1. Retirement/Thrift Savings Plan (TSP)
SHOW SLIDE 2-1: Retirement/Thrift Savings Plan (TSP)
2. Learning Step / Activity 2: Review Retirement/Thrift Savings Plan
Method of Instruction: DSL – Discussion (Small or Large Group)
Instructor to Student Ratio: 1:25
Time of Instruction: 02 hrs. / 20 mins
Media: PowerPoint Presentation, Handout
Required Student Materials:
Student Handout (Learning Activity 2: Retirement / Thrift Savings Plan)
TSP-U-1 Form
Calculator
Pencil
Learning Activity 2

2. Today's Retirement Concept
Retired 20, 30, or more years - Usually With Good Health
Independent, Active Lifestyle
Goal: 100% of Pre-Retirement Income
SHOW SLIDE 2-2: Today’s Retirement Concept
Instructor’s Note: Instructor read and discuss with students using the slide.
Retirement has changed significantly from the past. Many people are spending 20, 30, or even more years retired.
They retire younger, live longer, and are usually quite healthy.
Retirees not only live independently, but also enjoy more of the fruits of their labors.
Retirement income may need to equal or, depending on activities, even exceed pre-retirement income.
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3. Regarding Investment Information
Basic Information
Instructors Are Not Financial Planners
Will Not Recommend Any Particular Stocks, Bonds, or Mutual Funds
Investment Decisions Are Yours to Make
SHOW SLIDE 2-3: Regarding Investment Information
Instructor’s Note: Instructor read and discuss with students using the slide.
Keep in mind as we start discussing investments that we will be providing you with very basic investment information.
We are not financial-planners, nor are we qualified to recommend investing in any particular stocks, bonds, or mutual funds.
You will need to make these decisions for yourself as you mature and become more knowledgeable about investment strategies.
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4. Sources of Retirement Income
SHOW SLIDE 2-4: Sources of Retirement Income
Instructor’s Note: Instructor read and discuss with students using the slide.
Retirement income is often described as a three-legged stool.
The three legs are:
Social Security benefits;
Retirement and/or pension payments;
and Investment income.
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5. Social Security Federal Insurance Contributions Act (FICA)
Block on LES
Eligible for Full Benefits at Age 67
About $1,300 per month
Go to to get a copy of your Social Security Statement online
SHOW SLIDE 2-5: Social Security
Instructor’s Note: Instructor read and discuss with students using the slide.
Social Security/FICA:
The FICA withholding you see on your Leave and Earnings Statement (LES) is your Social Security contribution. Persons your age will be eligible to draw full Social Security benefits beginning at age 67. It will probably be about $1,300 a month or less in terms of today's dollars.
After you have been working for a year or two, you should ensure the Social Security Administration is tracking your employment by requesting an Earnings and Benefits Estimate.
Go to to get a copy of your Social Security Statement online.
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6. Types of Retirement Plans
Defined Benefit Plans
Company Paid (Army Pension)
Defined Contribution Plans
You pay (Thrift Savings Plan)
SHOW SLIDE 2-6: Types of Retirement Plans
Instructor’s Note: Instructor read and discuss with students using the slide.
Types of Retirement Plans:
The second leg of the retirement income stool is Retirement Benefits and Pensions. Some of you may retire from the military, begin a second career, and retire again. Others may leave the service prior to retirement and become employed in the civilian world.
In either case, I strongly suggest you examine an employer's retirement plans and pension benefits when deciding to take, or remain in, any specific job. At this time in your life, you are in the military and we will concentrate on military retirement benefits. There are two types of retirement plans, Defined Benefit and Defined Contribution.
Today's Army has both.
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7. Defined Benefit Plans Traditional Type of Plan Funded By Employer
Requires Long Service
Amount Based on Salary and Longevity
May or May Not Include Periodic COLAs (Military Retirement Has COLAs)
SHOW SLIDE 2-7: Defined Benefit Plans
Instructor’s Note: Instructor read and discuss with students using the slide.
Defined Benefit Plans:
Defined Benefit Plans are the more traditional type. The employer funds them, and one must usually work a relatively long time to become eligible for a pension check. The amount of monthly pension is normally based on salary and the number of years worked, and is guaranteed for life. These plans may or may not include cost of living increases (Military retirement does).
For you the Uniformed Services offers the current High-3 System, and starting January 1, 2018, the Blended Retirement System (BRS).
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8. Defined Contribution Plans
Employees Contribute From Salary Each Month
Employers May Match Some or All Contributions
Most Common are 401(k) Plans
Distribution Choices at Retirement
Amount Depends on Contributions and Investments
SHOW SLIDE 2-8: Defined Contribution Plans
Instructor’s Note: Instructor read and discuss with students using the slide.
Defined Contribution Plans:
Defined Contribution Plans have become increasingly popular over the last 20 years or so. These plans allow employees to contribute up to a certain amount of their salary each month, before taxes, to a fund that they have a significant amount of control over. Sometimes, frequently in the civilian world, employers will match a portion of each month's contributions. The most common are 401(k) plans, named after the regulating paragraph in the Federal Income Tax Code.
There is no guarantee with this type of plan. Many workers have options on how they want to receive their funds at retirement. The options are a lump sum payout, which they can then invest for future income; deferment of the distribution for a later date; converting their funds to an annuity and then receiving periodic payments from the annuity; or installment payments from their plan. These sums can be quite large, however, the amount depends on how much the worker has invested, and the earning of the specific investment plan.
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9. Two Types of Defined Contribution Plans
Traditional – Pre-Tax Dollars
Roth – Post-Tax Dollars, What You Put in Gets Taxed First
SHOW SLIDE 2-9: Two Types of Defined Contribution Plans
Instructor’s Note: Instructor read and discuss with students using the slide.
Generally, when money is withdrawn in retirement from a traditional plan, it is taxed. It is paid with tax deferred dollars and continues to grow tax deferred until withdrawn when you are taxed on the money you withdraw.
For a Roth plan, when the money is withdrawn in retirement it is not taxed. A Roth account is paid with after tax dollars and grows tax free, even when withdrawn (some restrictions apply).
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10. Blended Retirement System Opt-In Course
Educated decision
SHOW SLIDE 2-10: Blended Retirement System Opt-In Course
Instructor’s Note: Instructor read and discuss with students using the slide.
