Buyback.

Military Discussion.

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ArrieS
Posts: 1072
Joined: Sun Aug 05, 2012 10:56 am

Buyback.

Post by ArrieS »

I thought I would bring this idea to the community since it deals with the TSP.

I’m a Veteran and I get to buy back 9 and a half years. As a Federal employee I get FERS. They love to talk about FERS and its three pillars or something like that, the pension, Social Security, and the TSP.

However, considering I am buying back my time, which feels like a great wrong since I earned it and when I earned it, it was worth 2.5%, but now I have to pay for it and get it at a reduced rate… Sorry that was a rant.

So I have bought back my pension time, I paid Social Security taxes on it at the time, but I never got a matching TSP. So for the time period which is almost ten years my retirement plan is incomplete by the FERS standard. No third leg.

My idea is for people buying back their time, that they are allowed to voluntarily make additional contributions that the Government would match. These contributions would be based on the amount the Government claimed you earned and therefore used to calculate your buy back. I believe my amount was about $240,000. So as an example I would up my contribution to 7% a pay period. That additional 2% would go towards the $12,000 that would be my 5% of $240,000, and the government would match that until it had paid an additional $12,000, its 5%.

But here is where I really want your opinion. This is the Government and if I really want this I have to figure out a way to pay for it.

So I was thinking of reducing the tax deduction for home owners that are receiving BAH. Most Americans have this deduction because they are paying their mortgage with income that was already taxed. But BAH is tax free. I would like some honest answers, I was thinking of maybe making it based on rank, I.E., O-4 and above can only take half a deduction and O-3 and below can take the full exemption.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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rcozby
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Re: Buyback.

Post by rcozby »

ArrieS,

If I'm tracking correctly, you want a retroactive match on your TSP contributions in return for a retroactive cancelling of the BAH tax deduction? It sounds like a great idea...to the tune of Nice Work If You Can Get It!

Retroactive anything is hard, but if you were to pursue simply adding a TSP match for the military, similar to what is available for civilians, in the name of retention, then I think you have an outstanding idea. We're drawing down the force, but we need to keep the youngsters. A TSP match could be a way to do it.

jalvaro
Posts: 6
Joined: Sat Jan 12, 2013 12:15 am

Re: Buyback.

Post by jalvaro »

Great discussion! I am active duty and recently i read the proposal for the new retirement system here is an article:
http://www.militarytimes.com/story/mili ... /71011882/

I think this is a great proposal as it will address the countless veterans who get out after a few years.

crondanet5
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Joined: Tue Aug 19, 2008 8:51 pm

Re: Buyback.

Post by crondanet5 »

ArrieS were you commissioned or non-commissioned in those 9.5 years?

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ArrieS
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Re: Buyback.

Post by ArrieS »

rcozby wrote:ArrieS,

If I'm tracking correctly, you want a retroactive match on your TSP contributions in return for a retroactive cancelling of the BAH tax deduction?


No it's not retroactive. It's not to match past contributions, but future contributions as a federal civilian.

My point for FERS is, when active they don't match your TSP contributions if you made any. But your pension is worth 2.5%.

If you get out before 20 years. It's all gone.

You join the Federal Government as a civilian you have to buy back your time you already earned. Not only are you paying for something you already earn, but when you get it, it's at a reduced rate.

The reason FERS pension rate is reduced because of the TSP matching contributions.

But when you buy back your time, you don't have that, so as an example for me those 9 years don't have the "three pillars of FERS", just the pension I had to buy back, and Social Security.

For someone that served 15 or even 19 years but for whatever reason that didn't retire with a pension, if they buy back that time, it's a huge amount of their retirement under FERS that has a key piece missing.

Again, this would only apply to people serving in the Federal Government.

Enlisted.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

crondanet5
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Re: Buyback.

Post by crondanet5 »

Figures.

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ArrieS
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Re: Buyback.

Post by ArrieS »

crondanet5 wrote:Figures.


It was just an example. I didn't say that was how I planned it to be. Why don't you save the attitude, and offer something of substance.

Were you an Officer?
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

skiehawk11
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Joined: Wed Jan 05, 2011 2:32 pm

Re: Buyback.

