The goal of this new Thrift Savings Plan based retirement plan is to enhance fairness and flexibility, and to provide a solution to mandated budget cuts for the military. Under the new plan, all troops would receive the yearly retirement contributions, regardless of whether they stay for 20 years.
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Military Retirement and Your Thrift Savings Plan

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Are changes to your military retirement plan taking shape in your current Thrift Saving Plan?

A proposed new military retirement plan could be based on using the existing Uniformed Military Personnel Thrift Savings Plan (TSP), with a new twist: the new retiremement plan is more like a corporate benefits program which contributes money to your TSP retirement savings account rather than promising you a future monthly pension. This comprehensive solution would apply to Reserve as well as active duty personnel.

The goal of this new Thrift Savings Plan based retirement plan is to enhance fairness and flexibility, and to provide a solution to mandated budget cuts for the military. The plan to overhaul the Pentagon's retirement system would give some benefits to all troops, while phasing out the old 20-year cliff military vesting system.

Thus, under the new plan, all troops would receive the yearly retirement contributions, regardless of whether they stay for 20 years. Those contributions would be deposited into a mandatory version of the Thrift Savings Plan, the military's existing 401(k)-style account that now does not include government matching contributions.

A new feature would also adjust those TSP contributions to give more money to troops who deploy frequently, accept hardship assignments or serve in high-demand jobs.

Another significant change: military retirement benefits would become available to 83 percent of troops who leave service before reaching 20 years.

DoD could make an "immediate" transition to the new system, affecting all troops differently depending on their years of service:

 Recruits out of boot camp after the proposed change would not get a fixed-benefit pension. Instead, they would receive annual contributions to a Thrift Savings Plan account and could leave service with that money at any time - although they can't withdraw the money until age 59 without paying a penalty, except in certain circumstances.

 Troops with five years of service immediately begin accruing new benefits in a TSP account. If in service for 20-years, they also would get about 12 percent of pay at retirement, as an annuity. After 10 years, they would have no fixed-pension but would have a TSP account with five years of contributions.

 Troops with 10 years of service begin accruing new benefits in a TSP account. For 10 more years, they would receive about 25 percent of their pay at retirement, as an annuity. If they choose to separate after 15 years, they leave with a TSP account with five years of contributions.

 Troops with 15 years of service begin accruing new benefits in a TSP account. After five more years, they receive about 37.5 percent of their pay at retirement, as an annuity.

 20 years and beyond. Troops in service past 20 years continue to receive annual TSP contributions.

The proposed change would have no affect on current retirees or disabled veterans.

Most private-sector companies contribute 4 percent to 12 percent of base pay into an employee's retirement savings account. By comparison, the current military retirement benefit, for those who ultimately get it, amounts to a 75 percent contribution each year.



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