This course is designed to provide Service members eligible to opt into the new Blended Retirement System (BRS) sufficient information to make an educated decision about their retirement system.
Release: January 31, 2017
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11. Course Overview Being a part of the legacy "High-3" retirement system
You’re choice to remain in the legacy "High-3" retirement system or elect to participate in BRS
BRS = reduced-rate defined-benefit pension + TSP contributions
Goal: inform, educate, and empower you to make the best decision for your future
SHOW SLIDE 2-11: Course Overview
Instructor’s Note: Instructor read and discuss with students using the slide.
Congratulations! You are part of a select group of Service members who get to choose your retirement benefit system. It is vital you take the time to understand how both of the retirement systems work so that you can make an informed decision that’s right for you and your family.
Currently, you are part of the legacy “High-3” retirement system, which provides a defined retirement pay benefit if you complete 20 years or more of service. In addition, you have access to a non-matching, portable retirement system component known as the Thrift Savings Plan (TSP), where you may already be contributing.
You may choose to remain in the legacy "High-3" retirement system, or elect to participate in the modernized retirement system, commonly referred to as the Blended Retirement System (BRS). The BRS combines a reduced-rate defined-benefit pension, plus a TSP account where the Government will automatically contribute an amount equal to one percent of your basic pay and match your contributions up to an additional four percent, for a total contribution of up to five percent. Additionally, even if you do not complete a 20-year career in the service, the majority of individuals who opt into BRS will receive some portable retirement benefit upon separation.
This course is designed to inform, educate, and empower you to make the best decision for the future you are planning for yourself and your family.
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12. Course Overview (Cont.)
Blended Retirement System Opt-In lessons:
Opt-In Basics
The Importance of Lifelong Financial Security
Financial Planning Concepts and the TSP
Differences in the “High-3” System and the BRS
Important Factors to Consider
Tools and Resources
SHOW SLIDE 2-12: Course Overview (Cont.)
Instructor’s Note: Instructor read and discuss with students using the slide.
Given an instructional presentation on the “High-3” Uniformed Services retirement system, Blended Retirement System, time value of money and other financial planning concepts, and potential retirement savings outcomes; the student will be able to understand the importance of saving for retirement, differences between the “High-3” retirement system and blended retirement system, and the tools and resources available to help them make their decision. Upon completion of this course, you will be able to:
Identify the requirements for eligibility to opt into the BRS Recognize the opt-in period
(2) Understand the importance of planning and saving for retirement Understand the concept of a pension for Uniformed Services retirement pay Define vesting and understand the requirements of the “vesting period” Recognize the value of compound interest
(3) Recognize the advantages of investing in the Thrift Savings Plan
(4) Understand the basic components of the legacy “High-3” Uniformed Services retirement system Understand the basic components of the Blended Retirement System
(5) Understand the concepts of, and eligibility requirements for, Continuation Pay and the Lump Sum Option Understand the factors necessary to make an informed retirement system choice by December 31, 2018
(6) Identify (and access) tools and resources available to provide you with information and education for making financial decisions Understand how to use the BRS calculator to perform a financial comparison of your retirement planning options
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13. Opt-In Basics Lesson 1 SHOW SLIDE 2-13: Opt-In Basics
Instructor’s Note: Splash Page for transition to Lesson 1 on Opt-In Basics.
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14. Opt-In Basics Introduction
Covered in this lesson:
Eligibility requirements for opting into the BRS
The Opt-In time period
Similarities and differences between the legacy “High-3” Uniformed Services retirement system and the BRS
SHOW SLIDE 2-14: Opt-In Basics Introduction
Instructor’s Note: Instructor read and discuss with students using the slide.
In this lesson you’ll learn about the eligibility requirements for opting into the Blended Retirement System (BRS), the period of time you will have in which to make your opt-in decision, and be introduced to the similarities and differences between the legacy “High-3” Uniformed Services retirement system and the BRS.
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15. Opt-In Basics Objectives
After completing this lesson you will be able to:
Identify the requirements for eligibility to opt into the BRS
Recognize the Opt-In period
Recognize similarities and differences between the legacy “High-3” Uniformed Services retirement system and the BRS
SHOW SLIDE 2-15: Opt-In Basics Objectives
Instructor’s Note: Instructor read and discuss with students using the slide.
After completing this lesson you will be able to:
Identify the requirements for eligibility to opt into the BRS
(2) Recognize the Opt-In period
(3) Recognize similarities and differences between the legacy “High-3” Uniformed Services retirement system and the BRS
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16. Opt-In Eligibility
You are eligible to opt into the BRS IF as of December 31, 2017 you are either:
AC member who has served fewer than 12 full years from PEBD
RC member with fewer than 4,320 points
This is your decision to make!
SHOW SLIDE 2-16: Opt-In Eligibility
Instructor’s Note: Instructor read and discuss with students using the slide.
You are taking this training because as of December 31, 2017 you are either:
An Active Component (AC) member who has served fewer than 12 full years from your Pay Entry Base Date (PEBD), or A Reserve Component (RC) member with fewer than 4,320 points
This makes you eligible to opt into the BRS, or remain in the legacy “High-3” military retirement system. If you do not choose to opt into the Blended Retirement System, you will remain in the “High-3” system. This is your decision to make!
Please note, no one who is currently serving as of December 31, 2017, or who has previously served, is automatically enrolled in the BRS. All Service members who enter service, or who sign a contract to serve, on or before December 31, 2017 are grandfathered into the “High-3” retirement system that is more fully described later in this lesson and in Lesson 4. It is strongly recommended that you discuss this decision with your family, and take full advantage of the financial counseling and education opportunities available to you as a Service member. But only you can make the decision whether to opt into the BRS or remain in the “High-3” retirement system.
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17. Opt-In Period
