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Thread: House Panel Backs Major Military Retirement Overhaul

  1. #11
    Senior Member Rusty Jones's Avatar
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    If everybody gets "something" at the age of 60, the Reserve and National Guard are going to have a VERY hard time selling themselves to those who are leaving active duty.
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    Senior Member Stalwart's Avatar
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    Quote Originally Posted by sandsjames View Post
    I can't fathom how the stock market can possibly be a safe long term investment, especially if it's one's only source of retirement.
    It likely depends on how you define "safe", the stock market is the best long term investment; but there are couple of caveats:

    1. How do you define long term?
    -if you define long term as 1 year or even 5 years you may sell yourself short.
    -the avg rate of return for stocks going back 80 years is just under 10%, bonds is just over 5%.

    2. Where are you in your life?
    -the best thing you can get on your side with investing in compounded interest.
    -if you begin to invest early, you can substantially accumulate money in a portfolio as compared to someone who waits until later in life.
    -for example: investing $320 per month and getting a 7% rate of return while compounding the gained interest on your investment (which will double your money every 10 years) will result in a portfolio worth $1,000,000 after 40 years. If you start this at age 20 and NEVER increase your input, you are a millionaire at age 60. If you wait until you are 30 you would have wait until you are 70, or make a monthly investment of $775 to get to the same point by age 60.
    -basically, you have to be a bit disciplined and pay your future self before you get a new stereo or car.

    3. You have to be able to ride out down turns in the market.
    -This goes back to how you define long term and where you are in life. If the market dips just when you are planning to begin cashing out your investments, you may lose money ... this can be countered by the long term returns. You may not have as much money as you would have a year in the past, but you are very likely to still have more than you invested.
    -I started investing money in 1993 (single, E4, living in the barracks, no wife, no kids, no debt of any kind) and have invested every month for 22 years, increasing my investments as I got promoted, on average about half of the raise in my base pay went into investments. I have a set amount that purchases stocks, bonds, mutual funds and I also have commercial life insurance. Had I pulled my money out in 1998 when the market began a decline that lasted from 1998 - 2008, I would have had less than if I had pulled out in 1997 but still would have accumulated more from 1993 - 1998 than if I had just put the money in the bank in a regular savings account. I left my money in and the portfolio lost about .5% from 1998-2008 but was still up nearly 20% based on the total amount I had put in (in large part due to the good returns from 1993-1998.) When we sold our first house in 2006 we made nearly $200k, which we invested all but $4,000. Now from 2008 - 2015 we have had good returns as high as 26% but no less than 13% and our portfolio is doing quite well.

    4. There is a risk factor built in and you have to be willing to assume a level of risk. As I said, if you can go in for the long haul you can overcome downtrends in the market ... but if you can't then you have a higher risk of loss. I have one friend whose job is just day trading; he has made (literally) tens of thousands of dollars in a day & has also lost tens of thousands of dollars in a day. Frankly, I am not willing to assume that kind of risk nor do I understand the market enough to do that (& I think it stresses the hell out of him.)

    This proposed retirement plan isn't actually bad, but it wouldn't work for folks who have already been in for more than 5-8 or 10 years since they likely won't have the time to accumulate money to offset the difference percentage of their pension. What this new plan requires is that people be a bit more disciplined than many of us have seen (married at E3 or E4, start having kids at the cyclic rate and not really being able to afford it.) If the new plan comes into effect, people will have to be a bit more responsible for their own futures than any of us had to be for our future.

    One thing that I did see from my time on Capitol Hill was how much of the DoD budget pay and benefits takes up but is part of 'discretionary spending'. Military retirement is separate from that, it is part of 'mandatory spending' -- military retirement does not impact funding for weapons systems, maintenance, TAD etc & military retirement is quickly ballooning to being unsustainable in the long term (for 2015 it is at $160 billon and is projected to grow to $215 billion in 2025 under the current retirement system.)
    Last edited by Mjölnir; 04-27-2015 at 03:40 PM.
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    Senior Member Stalwart's Avatar
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    Quote Originally Posted by Rusty Jones View Post
    If everybody gets "something" at the age of 60, the Reserve and National Guard are going to have a VERY hard time selling themselves to those who are leaving active duty.
    I can see that.

