do your best to complete good years for your time in grade, and avoid the IRR if possible (because it’s so hard to get a good year in the IRR).

Once you’ve served at least two years’ time in grade (ideally two good years) then you could apply for “retired awaiting pay” status. When your retirement request is approved for the higher rank then your longevity will continue to accrue in that rank while you’re in gray area (just as if you were on active duty) until you begin drawing your pension. Even though you could apply for retirement when you’re around 23 years of service, your pension would be calculated from the maximum longevity column of the future pay tables in effect when you start drawing your pension

Sure, Deserat!

Here’s a basic post from Brandon, the blogger who popularized the term:
http://www.madfientist.com/how-to-access-retirement-funds-early/
It includes a number of examples, and the potential taxes are based on income-tax brackets (as well as deductions & credits). He even suggests when it might be smart to just pay a penalty.

Here’s a more detailed post from Justin, who you know from Early-Retirement.org as Fuego:
https://rootofgood.com/roth-ira-conversion-ladder-early-retirement/
It includes his family’s personal plan.

Here’s a very detailed post (with links to the applicable tax code) from CFP Michael Kitces, cofounder of XY Planning Network and FinCon veteran:
https://www.kitces.com/blog/understanding-the-two-5-year-rules-for-roth-ira-contributions-and-conversions/
He addresses the concerns of those who wonder whether this is too good to be true.

And finally, here’s my post with more military details about the TSP (including the Roth TSP) and those who might opt to use the Qualified Reservist Distribution:
https://the-military-guide.com/early-withdrawals-from-your-tsp-and-ira-after-the-military/

Thanks for your analysis, Peter!

I think a DoD match in an aggressive TSP asset allocation to the C, S, and I funds stands a very good chance of compounding faster than the High Three pension. I agree that Gordon’s Law predicts lower returns, but I’m not going to predict that returns will be lower for more than the next few years (or the next recession).

Veterans can tap both their TSP and their IRA accounts after leaving the military and before age 59.5. The law allows the “Roth IRA conversion ladder” to be done free of penalty, and it may even be free of taxes.

Outstanding question, Steve, and an impressive service record! That’s the most points I’ve ever seen.

I think you’re correct: your Guard pension is a better deal than your active-duty pension. Let’s check a few parameters from your e-mail.

You’ve used the phrase “final basic pay”. The term “Final Pay” has a specific meaning for those who’ve entered the military before 8 September 1980. Since you also say that you have 40 good years, it would imply that your Date of Initial Entry on Military Service (the date you first received a military ID card) is in the 1970s. If that’s correct then your Reserve/Guard pension is indeed calculated from your final base pay.

You might have to educate a few pay clerks in NGB and at DFAS. If they’re struggling to calculate your pension then you’d direct their attention to the DoD Financial Management Regulation (DoD 7400.14-R, volume 7B, http://comptroller.defense.gov/Portals/45/documents/fmr/Volume_07b.pdf). You’d refer to paragraph 010102.A.1 (Final Pay) and .B (the pay tables in effect immediately before starting the pension).

Paragraph 030501 entitles you to the most favorable pay formula. This means that the calculation has to be done for both active-duty (regular) and Reserve/Guard (non-regular) retirements, and you’d get the higher amount.

030501 also means that DFAS might have to do a Tower Amendment verification. I don’t think the Tower Amendment will affect you but I’ll describe it in case someone mentions it. It requires DFAS to check the pay table increases against retiree COLAs for the years after you made E-9. The calculation verifies that (if you’d filed for retirement at the moment you made E-9 on active duty) you’re still getting the highest pension to which you may have been entitled, especially if retiree COLAs were higher than active-duty pay raises.

Finally, check Table 3-1 Rule 13 on the FMR’s page 3-28. That describes the non-regular retirement formula (including a bunch of footnotes) for your rank and years of service. This is also the table that DFAS will use to check the amount of active-duty pension you might be eligible for, as well as any differences under the Tower Amendment.