Any eligible Service member wishing to opt in must do so during calendar year 2018
Otherwise you’re covered by the “High-3” retirement system
If you decide to switch to the BRS, you will have to record that decision and:
The decision is irrevocable. In other words it cannot be changed at a later date
SHOW SLIDE 2-17: Opt-In Period
Instructor’s Note: Instructor read and discuss with students using the slide.
You will be able to make a decision on your retirement system beginning January 1, Any eligible Service member wishing to opt in must do so during calendar year Completion of opt-in training is required prior to making the election. You may choose to remain covered by your legacy retirement system; in which case nothing will change.
But should you decide you want to switch to the BRS, you will have to record that opt-in decision. This decision is irrevocable, or final, and cannot be changed at a later date.
Members of the Reserve Component must be performing duties in a paid status during 2018 to opt in. If not in a paid status during 2018, but otherwise eligible based on having accumulated fewer than 4,320 retirement points, those Reserve Component members will have an opportunity at a later date, if returning to a paid status, to make their opt-in decision.
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18. Opt-In Period Important Notes
NOTE: Service members who have already retired or who have transferred to the Retired Reserve are not eligible to opt into the BRS
NOTE: Stay alert for Service-specific instructions for opt-in procedures
ROTC/Service Academy/Reentrants
SHOW SLIDE 2-18: Opt-In Period Important Notes
Instructor’s Note: Instructor read and discuss with students using the slide.
Reentrants will have the remainder of 2018, or depending upon when they return to service, a limited period of time after 2018, to opt in if they desire. Stay alert for Service-specific instructions for opt-in procedures.
ROTC/Service Academy/Reentrants
If you are taking this training while completing training through ROTC or a Service Academy, or are in an unpaid Reserve Component status, you will have 30 days upon commissioning to active service or from the time, you enter a paid status to make your election.
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19. Differences between the “High-3” and the BRS
SHOW SLIDE 2-19: Differences between the “High-3” and the BRS
Instructor’s Note: Instructor read and discuss with students using the slide.
The primary differences between the “High-3” retirement system and the BRS are described here.
(1) Under the “High-3” system, you will receive a pension in return for 20 years of active duty, or 20 qualifying (creditable) Years of Service (YOS) for the Reserve Component. Your monthly retired pay will be calculated as shown here, 2.5% times your Years of Service times the average of your highest 36 months of basic pay.
(2) Under the BRS, you will still receive a pension for 20 Years of Service, though the multiplier is reduced from 2.5% to 2.0%. If you choose to opt into the BRS, you will enroll in a U.S. Government Thrift Savings Plan (TSP), a defined contribution plan currently available to Government workers. TSP is portable and, once vested, all contributions and earnings stay with the Service member even after leaving the Service. You will also receive an automatic Government contribution to your TSP equal to 1% of your basic pay, and depending on your own contributions to TSP may be eligible for Government-matching contributions up to an additional 4% of your basic pay. So, if you choose to leave the service before completing 20 years, under the BRS you would separate with your contributions to your TSP and up to a total of 5% Government contributions.
(3) It is important that you understand that all Service members today have the option to participate in the TSP. The difference is that those who choose to remain in the “High-3” system will not receive Government-matching funds or the 1% automatic contribution.
(4) You must decide which of the retirement systems is best for you and your family based on your future financial needs, and your plans and goals for your Service career. You’ll get more information about the differences in the two retirement systems later in this course.
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20. Opt-In Check on Learning
SHOW SLIDE 2-20: Opt-In Check on Learning
Note: Conduct a check on learning and summarize this portion of the learning activity.
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21. Opt-In Check on Learning (Cont.)
Q1. All Service members who enter service, or who sign a contract to serve, on or before December 31, 2017 are automatically enrolled in the Blended Retirement System.
True
False
SHOW SLIDE 2-21: Opt-In Check on Learning (Cont.)
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. All Service members who enter service, or who sign a contract to serve, on or before December 31, 2017 are automatically enrolled in the Blended Retirement System.
True
False
A1. Answer: False
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22. Opt-In Check on Learning (Cont.)
Q2. The Opt-In Election Period is to .
January 1, 2017, December 31, 2017
January 1, 2017, December 31, 2018
January 1, 2018, December 31, 2018
January 1, 2019, December 31, 2019
SHOW SLIDE 2-22: Opt-In Check on Learning (Cont.)
Instructor’s Note: Continue with check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q2. The Opt-In Election Period is _________ to ___________.
January 1, 2017, December 31, 2017
January 1, 2017, December 31, 2018
January 1, 2018, December 31, 2018
January 1, 2019, December 31, 2019
A2. Answer: Opt-In period = January 1, 2018 to December 31, 2018
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23. Opt-In Check on Learning (Cont.)
Q3. Out of these options, which do you think is the best description of how the legacy “High-3” retirement system and the Blended Retirement System (BRS) are similar?
They each provide an automatic Government TSP contribution of 1% of a Service member’s basic pay
Service members are eligible for Government- matching TSP contributions in both systems
Both require 20 Years of Service to qualify for a pension
There are no similarities between the “High-3” and the BRS
SHOW SLIDE 2-23: Opt-In Check on Learning (Cont.)
Instructor’s Note: Continue with check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q3. Out of these options, which do you think is the best description of how the legacy “High-3” retirement system and the Blended Retirement System (BRS) are similar?
They each provide an automatic Government TSP contribution of 1% of a Service member’s basic pay
Service members are eligible for Government- matching TSP contributions in both systems
Both require 20 Years of Service to qualify for a pension
There are no similarities between the “High-3” and the BRS
A3. Answer: Both require 20 Years of Service to qualify for a pension
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24. Opt-In Basics Summary You should now be able to:
Identify the requirements for eligibility to opt into the BRS
Recognize the opt-in period
Recognize similarities and differences between the legacy “High-3” uniformed services retirement system and the BRS
SHOW SLIDE 2-24: Opt-In Basics Summary
Instructor’s Note: During this lesson, we completed Lesson 1 on Opt-In Basics.
You should now be able to:
