My 20 Year Plan

This is a follow up data post to my casual analysis of the new retirement plan that service members who joined after 2006 have a chance to switch to in 2018. Those who join the military after 2018 will be forced into this new blended plan with mandatory 3% base pay contributions to their TSP.

I went ahead and did the calculations for some one considering doing 20 years in the service starting at 30 years old entering as an O-3 and assuming you progress to O-6 for 5 years and do a total of 20 years. I obtained the pay information from DFAS and I just made some guesses on what is normally expected time in each rank in my calc tsp vs pay spreadsheet. I also assumed the average life expectancy of 79 for males reported in 2011.

 Plan Pension Monthly Year From 50 to 79
O-6 Pay $9,240.80 $110,889.60 N/A
New blend (40%) $3,696.32 $44,355.84 $1,286,319.36
Old Hi36 (50%) $4,620.40 $55,444.80 $1,607,899.20
Delta $924.08 $11,088.96 $321,579.84

As you can see its about a $321K loss over your retirement with the new plan, this was made to save the government money so this should be of no surprise that the new plan would make less money for you at your full 20. Now on the flip side, for those who know for sure they would never do 20 years, I went ahead and calculated the cumulative expected matching TSP at each exit year:

Matching Cumulative Year you leave
$0 1
$0 2
$1,490.40 3
$2,072.30 4
$6,135.91 5
$10,199.52 6
$14,495.76 7
$18,792.00 8
$23,337.94 9
$28,216.73 10
$33,336.14 11
$38,455.56 12
$43,751.88 13
$49,048.20 14
$54,572.83 15
$60,448.90 16
$66,883.54 17
$73,318.18 18
$80,080.92 19
$86,843.66 20

You must do 2 years to be fully vested to even get the 1% base pay TSP contribution. As you can see this is far better than the $0 the old plan would of given you after 2 years, and also note that if you do less than 4 years the matching 5% does not kick in yet. So for all those that don’t do their 20 full years theres something for you all as well. Its time to start thinking about which one you will do, you got till 01 Jan 2018 to make the choice (I think)!


EDIT: Looks like is only up to 5% matching, not 6%, check here with the new calculations.

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