Even the military needs help maneuvering through retirement

Over the past few years, I’ve had the good fortune of attending a couple of educational seminars, each of which featured a former Navy Seal as a guest speaker.

One was Marcus Luttrell, the lone survivor of Operation Red Wings and co-author of the book “Lone Survivor.” The other was Robert O’Neill, who was not only part of the operation that rescued Captain Phillips, but also the final assault on the compound where Osama Bin Laden was killed.

Both men shared some truly fascinating stories about their rigorous training and military experiences. At the end of the day, it strengthened my opinion that our nation’s military has some incredible men and women serving our country.

Recently, within a short span of time, I heard from a cousin who is a retired Army officer and I also drove past a military convoy near the National Guard base near Grayling.

It made me realize that, although I work with many people who served in the military, only a small handful actually made the military their career. And just as with so many other occupations, the financial dynamics of a military career appear to be changing.

I’ve previously written that traditional pensions known as defined benefit programs are becoming extinct. The auto industry, state government, educators and most municipalities have eliminated traditional pensions for new hires.

It appears that the military is also going to significantly alter their retirement program, in an attempt to save $1 billion annually.

If approved by Congress, the new program will be a “blended” plan.

It will shrink the traditional pension amounts by roughly 20 percent and implement a mandatory contribution. However, for the first time, those that do not make the military a lifelong career — in other words serve for less than 20 years — will receive some retirement benefits.

If the Pentagon’s recommendations are enacted, the 20 percent reduction in military pensions will be offset by government contributions into a program similar to a 401(k) or IRA. The program is called the Thrift Savings Plan (TSP.)

Within the TSP, Uncle Sam will automatically contribute one percent of basic pay. Military personnel will also have three percent of their pay automatically withheld and deposited into the TSP. The similarity I referred to is that there will be a ten percent penalty if the money is withdrawn prior to age 59.5.

Participants in the plan can opt out of having their three percent withheld if they complete financial literacy training. The greatest benefit of the TSP is for military personnel with more than four years of service. Uncle Sam will match their contribution into the TSP dollar for dollar, for up to five percent of pay.

If all goes as planned, the new military retirement program will go into effect in January 2018. More than likely, there will be a grandfather clause for long-term military personnel to continue with the traditional pension or opt into the new TSP.

Naturally, as these changes move through Congress, I’ll keep my readers posted. Like so many things in our nation’s culture, it is becoming more complex even for military personnel. From private to general, military personnel also need financial advisers to sort through their situation, goals and strategies.