Identify the requirements for eligibility to opt into the BRS
Recognize the opt-in period
(3) Recognize similarities and differences between the legacy “High-3” uniformed services retirement system and the BRS
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25. The Importance of Lifelong Financial Security
Lesson 2
SHOW SLIDE 2-25: The Importance of Lifelong Financial Security
Instructor’s Note: Splash Page for transition to Lesson 2 on Lifelong Financial Security.
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26. The Importance of Lifelong Financial Security Introduction
Covered in this lesson:
Costs and uncertainties of retirement
Simple steps you can take to make your own future a little less uncertain
You need to plan and begin saving for your retirement NOW!
SHOW SLIDE 2-26: The Importance of Lifelong Financial Security Introduction
Instructor’s Note: Instructor read and discuss with students using the slide.
Your retirement may seem like it is many years in the future, but that is exactly the reason you need to plan and begin saving for your retirement now!
In this lesson, you’ll learn about the costs and uncertainties of retirement that many people recognize too late, and be introduced to some 4 simple steps you can take to make your own future a little less uncertain.
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27. The Importance of Lifelong Financial
Security Objective
After completing this lesson you will be able to:
Understand the importance of planning and saving for retirement
SHOW SLIDE 2-27: The Importance of Lifelong Financial Security Objective
Instructor’s Note: Instructor read and discuss with students using the slide.
After completing this lesson you will be able to:
Understand the importance of planning and saving for retirement
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28. Why is Lifelong Financial Security Important?
Can you imagine what YOUR needs might be 50 years into the future?
According to the U.S. GAO and the BLS:
Life Expectancy = mid-80's
Only HALF of those approaching retirement age have savings at all
Living expenses could be well over $50,000/yr. between age 55 and 80
80% of your pre-retirement may be needed to maintain your current quality of life
SHOW SLIDE 2-28: Why is Lifelong Financial Security Important?
Instructor’s Note: Instructor read and discuss with students using the slide.
Retirement probably seems far off to you at this point in your life, and so it’s difficult to imagine what your needs might be 50 years into the future. Today’s generation at or near retirement age had the same problem when they were young. Consider some of these facts published by the U.S. Government General Accounting Office and the Bureau of Labor Statistics:
You can probably expect to live a good long life, into your mid-80’s.
(2) Many people approaching retirement age today have limited financial resources, and roughly half have no retirement savings at all. Those who have retirement savings probably don’t have enough, the average savings for households is about $104,000.
(3) The average American will need adequate savings and income to cover well over $50,000 per year in living expenses between age 55 and 80.
(4) Experts advise you may need around 80% of your pre-retirement income to maintain your quality of life.
While Social Security may cover some of your expenses, retirement savings will play a critical role in ensuring you can maintain the standard of living you desire in retirement. The decisions you make today when you are in your 20s or 30s may determine how you live during retirement.
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29. Uncertainties of Retirement
Your retirement future is uncertain:
Life expectancy continues to grow
Budgets and living expenses continue to change
Social security was never intended to be a primary source of retirement income
Investment returns may be unpredictable
NOW is the time to actively plan and invest in your future!
SHOW SLIDE 2-29: Uncertainties of Retirement
Instructor’s Note: Instructor read and discuss with students using the slide.
No one can predict the future. Your retirement is full of uncertainties. Consider just a few.
Life expectancy will continue to go up as health care is improving, meaning you’ll need more money to live on after your retirement.
(2) You’ll need to budget for living expenses, and unexpected health care expenses can disrupt the best plan. You have a standard of living to which you are accustomed, is that what you intend for your retirement?
(3) Social security was never intended to be your primary income during retirement.
(4) This is your opportunity to invest in your future NOW! Market fluctuations will impact your investments. Diversifying and starting early will help mitigate those issues. Your best strategy for protecting yourself against an uncertain future is to ensure you are actively planning and investing in your future.
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30. Cost of Retirement
Remember: Living expenses could be well over $50,000/yr. between age 55 and 80: BLS survey
People over age 55 are likely to reduce spending as a result of their reduced income
What will the cost of living be when you retire?
Essential retirement costs:
Housing
Transportation
Food
Healthcare
What Does It Mean?
SHOW SLIDE 2-30: Cost of Retirement
Instructor’s Note: Instructor read and discuss with students using the slide.
You are going to need money after you retire.
(1) The U.S. Bureau of Labor Statistics (BLS) conducts regular surveys of consumer spending. Based upon the most recent available survey results, in 2014 Americans over age 55 spent an average of $53,495 each year. Total expenditures were highest from age and decreased to an average of $36,673 for Americans over age 75.
(2) It is important to compare expenditure data against income data since the decrease in spending may be most attributable to decreases in income. In 2014, survey data indicates a steady decline in pretax income from age 55 to age 75. One must consider that declines in expenditures could be the result of declining income rather than consumer choices to reduce expenditures for other reasons. Keep in mind that this information is based on history, and that you are still years away from your own retirement.
(3) Another uncertainty to consider is how much these costs may increase by the time you retire. For most people, the essential costs of retirement include:
Housing - The largest portion of these expenditures is housing which accounted for nearly $18,000 or 33.3 % of the total annual expenditures for this population segment. The data is further segmented for Americans age 55-64, 65-74, and 75 and older. Based upon the BLS data, the share of housing costs relative to total expenditures decreased with age until age 75 and over. Americans over 75 spent fewer dollars on housing, but total annual expenditures also decreased for this population. As a result, housing represented a larger share of total expenditures at 36.5%. Transportation
Transportation - The next largest category of retirement spending was transportation at 17%, or a little over $9000. Transportation costs increased from age 55 to age 74 and then declined substantially. This is likely due to reduced mobility among the elderly population.