If your Guard pension is based on Final Pay at age 60, then you have another bit of flexibility that I’ve only seen in a few people during the last decade: the base pay at which you start your pension.

A Final Pay Reserve/Guard pension uses the pay tables in effect when you reach age 60. If you’ve deployed to a combat zone since 28 Jan 2008, or mobilized for some national emergencies, then your pension could start a few months earlier. See paragraph 010208.F of the DoD FMR and read Ryan Guina’s summary here:
https://themilitarywallet.com/national-guard-and-reserve-early-retirement-age/

If your pension starts in late 2018 then it’d be based on the 2018 pay tables. However if you elected to delay your pension by a few months then it could start at the pay in effect on the 2019 pay tables. If you’re turning age 60 in November or December 2018 then it might make sense to start your pension in January 2019, when the pay tables are (hopefully) 1%-2% higher. You’d lose a month or two of pension deposit but you’d make it up over the next 50-100 months of your life at a higher pension. The law which lets you do this is reflected in FMR 010801.D

And if you’re eligible to start your pension in late 2017 (because of mobilizations for an earlier retirement), then you might want to wait until January 2018 when that pay raise kicks in.

Note that this delay is only worth doing for Final Pay retirees. High Three retirees won’t notice a difference in their 36-month average. Even for Final Pay retirees, this is running up the score after winning the game. You’d need good longevity and a healthy lifestyle to make sure the delay pays off.

With those possible changes in mind, your Guard Final Pay pension is based on your longevity (40 good years) at your final rank (E-9) as though you’ve been on duty the entire time (which, in your case, you have actually done). The 2017 pay table tops out at E9>38 for $7844.70/month. An estimate of your 2017 pension is:
11,313 / 360 x 2.5% x $7844.70 = $6165/month.
Your 2018 pension may be 1%-2% higher, depending on the FY18 budget legislation.

Regardless of the age that you’re eligible to retire or when you choose to start your pension, your Tricare benefits start at age 60.

You also need to make a decision about the Survivor Benefit Program. Let me know if you have any questions, but for most Reserve/Guard members at age 60 the premiums are more expensive than the coverage is worth.

Great question, Dennis, and I understand why you seem a little frustrated by the lack of information from people who should know how the system works. I’m not an expert on the federal law of the civil service, and if you need an expert legal opinion then you should hire a lawyer for a few hours of advice. However I can get you (and perhaps your lawyer) started with the references.

I’d suggest you begin with a current copy of the OPM FERS Handbook. Here’s a link to a sample which might be the current chapter, although it’s from 1998. You’d want to make sure you have the latest edition:
https://www.opm.gov/retirement-services/publications-forms/csrsfers-handbook/c022.pdf
For example, section 22A2.1-2.E on page 8 of that document goes into the detail you seek, and it essentially says that only the active-duty time of your Reserve career counts… but not every period of active duty.
Way back on page 31 of that PDF, the FERS section says that the CSRS rules in section 22A2 also apply to FERS.

I realize that you’re trying to convert points into years/months. In the Reserves, every month has 30 days. That comes from the DoD Financial Management Regulation (the FMR) which has detailed procedures for calculating the Reserve/Guard pension. Once you know your total points of active duty then you can divide by 360 and 30 to get the years & months.

For more general reading on your military service credit deposit, I recommend Ryan Guina’s interview of Eddie Wills:
https://themilitarywallet.com/military-service-credit-deposit/
Eddie also has an extremely detailed guide to the process of obtaining your military service credit deposit. Since you’ve been at USPS for so long, you may have some interest to pay on your deposit. Eddie’s post on the process can help you walk through the paperwork and decide whether it’s still a good deal:
http://gubmints.com/2013/03/26/gubmints-comprehensive-military-service-credit-deposit-guide/

If you haven’t already seen the DFAS part of the process for making your payments, here’s their page:
https://www.dfas.mil/civilianemployees/militaryservice/militaryservicedeposits.html

After you’ve read through these references, if you still have questions then I’d suggest you contact Eddie through GubMints.com. Once he’s answered your questions, then you could either take the USPS’ word for their numbers (which you’d help them calculate) or have a lawyer advise you on any details of the federal law.