Post by skiehawk11 »

Any time the government recommends a different retirement system it means in the long run, military members are getting less of a benefits package. In my opinion (Aitrus, I think backs this), members who serve less than 10 already get amazing benefits that more than make up for any extra retirement benefits. If you are smart, you get a good MOS that is transferable to private sector.
Many benefits already:
* tax free BAH and BAS;
* access to free healthcare;
* college paid plus stipend;
* access to TSP;
* Years count toward federal civilian career (buyback);
* and numerous other discounts military members are eligible for.

Now, there are lots of caveats to all I've mentioned, but you can become financially independent as a military member with proper money management skills. A pension is icing on the cake IMO.

In a time when government is to be a lean, green machine offering a TSP matching retroactively is not the best thing. Selfishly, I'd love it, but ultimately I think a balance needs to be had. Maybe in the future such a benefit can be had. Also, I don't think offering a TSP contribution would be that big of a driver in increasing retention. After all, the biggest thing a 401k offers is less responsibility for the government and the ability for military members to "cut out" early before their 20. Again, I'm not opposed, just making an observation.

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ArrieS
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Re: Buyback.

Post by ArrieS »

skiehawk11 wrote:Many benefits already:
* tax free BAH and BAS;
* access to free healthcare;
* college paid plus stipend;
* access to TSP;
* Years count toward federal civilian career (buyback);
* and numerous other discounts military members are eligible for.

I shall address these points one by one.

* tax free BAH and BAS;

The majority of soldiers don't have this.

* access to free healthcare;

Essentially healthcare isn't needed for a young person. At the least, they would need catastrophic health coverage. Let's not forget that you can stay on your parents Health coverage until 26 now. And low income qualifications under the ACA.

* college paid plus stipend;

College is already paid for with money left over, it's called community college where the Pell grant will cover the whole cost with money leftover.

* access to TSP,

Have access to an IRA and most 18 year olds will be saving more than 10% to match the $5,500. and an IRA with ETFs has lower fees than the TSP. Advantage, IRA.

* and numerous other discounts military members are eligible for.

I see those military discounts, listed right next to student, or Government Employee.

Last but not least, your MOS argument is a moot point. Not everyone can serve as an X-ray technician. Someone has to be 11B.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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Kato
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Re: Buyback.

Post by Kato »

ArrieS wrote:
skiehawk11 wrote:Many benefits already:
* tax free BAH and BAS;
* access to free healthcare;
* college paid plus stipend;
* access to TSP;
* Years count toward federal civilian career (buyback);
* and numerous other discounts military members are eligible for.

I shall address these points one by one.

* tax free BAH and BAS;

The majority of soldiers don't have this.

**BAH and BAS are only for those members who are married and/or have been approved it for another reason, like not enough barracks space;

* access to free healthcare;

Essentially healthcare isn't needed for a young person. At the least, they would need catastrophic health coverage. Let's not forget that you can stay on your parents Health coverage until 26 now. And low income qualifications under the ACA.

** But it is still a benefit all soldiers have. There are those who don't need it, there are others who do;

* college paid plus stipend;

College is already paid for with money left over, it's called community college where the Pell grant will cover the whole cost with money leftover.

** I believe you have a cap on income to qualify for a Pell grant?

* access to TSP,

Have access to an IRA and most 18 year olds will be saving more than 10% to match the $5,500. and an IRA with ETFs has lower fees than the TSP. Advantage, IRA.

* and numerous other discounts military members are eligible for.

I see those military discounts, listed right next to student, or Government Employee.

**Not to mention PX and Commissary priviledges are two big one's I see;

Last but not least, your MOS argument is a moot point. Not everyone can serve as an X-ray technician. Someone has to be 11B.

**True, there is not much use for an infantry (11b) in the private sector.
Veteran - Someone who, at one point in his/her life, wrote a blank check made payable to "The United States of America" for any amount, up to and including their life

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ArrieS
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Joined: Sun Aug 05, 2012 10:56 am

Re: Buyback.

Post by ArrieS »

I'm sorry, my posting in response to what skiehawk11 said got this form off track. But this wasn't intended to be a discussion about the benefits soldiers receive and it they're too much or not enough.

It was about the original idea.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

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Kato
Posts: 49
Joined: Mon Jun 01, 2015 8:31 am

Re: Buyback.

Post by Kato »

ArrieS wrote:I thought I would bring this idea to the community since it deals with the TSP.