Food - Food was the third highest category at 12.6%, or about $6,700. The food share of spending remains fairly constant across the subcategories of age, but total dollar expenditures decrease with total expenditures and total pretax income as age increases.
Healthcare - Health care consumed an average of 8% of total expenditures for this population overall, but the health care share of total expenditures rose dramatically from age 55 to age 75 and over. Total dollar expenditures for this category were mostly consistent across the age subcategories, averaging about $4,300.
(4) What Does It Mean? In categories where dollar spending remains constant while total expenditures and total income falls, it is reasonable to assume the population had to reduce spending in other areas to maintain spending in the constant dollar categories. Further, where total share of expenditures remain constant, it is reasonable to assume cutbacks were made as a result of decreased total income.
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31. Cost of Retirement (Cont.)
Service Retirees Benefits
Maintaining Your Standard of Living
“Standard of Living” Definition
SHOW SLIDE 2-31: Cost of Retirement (Cont.)
Instructor’s Note: Continue to read and discuss with students using the slide.
Service Retirees Benefits
Service members who retire from the military may have access to military retiree healthcare benefits, commissary and exchange privileges, and access to military quality of life facilities such as gyms, recreation areas, theaters, etc. As a result, total spending for this population may be lower since there are significant cost savings for Service members who utilize military health care, commissaries, exchanges, and quality of life facilities. In addition, military retirees may be eligible for special local and state tax treatment of their retired pay and property in their home states.
Maintaining Your Standard of Living. The term “Standard of Living” has a variety of definitions and meanings, but what is important here is YOUR standard of living and what you want it to be during your retirement. How do you define your current standard of living? The answer to this question may be similar for most individuals in their 20s and 30s, but may be individually defined by the size of the family, location of the home, type of car, cost of entertainment, and preferences for travel and leisure. It is up to you to determine your current standard of living, your desired standard of living, and the standard of living you wish to have in retirement. Do you want the same, better, or a lesser standard of living when you are 40, 50, 60 or older? What will be your standard of living in retirement, since the costs of goods, services, and luxuries you desire will most likely have gone up?
(3) “Standard of Living” Definition. The necessities, comforts, and luxuries enjoyed or aspired to by an individual or group. A minimum of necessities, comforts, or luxuries held essential to maintaining a person or group in customary or proper status or circumstances.
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32. Retirement Income Streams
Needed Income?
Years to Reach Goal?
Standard of Living?
Retirement Age?
Potential "income streams"
Personal savings and investments
Employer-provided pensions
Social Security retirement benefits
Earned income if you choose (or need) to continue working
SHOW SLIDE 2-32: Retirement Income Streams
Instructor’s Note: Instructor read and discuss with students using the slide.
Once you have an idea when you want to retire and have considered all of the relevant factors, like the standard of living you want, you are ready to calculate the income you will need and how much you need to save each month (or year) to reach your goal.
There are four sources of retirement income, also known as “income streams”:
Your personal savings and investments
Employer-provided pensions
(3) Social Security retirement benefits, and
(4) Earned income if you choose (or need) to continue working
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33. Retirement Income Streams (Cont.)
Mike Smith
E-6 w/10 YOS
Entered Military at 24 yrs. old, plans to retire with 26 YOS hitting E-8 or higher before retirement.
Likely needs $70,000 a year at the retirement age of 65 Current income streams:
$33,000 from his military pension plan
$21,000 from Social Security
GAP = $16,000 /yr.
SHOW SLIDE 2-33: Retirement Income Streams (Cont.)
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
E-6 Mike Smith
Mike Smith is an E-6 with 10 years of service.
He entered the military at 24 and plans on retiring in 16 years with 26 years of service. He hopes to make E-8 or higher before he retires.
(3) Mike has made some estimates and determined he would like to have $70,000 a year when he retires for good at age 65. When he retires, he has decided to plan for a 25-year retirement (when he will reach age 90). Using today’s dollars, he estimates that he will have the following annual retirement income:
$33,000 from his military pension plan
$21,000 from Social Security
(4) That leaves a gap of $16,000 a year that will either need to come from personal savings and investments, or be provided through continued employment.
Mike needs to determine how much he needs to save each month/year to fill that gap, and what types of saving and investment vehicles he will use. And if he does not save enough, how long will he have to continue working to earn the income to live on?
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34. Retirement Income Streams (Cont.)
Plan ahead for your retirement
Ensure you have adequate savings for retirement
Plan for the standard of living you want to maintain at retirement
Take full advantage of financial literacy training, education, Personal Financial Managers (PFMs), and Counselors
You need to be an active participant in your own future!
SHOW SLIDE 2-34: Retirement Income Streams (Cont.)
Instructor’s Note: Instructor read and discuss with students using the slide.
Be an Active Participant! Let’s do a quick recap of what we’ve covered so far.
You want to stop working someday, and you need to plan ahead for how you will fund your retirement. Recent studies show most people who are at or near retirement age today either don’t have any money saved for retirement, or don’t think they have saved enough.
You face many uncertainties with your retirement, but the best protection against those uncertainties is to ensure you have adequate savings for retirement. Costs of retirement will include housing, transportation, food, and medical care, and you can expect all of those costs to be higher by the time you reach retirement age.
(3) You also need to plan for the standard of living you want to maintain after you stop working.
(4) As a member of the Uniformed Services, you will have a number of opportunities throughout your career to receive financial literacy training and education. You also have access to other resources such as Personal Financial Managers and Counselors. Regardless of the retirement system you choose, you should take full advantage of these opportunities and resources to help you create financial security for yourself and your family. Specific tools and resources available to help you with financial planning are discussed in more detail later in this course.
(5) You need to be an active participant in your own future!
2-34