I realize that you might not have enough good years to receive a Marine Reserve pension, but federal law has a specific exception to allow you to receive both a civil service (FERS) pension and a Reserve/Guard pension:
https://the-military-guide.com/earning-military-pension-civil-service-pension/

This advice has worked for other veterans with similar questions. Please let me know if you have more questions.

Thanks for the analysis, MilitaryDollar! I’ll pass your link along on my social media, too.

The USAA calculator is expressly designed for simplicity and a high completion rate. Most calculator nerds find it “too easy”, but it’s a great starting point for people who only want a quicklook.

Yep, it helped a lot of people!

If there’s a drawback to this type of app, it’s needing annual updates from the pay & benefits tables. Military.com has now released their own version of a pay app:
https://www.military.com/about-us/apps/military-pay-app-by-military-com.html

Same information, same data updates. My daughter was just using it the other night to check changes on her housing allowance.

Thanks, Roger, great numbers!

Great question, Ben! It’s all about good years.

You have at least 10 good years from your Marine service, and you need to confirm that the VA ANG has those records in their database. (Sadly, the services do not always share that data with each other.) You say that you’re working up to your 15th good year in the ANG, and with five more good years you’ll reach the minimum total of 20 qualifying good years. Shortly after that data is logged, the VA ANG will audit your point-count record and eventually issue a Notice Of Eligibility that you can retire. Once you get that letter you’re able to file a retirement request whenever you wish– after 20 good years, or after serving for the time in grade of a senior rank, or after 30-40 years in a very senior rank.

Your pension is calculated on your points in your retirement rank. It’s also based on the High Three average of the 36 months of your highest pay during the years that you served, including the years that you were in “retired awaiting pay” (gray area) status. When you “retire awaiting pay”, then your High Three average will be calculated from the highest 36 months of all of the pay tables up until you reach age 60, just as though you were on active duty during those gray-area years. (This is how your ANG pension keeps up with inflation before you start drawing it.) This is usually the three years of pay tables in effect when you’re ages 57-58-59.

You also accumulate longevity in your retirement rank during the gray area years, again just as though you were on active duty. For most ranks, this means that you’ll reach the maximum pay at that rank.

A few months before your 60th birthday, DFAS will calculate the average of your highest 36 months of pay, including all of the pay tables up to your age 60, at what is essentially the maximum longevity for your retirement rank. That’s your “High Three Pay Base”.

Then your pension is calculated from:
(Points / 360 x 2.5%) x High Three Pay Base.

Here’s the details of that calculation:
https://the-military-guide.com/national-guard-and-reserve-retirement-at-the-maximum-pay/

and you may be able to access a calculator for your service:
https://the-military-guide.com/military-reserve-national-guard-retirement-calculators/

Good comments, Peter– and I’m keeping an eye on the tech improvements.

Thanks, Hoya, that’s great advice!

A year later I’m still practicing the physical therapy techniques and pushing my balancing skills. (I bought a used stand-up paddling board of very challenging dimensions, and it works me hard.) Losing weight always helps, and I’ve made great progress there too. I hope to go the rest of my life without ACL reconstruction or cartilage repairs– let alone total knee replacements– and I’ll add your info to my checklist.

Ironically, CRDP would pay for most of the expense of any long-term care I’d need. I sure hope that’s never necessary, either!

That’s right, Rod, the answers are both “Yes.” The 30-year mark is just time passing by, and for an enlisted Navy retirement it’s in the Fleet Reserve. Thanks for your question!

Great question, Anthony! The answer is “probably”. The law was changed in 2005 and you no longer have to serve in a Reserve unit for the years before you apply for a Reserve retirement.