I’m a Veteran and I get to buy back 9 and a half years. As a Federal employee I get FERS. They love to talk about FERS and its three pillars or something like that, the pension, Social Security, and the TSP.

However, considering I am buying back my time, which feels like a great wrong since I earned it and when I earned it, it was worth 2.5%, but now I have to pay for it and get it at a reduced rate… Sorry that was a rant.

So I have bought back my pension time, I paid Social Security taxes on it at the time, but I never got a matching TSP. So for the time period which is almost ten years my retirement plan is incomplete by the FERS standard. No third leg.

My idea is for people buying back their time, that they are allowed to voluntarily make additional contributions that the Government would match. These contributions would be based on the amount the Government claimed you earned and therefore used to calculate your buy back. I believe my amount was about $240,000. So as an example I would up my contribution to 7% a pay period. That additional 2% would go towards the $12,000 that would be my 5% of $240,000, and the government would match that until it had paid an additional $12,000, its 5%.

But here is where I really want your opinion. This is the Government and if I really want this I have to figure out a way to pay for it.

So I was thinking of reducing the tax deduction for home owners that are receiving BAH. Most Americans have this deduction because they are paying their mortgage with income that was already taxed. But BAH is tax free. I would like some honest answers, I was thinking of maybe making it based on rank, I.E., O-4 and above can only take half a deduction and O-3 and below can take the full exemption.


@Arries - Back to your OP. Buying back my military time was a very sore spot for me too. Going from 2.5% of what you already earned to 1% (or 1.1% for those who retire with 20 years at age 62 or later in FERS) to me was like losing money. But since I did not retire and I lost that 2.5% anyway, the 1 or 1.1% I look at is a gain. It helps me to keep from ranting too :) Anyway, I digress...

I did buy my military time back too and there was no TSP option when I was in the military. Although I do like your idea of government matching, it wouldn't do me any good unless they retro'd it.

Any idea of lowering taxes I would vote for and I particularly like your idea of tax reduction but to my knowlede, BAH is only paid to military members. Maybe I'm missing something here but I don't see this part of your idea. I would also base it on BAH received with a cap, not necessarily by rank although I know they go hand in hand.
Veteran - Someone who, at one point in his/her life, wrote a blank check made payable to "The United States of America" for any amount, up to and including their life

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ArrieS
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Joined: Sun Aug 05, 2012 10:56 am

Re: Buyback.

Post by ArrieS »

Kato wrote:...it wouldn't do me any good unless they retro'd it.


Really, just an example, even an extra $10,000 from the Government matching contributions in your account wouldn't do you any good at all?

Kato wrote:Any idea of lowering taxes I would vote for and I particularly like your idea of tax reduction but to my knowlede, BAH is only paid to military members. Maybe I'm missing something here but I don't see this part of your idea. I would also base it on BAH received with a cap, not necessarily by rank although I know they go hand in hand.


I guess I failed to make my point clear. I'm not proposing to reduce taxes. I'm proposing elimination or reduction of a tax deduction, so it would be a tax raise to pay for this. But that's just an idea to pay for it, it doesn't have to be the idea that pays for it.

But BAH is tax free money. The average American pays his mortgage with income that is after tax. That is why they get to deduct it. It restores that part of their income to pretax to pay their mortgage.

Because BAH is not taxed they are getting a deduction against income that wasn't taxed in the first place.

But service members would still come out ahead in the long run because interest paid monthly goes down, so the tax deduction is reduced as time goes by and service members still enjoy BAH that is tax free for whole time.
OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The others are July, January, September, April, November, May, March, June, December, August, and February. - Pudd'nhead Wilson's Calendar

meddian
Posts: 32
Joined: Thu Jul 21, 2011 9:24 am

Re: Buyback.

Post by meddian »

I'm really confused. I thought the reason to "BUYBACK" your time while working for the government was for me to get my 4 years of active duty added to my retirement plan-which would give me an SCD with 4+ years? Four years added to the FERS calculation adds up to additional monies for my FER retirement. I also thought that I didnt pay FICA with the miliatry and thats why I paid it back.

skiehawk11
Posts: 2116
Joined: Wed Jan 05, 2011 2:32 pm

Re: Buyback.

Post by skiehawk11 »

ArrieS, I apologize for taking this thread on a tangent. I agree with your original premise. Playing devil's advocate here. :)

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