35. Lifelong Financial Security Check on Learning
SHOW SLIDE 2-35: Lifelong Financial Security Check on Learning
Note: Conduct a check on learning and summarize this portion of the learning activity.
2-35

36. Lifelong Financial Security Check on Learning
Q1. Most people approaching retirement age today have adequate savings and investments to fund their retirement for the rest of their lives.
True
False
SHOW SLIDE 2-36: Lifelong Financial Security Check on Learning
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. Most people approaching retirement age today have adequate savings and investments to fund their retirement for the rest of their lives.
True
False
A1. Answer: False
2-36

37. Lifelong Financial Security Check on Learning (Cont.)
Q2. For most people, the essential costs of living in retirement include (Select all that apply):
Travel and Leisure
Transportation
Healthcare
Housing
Food
SHOW SLIDE 2-37: Lifelong Financial Security Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q2. For most people, the essential costs of living in retirement include (Select all that apply):
Travel and Leisure
Transportation
Healthcare
Housing
Food
A2. Answer: All EXCEPT Travel and Leisure
2-37

38. The Importance of Lifelong Financial
Security Summary
You should now be able to:
Understand the importance of planning and saving for retirement
SHOW SLIDE 2-38: The Importance of Lifelong Financial Security Summary
Instructor’s Note: During this lesson, we have completed Lesson 2 on the importance of planning for retirement. You should now be able to:
Understand the importance of planning and saving for retirement
2-38

39. Financial Planning Concepts
and the TSP
Lesson 3
SHOW SLIDE 2-39: Financial Planning Concepts and the TSP
Instructor’s Note: Splash Page for transition to Lesson 3 on Planning Concepts and the TSP.
2-39

40. Financial Planning Concepts and the TSP Introduction
Covered in this lesson:
Important terms and concepts you’ll need to understand in order to be prepared to compare your retirement system options
The advantages of investing in the Thrift Savings Plan (TSP)
SHOW SLIDE 2-40: Financial Planning Concepts and the TSP Introduction
Instructor’s Note: Instructor read and discuss with students using the slide.
In this lesson, you’ll learn about some of the important terms and concepts you’ll need to understand in order to be prepared to compare your retirement system options.
You’ll also learn about the advantages of investing in the Thrift Savings Plan (TSP), which is the U.S. Government’s version of the 401(k) investment plan.
2-40

41. Financial Planning Concepts
and the TSP Objectives
After completing this lesson you will be able to:
Understand the concept of a pension for Uniformed Services retirement pay
Define vesting and understand the requirements of the “vesting period”
Recognize the value of compound interest
Recognize the advantages of investing in the Thrift Savings Plan
SHOW SLIDE 2-41: Financial Planning Concepts and the TSP Objectives
Instructor’s Note: Instructor read and discuss with students using the slide.
After completing this lesson you will be able to:
Understand the concept of a pension for Uniformed Services retirement pay
Define vesting and understand the requirements of the “vesting period”
Recognize the value of compound interest
(4) Recognize the advantages of investing in the Thrift Savings Plan
2-41

42. Financial Planning Concepts
Pension
Defined Contribution Plan
Employer Matching
Portability
Vesting
Compound Interest
SHOW SLIDE 2-42: Financial Planning Concepts
Instructor’s Note: Instructor read and discuss with students using the slide.
Planning Concepts
What is a Pension? A pension, which is a type of “defined-benefit plan”, is a retirement system in which an employee is promised that they will continue receiving a regular income, paid in intervals, even after they retire. Usually, qualifying for a pension is based on completing a certain number of years of employment; in exchange, the employee is guaranteed a monthly income even after he or she stops working. The Uniformed Services’ legacy retirement systems, such as the “High-3,” are pension plans based on creditable years of service – usually 20 years. Upon qualifying for retirement, you know you are guaranteed to receive a monthly retirement paycheck for the rest of your life.
What is a Defined Contribution Plan? Defined contribution plans, such as the Thrift Savings Plan and 401(k) plans, allow you to save for your own retirement through contributions from your pay into an investment account that you can manage. Often, your employer contributes additional amounts to that account enhancing your ability to invest and save for retirement. Like a pension, a defined contribution plan allows you to receive income in retirement. But the income is not guaranteed and is based on how much you and your employer contribute during your working years, and how well the investments perform over time.
(3) What is Employer Matching? Employer matching is when your employer contributes a certain amount of money to your defined contribution plan, such as TSP, based on how much you contribute. This is additional money that comes from the employer, not from your pay, that goes into your retirement account, which you manage.
(4) What is Portability? Portability is the ability of an employee to take their retirement investment account with them when they leave one employer and move to another. Under defined contribution plans, such as TSP, the rules allow you to take all of the money you invested in your account and move that money to another retirement account when you leave the organization. Also, depending on the rules for “vesting”, which we’ll discuss on the next page, you may be able to take the money your employer invested in your retirement account with you. With portability, you can re-invest that account in your new employer’s program or convert it to a different type of investment. You also have the option to leave your money in the TSP and it will continue to grow, even after you leave the service. Separating members also have the option to cash out of their TSP accounts, however, this option carries significant tax implications.
For more information on portability, see your installation Personal Financial Manager (PFM) or visit the TSP website. If a PFM or other Unit financial counselor is not available, consult with your Unit leadership or seek guidance through Military OneSource.
(5) What is Vesting? Vesting is the right an employee has to keep the money, and interest earned on that money, their employer contributed to their retirement account. Usually, vesting is based on the length of time you work for that employer or participate in the retirement system. Once “vested,” the amount of money in your retirement account is yours to keep and the employer cannot take it back.
(6) What is Compound Interest? According to Albert Einstein, "The most powerful force in the universe is compound interest.“
Compound interest is interest added to the principal of a deposit or loan so that the added interest also earns interest from then on. This addition of interest to the principal is called compounding. Compound interest allows you to make money on the contributions you make to your retirement account from your basic pay, any Government-provided contributions you receive, and from the money earned by those contributions. Compounding makes it possible for your retirement savings to increase exponentially.
For example, if you invest $100, and over the course of a year earn a 5% rate of return, at the end of the first year you’ll have $105. If you leave that money alone, and the next year you earn another 5% rate of return, you’ll have $ So in the second year, you’ve earned 5% on your original $100 contribution, plus another 5% on the $5 you earned during the first year. At this rate, your original investment would double in less than 15 years.
Compounding is most effective the more years it has to work. So it’s best to start saving as soon as you can, and to save consistently.
2-42