More details are at this post:
https://the-military-guide.com/reserve-military-retirement-for-active-duty-veterans-with-previous-reserve-or-national-guard-service/

The Reserves might have stopped tracking your data after you went on active duty (and never demobilized) so they may have to catch up with the active-duty databases. If you do not already have a Notice Of Eligibility from your Reserve service then obtain that first, and after that good-year and point-count verification you should be able to apply for retired awaiting pay.

Thanks, Ryan, good idea– we’ll add it to the editorial calendar!

In the meantime you can read the DoD implementation document at this link, including the portions applicable to the Reserves & National Guard:
https://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocuments/FINAL_BRSImplementationGuidance.pdf?ver=2017-02-27-084532-740

Thanks, Peter, good points.

Thanks! I’m glad to learn that Darrow and I aren’t the only ones…

… and let us know how your retirement transition goes!

You’re welcome! I think the services lobbied hard to use the continuation pay as a retention program.

The only consistent correlation with retention is… bonus money.

The issue of “consecutive” or “concurrent” obligations is also important to me. I watched the submarine force screw this up in the 1980s, and several submariners ended up with nine-year obligations instead of five.

John, if you didn’t sign up your ex-spouse for the SBP then you might never be able to do so. The SBP occasionally allows open enrollments, but that’s only happened a handful of times in the last four decades.

If you’re unable to comply with the court order (either because of the SBP rules or because of your ex-spouse’s lack of action) then you probably need to discuss your options with a divorce lawyer who’s experienced with the Uniformed Services Former Spouse Protection Act. Depending on the terms of the court order she may be considered eligible for more than you’re paying via your personal check.

Thanks, BK, good questions on two perpetual debates!

I’m not Rich, but in my family we retirees have rolled our (traditional) TSP accounts over to traditional IRAs and we’re converting them to Roth IRAs. We’ll do that at a lower tax bracket (now) than when we’d have to start RMDs, and of course Roth IRAs don’t have RMDs. When our daughter and our son-in-law leave the military, they’ll leave their assets in their Roth TSPs until five tax years before they’ll need to tap the funds– and then they’ll roll them over to a Roth IRA.

Mad FIentist does a great job on explaining the Roth conversion ladder.

“Pay off the mortgage” is more controversial. If you have a stream of income from a military pension or rental properties, then you’re amortizing a fixed payment with steady income that tends to rise with inflation. In addition, you can leave more of your assets invested in real estate (or equities) with returns that may exceed the cost of the loan. My spouse and I are currently refinancing our home & rental property mortgages into a new 30-year mortgage fixed at 3.25%. We’d earn nearly that much from seven-year CDs, let alone the yield on an equity dividend fund. However we’re using our military pension to pay down that mortgage, and I’ll make the final payment when I’m 86 years old.

I’d be a little more hesitant to carry a mortgage in retirement with only an investment portfolio of equities and no other annuitized income. The success rate is high but there’s still a failure rate. The only way to insure against that failure is with an annuity, even if the annuity is “just” the income from Social Security offsetting the mortgage payment.

There’s another side to that discussion which is every bit as important: the emotional aspect of behavioral financial psychology. If carrying a mortgage keeps you from sleeping comfortably at night, then the financial logic is not much help. In that case it’s better to pay down the mortgage rather than to continue to grapple with the financial aspects of offsetting liabilities with assets.

As Rich says, it looks like you’re doing fine, Tysan. You’re learning and building skills, and the money will follow as you earn your promotions.

Maintain your control of your expenses, learn your job and pass those promotion exams. Get your college degree if that interests you or pursue more professional certifications. As you approach the end of your active-duty obligation then consider your next step– continuing your enlisted career, or getting a commission, or leaving active duty for a combination of Reserve/National Guard duty and a bridge career with a real-estate side hustle.

I agree with the cash-only approach (for now). There’s no reason to take the risk of leverage until you feel more confident in your skills and finding a bargain and managing it.

