The trend has been to push that age out. When I started in the Texas teacher system, it was “rule of 80”: years of service + age had to equal 80. So if you started at 24, by 52 you had 28 years + 52 = 80. Retirement is 2.3 × years of service, so at 52, you could retire at 64% of your salary and then spend 10 years teaching in a priave school or another state or something. You could also retire/rehire, but your benefit is reduced if you do that. Then it was the rule of 90, then the rule of 90 + 60 as a minimum age. But I am still under the rule of 80.
As a bit of maybe, further explanation–while @LSLGuy and my own post on corporation pensions was fairly negative about the behavior and practices of corporations, it is probably at least worth mentioning that while there are many big companies that have indeed screwed people over, the norm for many years was that even very small employers would have some sort of pension plan. These plans were often setup in the “war years” or immediately after, when various assumptions about life expectancy proved to not be reality by the 1970s and 80s, and companies were ending up with more retirees receiving checks than current employees. This does create a genuine “crunch.” That isn’t to say there weren’t (and aren’t still) big companies with massive profits that could easily shoulder this burden who are just choosing not to do so, but there are companies that genuinely wrote promises they basically couldn’t easily or even sometimes feasibly keep at all.
A personal story from my family that shows a bit how this can work, my grandfather on one side was born in 1905. By age 20 he was hired at a chemical company as a laborer, while he never got a college degree while working (he actually got one in his 60s as a retired person) which limited his potential at the company, by the time he retired he had a production management position and was making a good wage for the time. He retired at age 65 in 1970. Now, when he was hired it was with some long forgotten small chemical company, that company had been absorbed through a series of mergers to eventually be part of Union Carbide, which was a chemical giant (until it was absorbed by Dow in more recent times.)
My grandfather started receiving a pension check, monthly, from Union Carbide in 1970. He lived until he was 92 years old, dying in 1997 after having collected pension checks from Union Carbide for 27 years. Due to COLA adjustments, at his death his pension check was actually more than his monthly pay had been when he was working full time.
Carbide wasn’t done writing checks, though, because this was a joint survivor pension in which the spouse continues to collect checks. My grandmother who was the same age as him (they met in High School and married at age 18), she lived to be 101 years old, collecting checks for another 9 years until 2006.
Carbide was in a profitable industry, and in their lifetime never attempted to screw over retirees, my understanding is Dow continued the plan ( I think it was already Dow by the time my grandmother died, but was not Dow when my grandfather died) as written, but I believe reporting in the 2010s said Dow h ad started the “typical” big corporate shenanigans to divest itself of the pension debt.
I know that even in the 90s, Carbide had more retirees receiving benefit checks than it had working employees, which isn’t too shocking–chemical manufacturing like lots of manufacturing, was much more labor intensive in mid-century than it was by the 90s, so they had a big “base” of employees from the past who had retired.
It would be pretty sweet to retire near 40, though, and first take a long 2-3 year vacation before going back to full-time work.
When did this rule change? There is currently no restriction for a servicemember to contribute to an IRA, either Roth or Traditional, while pursuing a 20-year pension. A servicemember has the same annual limits as anyone else, despite being enrolled in a military pension plan.
It’s not a military thing - traditional IRA contributions are not fully deductible for some people covered by any pension plan, military or not. And there’s not much reason to contribute to a traditional IRA if the contribution isn’t deductible.
Yeah, I’m unfamiliar with there ever having been restrictions on contributing to a Traditional IRA or Roth IRA. For a Traditional IRA, your contributions are tax deductible unless you are covered by a workplace retirement plan (which someone in the military would be covered by said plan) if you are covered by a workplace retirement plan, your Traditional IRA contributions are only tax deductible if you fall under the Modified Adjusted Gross Income limits. If you are over the limit, they are tax deductible at a reduced rate based on how much over the limit, and far enough over the limit they are not tax deductible at all. For the vast majority of the military, unless they are married filing jointly with a spouse who is earning upper middle class wage or better, they probably don’t exceed the MAGI limits and can make fully tax deductible contributions to a Traditional IRA.
Roth IRA obviously isn’t tax deductible on contribution anyway, but it actually has income limits just to be allowed to contribute at all–but again, a typical member of the military won’t be over those limits unless married to a decently high earning spouse.
If you aren’t eligible for a tax deduction on a Traditional IRA contribution you still benefit from the tax free growth of assets held in the IRA, but you do pay taxes on withdrawals. For that reason, it generally is the case that you’re better off contributing to a Roth IRA if you can’t max tax deductible contributions to a Traditional IRA. However, mind what I said above–some higher earners cannot make contributions to Roth IRAs at all (my income has been too high since my early 50s to make any contributions to Roth IRAs without using some creative loopholes that I don’t bother with), but like all wage earners I can cap out my annual Traditional IRA contributions if I so choose, and I do. I also cap out my contributions into what’s called a SEP-IRA, which is a different retirement savings vehicle.
