The new plan is specifically limited to service members who “opt-in” to the new plan before January 1, 2019 provided they have less than 12 years of service prior to January 1, 2018, and any individual who enters the military once the new plan goes live. For those service members who have more than 12 years of service or do not opt-in, the traditional retirement plan will remain in effect.
Unlike the traditional retirement plan that provides a fixed pension payout for retirees who serve at least 20 years, the new plan will promote contributions to the Thrift Savings Plan (TSP). Specifically, under the new plan, contributions equivalent to 1% of the annual base pay will automatically be contributed to the service member’s TSP account, and provide additional matched contributions of up to 5% of the service member’s annual base pay. In exchange, the pension payments will be reduced by 20% of the current value. Currently, the Department of Defense does not make any contribution to a service member’s TSP account.
Additional perks to the new plan include lump sum payments. Not only does the plan provide a service member with a mid-career continuity bonus, but upon retirement, a service member will receive a lump sum payment that is equal 25% or 50% of a promised pension benefit. This will then cause a reduction in the monthly pension checks until the retiree reaches age 67.
For service members who do not intend on retiring, the new plan, unlike the old “all or nothing” plan, provides an increased retirement benefit. On the other hand, it is clear that service members who are impacted by the new plan should consult with an experienced financial planner. The failure to develop a proper financial plan at the beginning of a military career could have a detrimental impact on the financial status of the service member upon retirement.
Hook Law Center works with a team of financial planners who have developed plans to maximize benefits under the new plan. Should you need any assistance in determining whether to opt-in, how to allocate your TSP portfolio, or how much you should contribute to the TSP, please contact us and we will help make a connection.
Ask Kit Kat – Dog Coming to Scotland
Hook Law Center: Kit Kat, what can you tell us about the little dog, Gobi, who will be coming to live in Scotland?
Kit Kat: Well, this story you’re going to love! Dion Leonard is a distance runner from Scotland who has participated in some unique events. While he was running in the June 2016 Gobi (Desert) March, which is part of the 4 Deserts Race Series, a small dog approached him. There are 6 stages in the race adding up to a 155-mile trek. During the first day, Gobi just followed the group of runners, but on the 2nd day, she seemed to favor Leonard and stuck close to him. He is not sure of the breed, but she’s copper colored and has pointy ears, and was just a puppy at the time. To me, she looks like she’s part Akita, but that’s just my observation. Anyway, by Day 2, it was clear that Gobi had adopted Leonard. She followed him all that day through 23 miles of varying terrain, making it up to 20,000 feet to cross the Tian Shan mountain range, and finally cross into the Gobi Desert. Leonard shared some of his provisions with her, letting her feast on beef jerky and water. He says he’s not sure why she chose him out of the 101 participants in the race. ‘I didn’t do anything in particular to gain her attention. She chose me. I was the one that she was going to stick to.’
Day 3 arrived and she was still with him. At some points, he carried her, like when they crossed chest-high rivers. In all, she completed stages 2,3, and 6 with him, amounting to 105 miles. During stages 4 and 5, race staff drove her to the finish lines for that day, because of extreme heat when temperatures hovered around 125 degrees.
Leonard finished the race in 2nd place, and both he and Gobi received a medal. By that point he was hooked, and he knew he had to get her back to his home in Scotland. What he found out was that it was possible, but she would have to be quarantined and get various shots and clearances. The cost would be more than $6,500. No problem—he and his wife started an online campaign, and the money was raised. Now, they are just waiting for her to arrive, which they anticipate will be around Christmas! (https://www.washingtonpost.com/news/animalia/wp/2016/08/07/stray-dog-wins-hearts-and-…)
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Hook Law Center encourages you to share this newsletter with anyone who is interested in issues pertaining to the elderly, the disabled and their advocates. The information in this newsletter may be copied and distributed, without charge and without permission, but with appropriate citation to Hook Law Center, P.C. If you are interested in a free subscription to the Hook Law Center News, then please telephone us at 757-399-7506, e-mail us at mail@hooklawcenter.com or fax us at 757-397-1267.The post Department of Defense Rolls Out a New Retirement Plan first appeared on SEONewsWire.net.]]>
The idea of active-duty military families barely scraping by, either here or abroad, is hard to fathom: just how could our legislatures, super-select commissions and agency heads, allow this to happen?
To some, it may be equally unfathomable why veteran benefits should be tinkered with at all. But the rif today over possible veterans benefits changes comes from the fed’s ongoing strategy to meet new military budgeting requirements.
Veterans Administration Pensions
For example, cuts to the traditional pension payouts is seen as a way to help fund a yet-to-be-approved 401(k) for those retirees leaving military service “without receiving any retirement pay.”
No surprise, but the ongoing proposals to make these changes to the existing military benefit’s system has brought together a swirl of concern from vet advocacy groups; the latter has their own take on how any proposed change will do harm, or actually help retired/retiring vets.
Unfortunately, there is no hope of returning to the traditional way vets have received their health and pension benefits. Indeed, the tsunami of modifications stem from the congressionally Military Compensation and Retirement Modernization Commission.
Beefing up the Thrift Savings Plan
One proposal has to do with the military’s Thrift Savings Plan (TSP). Amendments would require automatic enrollment for military personnel, allowing full vesting after two years of service. The backbone TSP’s fund offerings would include default investments deemed “age-appropriate” by choosing among a number of target-date funds.
Underlying these broad range of proposals will be a renewed commitment to promote better “financial literacy,” not only when it comes to retirement options, such as lump-sum payments, but also in understanding the workings of their health plan.
Possible ‘age-appropriate’ target date funds.
Overall, the ‘winners’ in this new development could well be those vets who have put in their 20 years of service, thereby making them eligible for their military benefits, but who need to rely on a their defined-contribution plan instead of the traditional military pension.
Consequently, their retirement would consist of a 401(k), including a proposed 5% match, to help fund their retirement during civilian life; this, with a ‘rollover option’ into a sponsored plan within the private sector—a financial fiduciary akin to a Vanguard-or-Fidelity-type institution.
But the possible outcome from changing the existing defined-benefit pension plan could be numbing. Under current law, officers and the enlisted who exit the military after 20-years of service, are set to receive one-half of what’s considered their “final basic pay.” Furthermore, they can count on that payment for their lifetime.
Reducing the traditional pension by 10%
But the commission is drilling-down on ways to balance the proverbial ‘budget’ by proposing to reduce it from 50 to 40 percent; this, to help fund those “eight in 10 service men” who leave the military without any retirement benefits.
A major disincentive might well be fewer ‘re-ups,’ or extended military service beyond the current 20-year requirement to receive benefits
Veterans Benefits Health care
Why would anyone want to try to change the mother-of-all health care packages provided to military personnel: TRICARE benefits, given the wide range of family coverage; the medical outlets and medical services for the retiree and their survivors?
A move is under foot by the ‘reserve associations’ to actually deep-six Tricare. This may seem beyond extreme, but by offering a slew commercial insurance options, the association feels their members would be better served (One member on a blue-ribbon panel said a common phrase that characterizes Tricare is “try-to-find care.”)
But the commission will not let Tricare go silently into the night without a heap-more discussion on the impact of severing this plan. Ultimately, though the goal might be to mirror the present-day Federal Employee Health Benefits plan.
With veteran benefits facing a multitude of changes, it might well make a lot of sense to sit down with an experienced Elder counselor to help explain the changes as they happen. Contact us for more guidance in this area, and to start the discussion about your estate planning goals.
The post Veterans benefits changes could mean 10% cut to pensions, but new defined-contribution options. first appeared on SEONewsWire.net.]]>