If it helps, here’s some numbers on how your savings can grow with each annual pay raise, longevity raise, and promotion.
https://the-military-guide.com/saving-base-pay-and-promotion-raises/

You’re welcome, Deserat! I’m glad we got the offer to host it.

I remember that when my spouse was at her Reserve drill weekends, she’d walk down the hall to see whether the Reserve dentists & doctors wanted to practice their skills on their teeth exams & flu shots.

It adds up quickly.

As Daniel says, John, figure out your insurance needs now– while you’re on active duty and it’s relatively cheap– rather than later when you might be less insurable.

USAA has lowered rates (starting in 2017) on term policies. The policies also include “guaranteed insurability” riders for life events like starting a family.
https://the-military-guide.com/lower-life-insurance-premiums-usaa/

Ryan, if the debts were incurred before active duty then the interest rates could be required to comply with SCRA. But if the accounts are closed (especially if they were closed after payoff, not delinquent or sent to collections) then the companies may have complied with SCRA.

This is a situation where you may or may not have paid more interest than required by the SCRA, but it could cost you far more in legal fees to obtain a resolution.

Thanks, John, that would be a bit tone-deaf of the exchanges…

I don’t have a deadline on the book, and I keep getting distracted by shiny objects, I mean, more research. The biggest challenge is breaking the outline into smaller chunks for shorter eBooks. I’ll start putting out draft chapters in a few more months.

I appreciate your offer, and I’ll add your name to the beta-reader list!

Anyone else want to help with the next book? Your contribution gives you a vote on which military-friendly charities receive the royalties! Comment here or send me an e-mail.

Thanks for chiming in, SFC, it’s been a while since we’ve heard from an Army sanctuary servicemember.

I think all of the services lack proficiency at handling sanctuary. You’re going to have to use personal copies of the Army instructions and the info on the HRC website to show the medical & personnel people how to figure things out. I’d also suggest that you keep in touch with a JAG on the base in case there are more problems with your eventual retirement processing.

Thanks, Peter!

That’s right, Nick, DoD currently plans to open opt-in signup for the Blended Retirement System on 1 January 2018. It’s remotely possible that this could be moved to December 2017, but I’m not holding my breath.

DoD expects that people who wish to immediately opt in will be able to do so early enough in January to get the full match directed to their TSP accounts at the end of January for that month’s pay.

Sorry to read that Marcos, yet in over six years of blogging (and millions of pageviews) it’s only the second time I’ve had that feedback.
In general, readers who are distracted by the ads use an adblocker.

Thanks, Marsha, it’s the best resource for gray-area retirees who are tracking down records and retirement info!

Thanks, Alex!

We’re going to have some time with that spreadsheet, because the DoD’s BRS calculator is still in beta and reportedly delayed until March…

And I’ll say it again, the BRS is best for people who are not staying until retirement. They’ll be able to leave with more money (assuming they invest in the TSP for the match) to compound for retirement on their own instead of trying to cliff vest at 20 years.

Stephanie,

You’re protected by federal law, but you’re also going to have to request an extension in your status past age 60.

First, please check your Air National Guard drill records to make sure that you indeed have nine good years. Sometimes mistakes are made at the local or national level, and you want to be absolutely sure that the ANG national database has everything you’ve earned. Good years are not just based on points. Good years also depend on mobilization readiness (dental/medical), being within physical standards (height/weight and the physical fitness test), and perhaps satisfactorily completing annual active duty. Even if you have enough points to qualify for a good year the unit still has to attest to the personnel center that you met the standards to receive a good year. If that unit confirmation doesn’t get into the ANG database then although you may have enough points for a good year, you won’t have the credit for a good year.

It’s far easier to correct those records now than a decade from now. Keep good records of your drill musters and your active duty and make sure the official database gives you credit for everything you’ve done– and then gives you credit for a good year.

If you have nine good years in your record today, then you’ll need 11 more good years to qualify for a Reserve/Guard retirement. Since you’re 50 years old with nine good years, that means when you get the 11 more good years you’ll be 61 years old.