43. The Thrift Savings Plan (TSP)
Retirement savings plan similar to 401(k)
Long-term retirement savings and investment plan
Advantages:
Automatic payroll deduction
Diverse investment options with pre-tax and after-tax treatments
Contributions from your service
Beneficiary participant account
Variety of withdrawal options
SHOW SLIDE 2-43: The Thrift Savings Plan (TSP)
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP.
(1) As a member of the Uniformed Services, you have the opportunity to participate in the Thrift Savings Plan, a retirement savings plan similar to 401(k) retirement plans offered to private sector employees.
(2) The purpose of the TSP is to give you the ability to participate in a long-term retirement savings and investment plan.
(3) TSP Advantages:
Saving for your retirement through the TSP provides many advantages, including the following: Automatic payroll deductions.
A diversified choice of investment options, including professionally designed lifecycle funds. A choice of tax treatments for your contributions:
Traditional (pre-tax) contributions and tax-deferred investment earnings, and Roth (after-tax) contributions with tax-free withdrawals at retirement (including withdrawals of earnings if you satisfy the IRS requirements). Low administrative and investment expenses (e.g., as of 2016 TSP management fee is .03% per year).
Contributions from your service (Government-automatic [1%] contributions and Government-matching contributions up to an additional 4% of your basic pay that you contribute) if you are enrolled in the BRS. Under certain circumstances, access to your money while you are still a member of the Uniformed Services.
A beneficiary participant account established for your spouse, or anyone you designate, in the event of your death.
A variety of withdrawal options.
2-43

44. The Thrift Savings Plan (TSP) (Cont.)
TSP Vesting
Tax-Exempt Pay
SHOW SLIDE 2-44: The Thrift Savings Plan (TSP) (Cont.)
Instructor’s Note: Instructor continue to read and discuss with students using the slide.
TSP (Cont.)
(1) TSP Vesting. Vesting refers to the time-in-service requirement that you must satisfy before you’re entitled to keep your Government-automatic (1%) contributions (and their earnings). For BRS members, this requirement is 2 years. All of your time as a member of the Uniformed Services counts toward vesting, not just service while you are a TSP participant. So, if you opt into the BRS, and have already have 2 or more full YOS, you will be fully vested in your Government-automatic contributions. The date your vesting period begins is determined by your Pay Entry Base Date (PEBD), which your service reports to the TSP. Your PEBD is shown along with other vesting information on your quarterly and annual TSP participant statements. If you leave the Uniformed Services before you satisfy the vesting requirement, your Government-automatic (1%) contributions and their earnings must be forfeited. However, if you die before separating from service, your beneficiaries are automatically considered vested in all of the money in your account. You are immediately vested in your own contributions plus their earnings, as well as vested in any Government-matching contributions, plus earnings on those matching contributions. You do not need to serve for 2 years in order to keep Government-matching contributions.
(2) Tax-Exempt Pay. If you are serving in a combat zone, you can contribute tax-exempt pay to your traditional account or to your Roth account. If you contribute tax-exempt pay to your traditional account, the amount you contribute will be tax-free when withdrawn. If you contribute tax-exempt pay to your Roth account, both the amount contributed and associated earnings will be tax-free when withdrawn (if you satisfy the regular Roth withdrawal requirements).
2-44

45. Planning Concepts and the TSP Check on Learning
SHOW SLIDE 2-45: Planning Concepts and the TSP Check on Learning
Note: Conduct a check on learning and summarize this portion of the learning activity.
2-45

46. Planning Concepts and the TSP Check on Learning
Q1. A pension is a type of ; a retirement system in which an employee is promised that they will continue receiving a regular income even after they retire.
defined-benefit plan
defined contribution o tax-exempt plan
401(k) plan
SHOW SLIDE 2-46: Planning Concepts and the TSP Check on Learning
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. A pension is a type of ________; a retirement system in which an employee is promised that they will continue receiving a regular income even after they retire.
defined-benefit plan
defined contribution
tax-exempt plan
401(k) plan
A1. Answer: defined-benefit plan
2-46

47. Planning Concepts and the TSP Check on Learning (Cont.)
Q2. Once “vested” in your retirement account, .
the money contributed to your account by your employer, and the interest earned on that money, is yours to keep
your employer will begin making contributions to your defined contribution plan, such as the TSP
your employer may contribute to your account, but has the right to take that money back
you can re-invest that account in a new employer’s program
SHOW SLIDE 2-47: Planning Concepts and the TSP Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q2. Once “vested” in your retirement account, _______.
the money contributed to your account by your employer, and the interest earned on that money, is yours to keep
your employer will begin making contributions to your defined contribution plan, such as the TSP
your employer may contribute to your account, but has the right to take that money back
you can re-invest that account in a new employer’s program
A2. Answer: the money contributed to your account by your employer, and the interest earned on that money, is yours to keep
2-47

48. Planning Concepts and the TSP Check on Learning (Cont.)
Q3. Compound interest is when your employer contributes a certain amount of money to your defined contribution plan, such as the TSP, based on how much you contribute.
True
False
SHOW SLIDE 2-48: Planning Concepts and the TSP Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q3. Compound interest is when your employer contributes a certain amount of money to your defined contribution plan, such as the TSP, based on how much you contribute.
True
False
A3. Answer: False
2-48

49. Planning Concepts and the TSP Check on Learning (Cont.)
Q4. Advantages of the Thrift Savings Account include (Select all that apply):
Automatic payroll deductions
Contributions from the Government if you are enrolled in the BRS
A diversified choice of investment options, including professionally designed lifecycle funds
SHOW SLIDE 2-49: Planning Concepts and the TSP Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q4. Advantages of the Thrift Savings Account include (Select all that apply):
Automatic payroll deductions
Contributions from the Government if you are enrolled in the BRS
A diversified choice of investment options, including professionally designed lifecycle funds
A4. Answer: ALL answers are correct
2-49

50. Financial Planning Concepts
and the TSP Summary
You should now be able to:
Understand the concept of a pension for Uniformed Services retirement pay
Define vesting and understand the requirements of the “vesting period”
Recognize the value of compound interest
Recognize the advantages of investing in the Thrift Savings Plan
SHOW SLIDE 2-50: Financial Planning Concepts and the TSP Summary
Instructor’s Note: Instructor read and discuss with students using the slide.
You have completed Lesson 3 on financial terms and concepts, and the Thrift Savings Plan (TSP). You should now be able to:
Understand the concept of a pension for Uniformed Services retirement pay
Define vesting and understand the requirements of the “vesting period”
Recognize the value of compound interest
Recognize the advantages of investing in the Thrift Savings Plan
2-50

