Aw, snap.
I had thought that technically someone who retires at 40 and collects $25,000 a year for the remaining 40 years of his life makes a million dollars off of Uncle Sam exactly the same way that someone who retires at 60 and collects $50,000 a year for twenty years does.
(I have no plans of joining the military, it’s just that I thought the math was weird, turns out it was indeed since I was wrong)
No, active duty retirement pensions begin immediately with no age minimum. Reserve and National Guard pensions cannot begin until aged 60.
It would have been correct if that was what you actually said.
I was wrong and I appreciate the correction.
They do. They collect their military pension at 37 (or 40, or whatever age they retire at after 20 years), then they collect their social security at 62, or 65 or whatever age after 62 they decide to start collecting. And they can start cashing in on their IRA at 59.5 or whatever age after that they choose.
As @Bear_Nenno has already answered, this is not correct. Regular military retirement checks start going out the next month after you have retired. The National Guard works under a different system, you have to hit a certain amount of service credits by age 60 to qualify (remember most guardsmen are part-time so that’s why that terminology, but the guard does have some full timers), I am pretty sure your friend would have been able to count his initial short active-duty career as part of the credit needed to be eligible for the NG retirement by age 60. But yeah, this is a different system than regular active duty military.
Edit to add: To elaborate briefly, full “service credit” in the National Guard is considered 20 years worth of drilling one weekend per month, plus 15 days of annual training. If you complete 20 years worth of that, you are eligible for National Guard retirement, but you can’t collect it until you are 60 in most cases. However, if you get deployed with the guard etc that counts, I believe, as extra service time. So you can theoretically hit the “basic” qualification for retirement with the guard in less than 20 years in if you go on a few deployments. The more time you put into the National Guard, both in years and amount of time “activated” the closer it gets to being a halfway decent check. I think for the basic 20 years of monthly drill and 15 day annual training, it isn’t that impressive, but again it’s a benefit for a very part time type of soldiering.
It’s always bugged me that a person cannot retire from active duty and then enter the National Guard or Reserves. I wish that was a thing.
One interesting related anecdote from my Guardsman friend who was a JAG. One of his paralegals popped positive for a drug test and was going to be terminated. Tragically she only needed one more weekend to have enough points to qualify for retirement. She was otherwise a model airman.
He had no choice to terminate her but didn’t want her to lose her pension. He was able to figure out a way to delay things such that she got in the last weekend. I don’t recall the details but it involved a lot of creativity.
Not at all; I just like to cook. I was a Seabee electrician, but the part that really translated well to civilian life was the management of people, projects and assets. I also acquired a useless degree along the way, which opened some doors. Honestly, I had no intention of staying in the military past my initial hitch. I knew if I stayed in I’d likely end up with another tour in Vietnam (this was in 1971). My ex convinced me that we should stay because for some reason she was afraid we wouldn’t make it on the outside, and rather than argue, I just went along with it. 
So I reenlisted and to my shock she promptly quit her teaching job.
Heh, so many 20+ year military careers are completed by people who were just signing up for “one enlistment”, and on the flipside I knew a lot of guys who talked a big talk about being in it for full career who ended up leaving as soon as they could.
Modnote: Knock it off. You provided incorrect/incomplete info and now you’re arguing it for no good reason. This is a hijack of a otherwise very informative thread.
Yeah, I was a very reluctant careerist. I always either extended or signed on for the minimum time allowed, mainly because I didn’t want to end up in another combat zone because someone in WDC decided it was time for another war. The only reason I stayed past 20 is because I was able to wangle a four year assignment to the Department of State, where I wore civilian clothes and traveled around Europe. Best gig. . .ever.
The usual method - what is the pension plan provision, say 1.5% of your best 5 years average for each year of service, so 3% for 2 years. Then if you want a lump sum payout, take the net present value of something you won’t collect until say, 30 years later at 65. Nowadays, that has to go into a “locked in” savings plan that cannot have withdrawals until 65 (but you can direct how it’s invested).
Back in the day, (numbers from around 1990) I knew an engineer who was making $50,000 after 15 years on the job - his pension amount was worth IIRC about $17,000 at age 35. (It all depends on the interest rate they allow to calculate NPV.) A buddy who was working there for 20 years, but married for 10, could cash out his “pension so far” to split community property with his wife (the law in most of Canada) so she got her half of half his pension entitlement - which worked out to $8,000 not the windfall she thought. (I think he could pay he out this amount cash to her and not leave/restart his pension plan.) A friend of mine mentioned that the local Member of Parliament went through something similar, having taken the current value of his government pension to split during a divorce, and so was no longer vested in the lucrative MP pension scheme.