Federal law says that when you reach 18 years of service then you’re entitled (protected) to stay on active duty status (drilling) until you reach 20 years (good years) of service. Here are the sections of federal law for enlisted and officer ranks:
https://www.law.cornell.edu/uscode/text/10/1176
https://www.law.cornell.edu/uscode/text/10/12646

Although Reserve/Guard pensions normally start at age 60 (or a few months earlier for some mobilizations), you’ll have to stay in a drill status past age 60 to earn the last couple good years. That requires an age waiver for you to stay up through age 62. This could be what you were told in June 2013, but they may have meant that you just made the age deadline to qualify for your pension. Make sure you get that waiver to stay in a drill status past age 60, because it doesn’t happen automatically. Here’s one cautionary tale:
http://cjonline.com/news/2014-11-28/reservists-request-stay-military-past-retirement-age-denied

Next time you’re at the drill weekend or on a military base, I strongly recommend that you talk to a JAG lawyer about your good years, your broken service, your age, and your need for an age waiver. When you submit the waiver, make sure you know who’s approved it and that it’ll be completed on time.

I’m not sure what you mean by “My LES shows a payday of 070510 with 9 years.” That could be referring to the number of pay months that DFAS has in their records for your longevity on the pay tables. It’s not the same as your ANG record of your number of good years. The LES is not the reference document for retirement eligibility. That can only come from the ANG record of your good years, because that’s what’s used to generate your Notice Of Eligibility letter for your pension.

I hope this clarifies the rules! Please let me know if that answers your questions or if there are other issues.

Good question, Super Dave. Unfortunately the answer is “No”.

I get that question several times per year from Reserve/Guard members who have missed a good year and then (for whatever reason) run into an obstacle: failure to promote, not permitted to re-enlist, or not able to continue in a drill billet.

I’ve heard (but have not confirmed) that it’s hypothetically possible to transfer to another service. One example is an O-4 who fails to promote and reaches their service limit at 20 years but has only 16 good years. They could separate from the Navy Reserve and apply to the National Guard in the enlisted ranks, reach 20 good years there, and then file for retired awaiting pay. Because they had more than 10 years of commissioned service they’d be considered eligible (at age 60) for an O-4 Reserve pension.

Thanks, Brad, that’s a great question!

You’re absolutely right: a conversion only makes sense when you do it during a lower tax bracket. A conversion also avoids the hassle of RMDs, and that may also mean that your Social Security income is not subject to taxation.

Military servicemembers are an edge case because so much of military compensation is untaxed. Especially at the junior ranks, it makes much more sense to contribute to the Roth TSP and Roth IRA(s) because you’re in the lowest tax bracket of your life. Pay the tax now and avoid conversion paperwork (and RMDs) later.

When you retire (at an O-4 or an O-5 pension) you’re going to start right out in the 15% or 25% income-tax bracket. If you minimize all other income (no bridge career, no dividends, no interest) then every year you may be able to convert a little of a traditional IRA (and a traditional TSP) to its Roth equivalent. You’d do that up to the top of the 15% income tax bracket. You’d also have to either live within your military pension or sell some of your investment shares for capital gains. (You’d try to stay within the 15% income-tax bracket to qualify for the 0% capital-gains rate.) That’s a challenge.

If you retire to an O-4/5 pension *and* start a bridge career, you’ll be in (at least) the 25% income-tax bracket. The only benefit you’d gain from TSP & IRA conversions would be avoiding RMDs.

There are two times when it makes sense to contribute to a traditional IRA now and convert to a Roth IRA later.

The first one is reaching financial independence without earning a military pension. A very few servicemembers with extremely high savings rates (or gifts, or inheritances) can do this within 10-15 years. They’d leave active duty and do a little bit of a conversion every year (perhaps up to the top of the 10% income-tax bracket) to avoid having to deal with RMDs later in life. If their expenses are extraordinarily low then they might be able to do conversions at the 0% income-tax bracket: no taxes at all! See this post from my friend Jeremy:
https://www.gocurrycracker.com/gcc-vs-rmd/
(Caution: it’s an extremely in-depth tax discussion.)