Just a vague caveat to the military retirement. There have been short term changes to encourage people to leave when the overall force is being reduced. In the early 1990s there was a 15 year retirement that only paid for a limited time, not life. It was not automatic, you had to request it and not be in a high demand field to be approved.
There was an experiment with reducing the 20 year amount to 40% and increasing by 3.5% per year after 20 to encourage people to not leave at 20. That turned out to discourage people from staying beyond initial obligation.
That would explain why I’d never heard of this restriction. Personally, I never bothered with a traditional IRA, so I never dived deep enough to discover this. I used the HERO ACT to max out Roth IRA contributions with tax-free deployment money. That way, I don’t pay tax on the contributions or the withdrawals.
There is a bit of truth to this but it’s not at all correct.
That said, I will oversimplify a bit. People who earn a paycheck get 6.2% taken out for Social Security (FICA) up to a certain limit (currently ~$138k) which goes into a fund. The employer pays the same amount into the fund. Self employed people pay the entire 12.4%. There are a bunch of weird exceptions that don’t apply to most.
The amount one gets is based on the salary of their top 35 years of work. You have the option to start taking it at 62 but then you only get around 70% of your maximum benefit. Depending on when you were born, you get your maximum benefit if you wait to take it. That max age is between 65 and 70 years old. Every extra month that you wait increases that percentage. That amount will increase for everyone each year based on inflation.
Whether or not one should wait can get complicated and is very individualistic. Factors include net worth, life expectancy, if one is currently still working, spending rate and others. In some situations, SS income is taxed but usually not.
Not at all correct? Which part was incorrect?
You said that once people turn 62 they get a small check every month. This is just one option and one that most people don’t take. You have to apply to get it, it’s not automatic. You are eligible to start at 62.
And also not everyone pays in - some government employees don’t pay in.
What was startling to me is that the first job I got after I “retired” was double my military pay. Two years after that I doubled it again, and eventually I topped out at six figures before I actually retired. But that’s really atypical for retired enlisted who are not in, say, the nuclear field.
I was googling foe stats on this and it refreshed and I saw yours.
Internet says about 10% of workers are not covered, which is a fair number.
Certainly possible for someone like Martin_Hyde, who retired at a senior officer rank. For enlisted folks, you could do it if you lived out of your car.
So, not incorrect, then? Just incomplete information? It’s almost as if this thread wasn’t even about Social Security and it was just mentioned in a simplified and brief manner sufficient to explain to md-2000 that his/her idea of a “US Pension” is closer to our social security program rather than a military or private pension system.
My understanding is that you don’t start getting paid until you’re 60 even if you are able to retire from the military at 40. A good friend who is now 58 was a military officer who served a few years of active duty and then was in the National Guard and was able to get enough time in to retire a couple of years ago. His regular job is a high school teacher which also has a pension. He has over twenty years in that job as well. When he is 60 he will be a double dipper and get two pensions.
Even though it was a bit off topic, you were still incorrect and I provided, I hope, the actual truth of the matter. It’s not a big deal to not know something. Geez.
Yep. I’m not sure if your forum name relates to your military job, but one of my best friends was actually a cook with the Navy and retired after 20 years, he’s retired for real now, but he actually got into airplane mechanic work after retiring from the military and was making a lot more money a couple of years out. It’s kinda funny because had he structured his military career differently, he could have left the military as a trained airplane mechanic, but when he enlisted, he really had no direction in his life and thought cooking was something he liked. He did get military benefits that paid for the training he took near the end of his military career to get certified as a mechanic. While I traveled a good bit in my career, working on ships like he did he saw damn near the entire world during his enlistment.
The military is pretty big on selling you on the idea that while the base pay isn’t good (even for officers it’s probably not competitive with what you might be getting in a civilian job with a college degree and a professional career etc), there are a lot of benefits that make up for it. At the end of the day though, the low base pay does result in a pension benefit that for most isn’t that amazing, but it is guaranteed for life and you can be collecting it in your 30s.
One thing I did that saved me a ton of money over the years I was in, is aside from a few overseas postings where I basically had to live on base, I usually used my housing allowance to rent a “room in a house” situation with 2-3 other people, so we’d live really cheap and pocket the rest of the allowance. (If you live on base housing your entire allowance is nulled out, if you live off base you get the allowance paid out to you and it’s up to you to figure out housing with that money, the savvy can spend half or less of the allowance on rent and pocket the rest.)
People are eligible to receive social security checks at 62. That was not an incorrect statement. geeez.
It certainly doesn’t qualify as being “not at all correct”, when it is in fact true.