But thanks all for a bit more clarification of the US system. I think the concept in Canada is a pension is something you earn as you work, basically foregone cash-in-pocket for future consideration, so therefore belongs to you whether including contributions or not. You’ve earned it. But like the 20-and-out in the US forces, any special “extra” like 30-and-out is not part of the regular “partial” calculations until you get there. In most plans, once you can collect a monthly amount immediately, you can no longer opt for a lump payout. (I.e early retirement at 55)
And much like the USA, defined benefit pensions seem to be gone in the private sector in favour of personal savings plans. Which, if the company is going to go bankrupt and shaft you like LSL says, a private savings plan is better. After all, the lucrative pensions offered US airline pilots were in lieu of higher wages, to settle labour contracts - so reneging on those is no different than going into your bank account and taking all your money, or bouncing a few paycheques. (In Canada, the rules for keeping pension plans solvent are far stricter.)
Yes, a defined contributions plan is safer for the employee, and also reduces the long-term cost for the employer because its a “pay as you go” system.
The net benefits, however, are likely lower. That has to be offset against the risk of the employer fiddling with the funds for the defined benefits plan.
The military recently tinkered with the retirement plan again, calling the new system the Blended Retirement System. Beginning in ~2018 anyone who joined from 2006 to -2018 had the option to remain under the old system (50% at 20 years, 2.5% more per year thereafter) or elect the new “totally not a way to cut down on pensions and begin the transition to a privatized system” BRS. BRS set the 20 year retirement at 40% and… I honestly don’t know how much it increased each year after 20 (if it was 2% or 2.5%). The “tradeoff” that was supposed to be beneficial for the servicemember was that under BRS the military would make matching contributions to the military’s version of a 401(K) up to a certain amount, and also I think some kind of continuation pay around the 12 year mark (don’t recall if it had to go into the “401(K),” could be taken as a lump sum, if it came in installments, or what).
The idea (apart from “totally not reducing the pension benefit”) was to try and coax more people to stick around to the ten to fifteen year mark, but without necessarily incentivizing the, to stay all the way to 20. To target mid-range retention.
Anyway, I didn’t have to worry about it as I joined in 2005 and retired sensibly in 2019 at the age of 35.
In Canada (and Netherlands, I understand), the pension plan has to be managed by an independent fiduciary, it’s not a department of the company. The company cannot fiddle. (And so not prone to being gutted like Ghislaine’s father did…) While laws prevent withdrawals from the fund, foregoing contributions while the market is doing good is effectively withdrawing on the installment plan.
Then, when the market is down and the fund needs even more than usual contributions, business is not as profitable, and the company whines about how much of a drag their self-created shortfall is. Another failing of the US pension system is that the company often adds to the pension plan by using company stock, meaning that in a downturn the plan is doubly impacted, the company’s stock may take a bigger hit than the market - so just when it needs to top up the plan even more, the company is in financial trouble.
Given that benefits in general are disappearing, and the stock market is unreliable from time to time, it’s hard to say whether defined benefit pensions are better than the market - more stable, yes. Another problem with defined benefit, as LSL alludes to, is that the promised pension is often overinflated to balance a lack of immediate compensation - by management that know full well they can walk away with their golden parachutes intact and reneg on the workers who gave them that money. (Or, like governments as diverse as Detroit and Greece, buy labour peace today with promises that will come due long after the politicians who promised it are gone.)
A good friend of mine worked for Countrywide. He lost a few hundred grand when they went tits up and will consequently have to work for several more years before he can retire.
Could be worse. An S&L in Canada back in the 80’s had a policy that their higher execs had to have a stake in the company to ensure dedication. If the employee did not have sufficient funds, the company would lend them the money to buy stock - often several hundred thousand dollars. There were several hundred who fell into this category of manager. So in the late 80’s, the company tanks. Now these poor schmucks owe hundreds of thousands for worthless stock. And… they’re out of a job. And… if the company’s bankruptcy trustees forgive the loans, technically that’s income and the poor unemployed schmucks owe income tax on it.
Beware of executives bearing gifts.
I think this sort of thing came up with Enron; Googling, employees collectively held almost 60% of their 401(k) assets in company stock, so when it collapsed, they lost a whole lot of money, in addition to losing their jobs. I think since then, laws have been passed to prevent this from happening in the future.
I don’t think this has been mentioned yet in this thread, but any retired US military is eligible for copious benefits for life, including a spouse and dependents.
These include commissary and PX privileges, use of military base functions like workshops, special services, etc., plus extensive, comprehensive medical care. Although the pension might not be all that much, these bennies can make the whole scheme worthwhile.
OTOH, if the nearest commissary and PX are not close, it might not be worth much. In my case, I am eligible for those services, but the nearest ones would eat up any savings with the extreme transportation cost.
(I hope I’m right about all of this; if some things have changed over the years, my info could be out of date.)