The second case includes servicemembers who leave active duty for the Reserves or Guard. They’ll start a pension at age 60 and RMDs at age 70.5, which (along with other dividend/interest income) will probably push them into at least the 25% tax bracket. In their case it makes sense to do conversions before their pension pension starts at age 60. My spouse is facing this exact situation: she’s converting her IRA and her TSP into a Roth IRA at the 15%-25% income-tax brackets to avoid RMDs at the 28% income-tax bracket.

Side note for dual-military or dual-career couples: if your earned income is too high to contribute to a Roth IRA, then contribute to a traditional IRA (sorry, no tax deduction for you either) and then immediately convert that traditional IRA to a Roth IRA. See: “backdoor Roth IRA conversion”.

Thanks, Peter, good comments.

Servicemembers (and especially spouses) really need to read the SBP case studies before they make their choice– no matter what situation their finances may be.

Thanks, Erin, NMCRS does good work these days!

Thanks, Deserat!

You’re absolutely right about the “brain drain” if people can take a little extra with them before 20 instead of sticking around for cliff vesting at 20.

The #1 regret of my readers in their 50s (and older) is that they didn’t stick around for that 20. In retrospect, the issues that kept them from serving until retirement eligibility weren’t as bad as they seemed.

Well, Logan, your last phrase is an important point. Nobody should plan on doing 20.

83% of the people who join the military end up leaving the service (for whatever reason) before they’re eligible for a pension. My daughter and her spouse are planning to take it one obligation at a time, and they’re also focused on reaching financial independence via a high savings rate. That way they have more flexibility at deciding whether they’ll be among the 1 out of 6 servicemembers who beat the odds, and by taking the matching feature of the BRS they’ll have more in their TSP accounts if they don’t stay for 20.

As part of their high savings rate, they’re maximizing their TSP and IRA contributions (as well as saving even more in taxable accounts). When they convert to the BRS then they’ll maximize the DoD matching contributions as well. If they go for 20 under the BRS, it’s possible that the matching funds in their TSPs will compound faster than the larger High Three pension would have yielded. That’s what I hope we can analyze with DoD’s BRS calculator, which is expected to be released next month.

However the most important factor is that nobody should plan on doing 20. Not even aviators who obligate for 10+ years upon commissioning.

Thanks, Peter, good points!

I’m not implying that at all, Chris. The post is about the sizes of those pensions and how a military pension is affected by taking the FERS military service credit deposit.

The military service credit deposit is a bad deal for active-duty military retirees (although they should still take the adjustment to their federal Service Computation Date). I don’t know any active-duty military retirees who have applied for the military service credit deposit because it would halt their active-duty pension while they were in the federal civil service. Instead, active-duty military retirees should choose to continue to receive their active-duty pension and should not buy into the military service credit deposit. The result is that their FERS pension is based only upon their years of federal civil service. Review bullet #2 in the post.

The FERS military service credit deposit is a great deal for Reserve and National Guard retirees. The reason that FERS retirees should still buy their Reserve/Guard military service credit deposit is because there’s a specific exemption in the FERS regulations allowing them to do so while still receiving their full Reserve/Guard pension. As a result they still receive their Reserve/Guard pension (beginning at age 60 or perhaps a little earlier) and they receive a larger FERS pension. Review bullet #3 above.

That’s a tough question, Arthur! You’re going to have to contact the Defense Finance and Accounting Service directly on this one:
https://www.dfas.mil/retiredmilitary.html

You can apply from overseas, and you will need a bank account for electronic deposit of your pension. Take a look at this DFAS link for international direct deposit:
https://www.dfas.mil/retiredmilitary/apply/receive-pay.html

I appreciate the sentiments, Mike, but I doubt that type of Reserve retirement reform is on any legislative agenda… especially in a drawdown.