    I don't know if the new plan would have much effect on Active Duty recruitment. I didn't know nor care about what the pension plan was when I came in ... it wasn't a factor in my thinking at that age. Now as service members get a bit older I could see this becoming a factor for retention ... likely tied to the health of the overall economy etc.
    The most important six inches on the battlefield is between your ears.

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    interested to see how much this "continuation pay" is and if you have the opportunity to increase that 40% benefit by 2.5 for each year you serve over 20.

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    Administrator UncaRastus's Avatar
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    Stalwart,

    Cyclic rate? You made me spew coffee on my keyboard!

    I thought about the cyclic rate for a Ma Deuce when I read that.

    You have made my day!

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    Senior Member Stalwart's Avatar
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    Quote Originally Posted by mikezulu1 View Post
    interested to see how much this "continuation pay" is and if you have the opportunity to increase that 40% benefit by 2.5 for each year you serve over 20.
    I have to go back and read the bill for the exact number, but yes, the pension increases for years served beyond 20.
    The most important six inches on the battlefield is between your ears.

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    Senior Member Stalwart's Avatar
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    Quote Originally Posted by UncaRastus View Post
    Stalwart,

    Cyclic rate? You made me spew coffee on my keyboard!

    I thought about the cyclic rate for a Ma Deuce when I read that.

    You have made my day!
    The firing rate for the Mk1 Mod0 Mil-Spouse is not close to that of the M2 .50, but it is still advised to maintain a steady (sustainable) vice cyclic rate of fire to avoid expending all resources & compromising the weapon system and subsequently ... Your fighting position.
    The most important six inches on the battlefield is between your ears.

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    Banned sandsjames's Avatar
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    Quote Originally Posted by Stalwart View Post
    It likely depends on how you define "safe", the stock market is the best long term investment; but there are couple of caveats:

    1. How do you define long term?
    -if you define long term as 1 year or even 5 years you may sell yourself short.
    -the avg rate of return for stocks going back 80 years is just under 10%, bonds is just over 5%.
    I'm not gonna lie...I attempted to read all that but I couldn't get through it.

    The key word you used was "average". That means that some make less, some make more, and some lose. I could see taking the chance of being one of those who loses if it was an investment because that's part of gambling. But for THE retirement plan to be a gamble just seems crazy to me. And I know there's always stories out there and they aren't common but my Aunt and Uncle are still working at their Real Estate business in their late 70s because they lost a shit ton in their 401ks about 10 years ago and were unable to retire.

  9. #19
    Senior Member Stalwart's Avatar
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    Quote Originally Posted by sandsjames View Post
    I'm not gonna lie...I attempted to read all that but I couldn't get through it.

    The key word you used was "average". That means that some make less, some make more, and some lose. I could see taking the chance of being one of those who loses if it was an investment because that's part of gambling. But for THE retirement plan to be a gamble just seems crazy to me. And I know there's always stories out there and they aren't common but my Aunt and Uncle are still working at their Real Estate business in their late 70s because they lost a shit ton in their 401ks about 10 years ago and were unable to retire.
    It is too bad you did not read the whole thing, there are some good facts in there; don't let them get in the way of you not understanding a complicated issue that cannot be summarized in a quick bullet or two.

    Yes, it is an average. There is no guarantee, but in the long term it is the best thing you can do.

    Also, did you read how the new retirement plan would be structured? The 401k-styled portion of it is IN ADDITION to a 40% of base pay pension at 20 years of service. To invest in an investment plan (401k or other) that after 20 years failed to make enought to at least equal (much more likely to surpass) that 10% difference would be highly unlikely.
    The most important six inches on the battlefield is between your ears.

  10. #20
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    Quote Originally Posted by Stalwart View Post
    3. You have to be able to ride out down turns in the market.
    -This goes back to how you define long term and where you are in life. If the market dips just when you are planning to begin cashing out your investments, you may lose money ... this can be countered by the long term returns. You may not have as much money as you would have a year in the past, but you are very likely to still have more than you invested.
    Looking at risk, unfortunately few people predicted the stock market crashes/corrections over the last 30 years. For millions of people in 2008/9, not only did they lose up to 50% of their investment value, but they also lost their jobs...which of course forced them to spend much of what was left in their investments long before they could wait for that upturn in the market. Bottom line, they lost everything. That's the risk everyone needs to accept before they invest in the stock market. My advice is, ensure you have zero debt (if possible) before jumping into the stock market. That way you can reduce the risk of losing EVERYTHING if the market crashes.

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