Note: the 5% match will show up in your February contribution into TSP as it takes the allocations from the previous month make it to TSP. Thanks to my trusty O-3 desk buddy for the information!
You could not fuck up your TSP in 2017 as CSI funds all returned 22.87%, 19.8% and 27.69% respectively. Of course we all look like Einstein in a bull market. Think about this, what if the entire economy is on autopilot and we are just blindly buying the S&P 500 because we all bought into indexing? Regardless of valuation, business models or even price earning ratios, we are just going to automatically dump money into the market, each one of us at $18,500, every year. This is all great, unless of course when we stop dumping money into CSI blindly. The downside risk is there, but we just never know when to sell. Timing this market is hard since we are in unusual times. Despite the doom and gloom of a correction, the bull market persisted!
Well if I keep it all in G and F we would have very modest gains of 2.33% and 3.49% respectively with very little downside risk. What I know for sure is I have given myself at least 5% of my base pay return on my TSP for 2018 till 2038 by opting into the Blended Retirement System. The process was super easy. I logged into MyPay and saw a new link:
The next page makes sure you did the training, and if you are eligible to sign up:
I certainly hope you did the training as well as understand what the BRS is. You can always call military ONE source at (800)-342-9647 with any questions. This decision is yours to Opt-in and don’t blame me in your old age if you made the wrong decision. If you made an important financial decision based solely on reading a single article from a site that tells you to buy Bitcoin and gold coins with credit cards for fake hotel points, then you need to really think about your life decisions. Really think about your personal pros and cons of BRS vs traditional high 36!!!!! I went ahead and clicked yes and got this:
They ask once again if you are willing to give up 20% of your pension to have some sweet 5% base pay returns every year till year 26 for mad gainz in 2018 and beyond. You bet your bitcoins this is the only way to have your yacht ready for you at 59.5 years old! No waiting years and years to save your pension to go sailing the world when you are too old to enjoy it. This is just my sarcastic humble option, but I am serious about up front returns vs banking on pension alone. Remember you have still have a pension of 2% per year worked with BRS, but you have to hit 20 years to get it. The next screen makes you verify your address and contact information so they know where to send your big fat check on retirement.
They ask once again if this is some thing you really want to do. One more screen comes up to verify this is really what you want to do. This is your signature for your premature separation insurance! So the BRS lets you have all that match if you get kicked out, die, or quit the military before 20 years. This in my opinion, is one of the greatest benefits of the BRS.
The last question makes you check a box to make sure your cat walking on your keyboard didn’t accidentally click it for you, and just like that you are done! So from now till my 26th year I will get a sweet 5% base pay match on top of my $18,500 traditional contribution. At 50 years old I can put in an additional $6,000 and deduct it from my earnings as a traditional TSP contribution.
Consider the 26 year O-6 base pay is $11,373 a month, the match will be $568.65 or $6,823.80 a year on top of the $18,500 as well as the catch up of $6,000. We are putting away $31,323.80 a year into Traditional TSP which is all tax deferred. This money can sit to compound until RMDs hit at age 70.5.
If I leave at year 26 (age 55) as an O-6, my BRS pension of $70,967.52 a year will count as income on top of any current employment. Consider the tax burden of a dual income married couple who has two $200K jobs on top of two $70K pensions. It maybe more tax efficient to take the 20% pension cut with BRS so that from age 59.5 to 70 you can avoid paying the highest of taxes while working by not taking any distributions. Then you can slowly take out the difference from your TSP as needed when not working from age 70.5 to 130.
You can also go all baller and just quit working at 59.5, and take the lump sum of the TSP with match and earnings and go crazy buying up anything you want. This is a better option than those structured settlement brokers as seen on late night TV. This of course is a very drastic option for those with Champagne lifestyles and caviar dreams!
The BSR vs High 36 is so theoretical in situation, that it is hard to make a decision based on numbers alone. I know for certain that there is a chance I might not do 20 years, and I would have a big chunk of change with BRS when I leave. If I had done 15 years and left I would feel like a bitch for not having anything to show for my time in. With BRS there would be a good amount of cash to take from the retirement plan.
Even besides my own situation, those that have done less than 2 years who opt in will immediately get 5% base pay match without waiting 2 years like those joining in 2018. Now if you don’t put anything away into TSP, or don’t have these high tax bracket, then don’t go BRS! If you are for sure leaving the military, then you would be a fool not to Opt in to get the sweet free money. Hope that helps, but you need to make a decision soon! Every month you don’t opt in for this year means missing match money because you waffled!
PS: 3 days later I got this email:
The Blended Retirement Enrollment transaction was processed by your pay system on 20180103 for the following reason: Opt-In election was accepted. Please visit your Local Finance Office if you need assistance.
PLEASE DO NOT REPLY
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I guess I done did it now!