Thanks, Ms. M, sounds like you’ll have the best of both worlds: working for fulfillment and fun, and not having to work for money.

I’m not aware of any limits. You could drill in the National Guard or Reserves for up to 40 years (depending on making rank) and could even get an age waiver as old as 62 years.

If you reach over 18 years of active-duty points (AT, ADSW) while mobilized on active-duty orders of at least 30 days, then you could reach sanctuary and be eligible for an active-duty pension at 20 years of service. That would hypothetically cap your point count at about 7300 points because you’d retire and immediately start an active-duty pension. The reality is that most Guard/Reserve servicemembers never reach sanctuary and continue to earn points.

Those are all good points, Deserat. I think USAA is focusing on the demographics (especially active-duty military) who generate the most lifetime revenue.

Good point, Kim. I don’t think any of the CFP offices are set up to see clients in person, and USAA is planning to provide only online support.

Great point, Chico, thanks!

We’ve seen the pendulum swing both ways over the last 30 years. Even in gray area under today’s rules as of Sep 2016, you could be escorted on the base by a sponsor or during one of the few annual holidays when the base is open to all ID card holders.

I agree that NS Rota makes it a lot harder than it should be, but the Status Of Forces Agreement was written to “encourage” retirees to spend their money on the local Spanish economy instead of on the base.

Great comment, Big Dawg!

You’ll find the type of retirement life that works for you… and 20-30 hours per week is just fine when you get to choose which hours.

Thanks, Pat & Deserat– I enjoyed reading the books and writing the list!

Thanks, Tony, and you’ve asked a good question.

I’m not clear on the RET1 and RET2 acronyms, but let me answer the rest. Your pension amount at age 60 will be based on your total points and on High-Three average of the pay tables in effect when you’re 60 years old.

Reserve and Guard members have to get at least 20 good years to receive a Notice Of Eligibility letter certifying that they’re qualified to retire, but the extra years just give you an opportunity to rack up more points (and more promotions). Unlike the active-duty retirement formula, the extra Reserve/Guard years themselves are not part of the calculation. The multiplier is fixed and is only applied to your total points.

Because you’ll be using the newest set of pay tables at age 60, you’ll still benefit from the pay increases between now and your 60th birthday– as well as any possible longevity increases in the O-3E row. Right now you’ve maxed out that longevity, but it’s remotely possible that DoD could change the pay tables as they did in 2007.

For now, I’d calculate your pension based on your total points and today’s pay tables. I’d assume that your pension (if you started it today) will keep pace with inflation until age 60. That assumption is unpredictable (and imprecise) but it’s a reasonable approximation.

Great question, Lonnie!

First, contact your local Air Force Reserve center to make sure that they have a record of your Army Reserve points as well as your AF Reserve points. (Other readers report that this has been a problem.) Next you’ll want to check how many good years they have on your record. For example, you may have been short of 50 drill points during a year but your 15 participation points may have put you over the 50-point threshold for a good year.

Once you reach 20 good years, request your Notice Of Eligibility from the Reserve center. They may need a few months to audit your record(s) and confirm the 20 good years. Once you’re sure that you have 20 good years then you could reschedule drills or even take an authorized absence from drills until your retirement date. You’ll want to wait until you have the NOE letter before you apply for retirement.

Keep in mind that once you leave drill status (even for one day in the IRR) you’ll lose your eligibility for Tricare Reserve Select health insurance.

Great question, Mark, and we won’t know the answer until 2018!

I suspect that you could always take the continuation bonus and tack four more years onto your current obligation. The big question is whether the four-year obligation could be concurrent/overlapping with your existing obligation.

I suspect that the assignment officers will make that “concurrent” retention decision for each community and specialty. You’ll have all of 2018 to assess the options and make your choice.

The key is to keep saving & investing as much as you can so that you have the financial flexibility to make the retention choice based on your career goals and quality of life– not based on getting out of debt or living paycheck-to-paycheck.