51. Differences in the “High-3” and BRS
Lesson 4
SHOW SLIDE 2-51: Differences in the “High-3” and BRS
Instructor’s Note: Splash Page for transition to Lesson 4 on “High-3” and BRS.
2-51

52. Differences in the “High-3” and BRS Introduction
Covered in this lesson:
The differences between the components of the Uniformed Services’ legacy “High-3” retirement system and the BRS
SHOW SLIDE 2-52: Differences in the “High-3” and BRS Introduction
Instructor’s Note: Instructor read and discuss with students using the slide.
In this lesson, you’ll learn more about the differences between the components of the Uniformed Services’ legacy “High-3” retirement system and the BRS.
2-52

53. Differences in the “High-3” and BRS Objectives
After completing this lesson you will be able to:
Understand the basic components of the “High-3” Uniformed Services retirement system
Understand the basic components of the Blended Retirement System
Understand the concepts of, and eligibility requirements for, Continuation Pay and the Lump Sum Option
SHOW SLIDE 2-53: Differences in the “High-3” and BRS Objectives
Instructor’s Note: Instructor read and discuss with students using the slide.
After completing this lesson you will be able to:
Understand the basic components of the “High-3” Uniformed Services retirement system
Understand the basic components of the Blended Retirement System
(3) Understand the concepts of, and eligibility requirements for, Continuation Pay and the Lump Sum Option
2-53

54. Differences in the “High-3” and BRS
SHOW SLIDE 2-54: Differences in the “High-3” and BRS
Instructor’s Note: Instructor read and discuss with students using the slide.
“High-3” and BRS
The “High-3” Retirement System. The legacy "High-3" retirement system for the Uniformed Service is based on a pension, or defined-benefit plan.
Under the “High-3” system, Active Component (AC) members today who serve for 20 years are vested in the system and will receive monthly regular retirement pay upon retirement. Reserve Component (RC) members under the “High-3” system can start receiving non-regular retirement pay after 20 years of qualifying service and reaching age 60 or earlier based on your qualifying active service.
The formula for regular retirement pay under the “High-3” system for AC Service members is 2.5% X Years of Service (YOS) X the average of the highest 36 months of basic pay, which results in a monthly retired pay benefit of 50% of the average of your highest 36 months of basic pay, based on 20 Years of Service. For members of the RC, Years of Service is equal to the Service member’s accumulated retirement points divided by 360.
(2) The Blended Retirement System. The new Blended Retirement System takes effect on January 1, Like the “High-3” retirement system, the new Blended Retirement System provides a pension, or defined benefit, of monthly retired pay, though the formula changes.
The new formula for both Active and Reserve Components is: 2.0% x your Years of Service x the average of your highest 36 months of basic pay, which results in a monthly retired pay benefit of 40% of the average of your highest 3 years of basic pay based on 20 Years of Service. Years of Service is calculated based on an individual's Pay Entry Base Date (PEBD), also known as Pay Date, for the AC, and based on Total Years of Qualifying Service for the RC. For RC members, Total Years of Qualifying Service is still computed by dividing the number of accumulated retirement points by 360. The defined-benefit pension is reduced when the multiplier decreases from 2.5% to 2.0% under the new BRS. However, depending upon your own contribution rate to the TSP and investment returns, the addition of Government automatic and matching contributions could allow you to achieve nearly the same or better total retirement benefit when compared to the current retirement system.
The qualifying service for the AC to receive regular retirement pay in the BRS is still at least 20 qualifying Years of Service, the same as for the current system. For members of the RC qualifying for a non-regular retirement, the vesting point remains 20 years of qualifying service, although the member will not begin receiving retired pay until age 60. Some members of the RC could begin receiving retired pay sooner if they have certain types of qualifying service that reduces his or her retirement age.
2-54

55. Differences in the “High-3”
and BRS (Cont.)
Defined Contributions
Continuation Pay
Basis for CP Amounts
Important CP Information for RC Members
SHOW SLIDE 2-55: Differences in the “High-3” and BRS (Cont.)
Instructor’s Note: Continue to read and discuss with students using the slide.
“High-3” and BRS (Cont.)
Defined Contributions. A major difference between the “High-3” retirement system and the new BRS is that the new blended system includes a TSP account for Service members where the Government will contribute to the account along with the member. If you choose to participate in the BRS, you will be able to set up a TSP account if you do not already have one.
Upon opting into the BRS, you will choose the percentage contribution you want to make from your basic pay each month. For those members who already have a TSP account, you may still determine your contribution level upon opting in.
The Government will begin automatically contributing an amount equal to 1% of your basic pay, and will continue these contributions until you separate, retire, or complete 26 years of service, whichever occurs first. You will begin seeing this contribution the next pay period after you opt-in.
In addition, the Government will begin matching your contributions up to 4% of basic pay each month.
If you opt into the BRS, you are immediately vested in your own contributions plus their earnings, as well as vested in any Government-matching contributions, plus earnings on those matching contributions. You do not need to serve for 2 years in order to keep Government-matching contributions.
You must serve at least 2 complete years from your PEBD to be vested in your Government-automatic (1%) contributions and their earnings. However, if you already have 2 or more full Years of Service when you opt in, you will be fully vested in your Government-automatic contributions and their earnings. These Government matching contributions will continue as long as you continue contributing, and until you separate, retire, or complete 26 Years of Service.
(2) Continuation Pay. With the introduction of the new BRS, Congress authorized a Continuation Pay (CP) bonus, which may be provided to you mid-career for your commitment to at least 3 more Years of Service.
Continuation Pay will be paid to members covered by the BRS anywhere between eight to 12 years of service depending on guidelines that will be put out by your Service. This pay, which is like an incentive or bonus, is designed to encourage members to continue serving at critical points in their career. The amount of Continuation Pay and when it is paid will be determined by your Service based on unique aspects of each career field.
While Continuation Pay is not part of a Service member’s retirement benefit, it is a factor in your decision between opting into the BRS or remaining in the “High-3” retirement system.
(3) Basis for CP Amounts. Your Service may decide that a particular career field is in high demand, and they must retain as many members in that career field as possible. This might lead your Service to pay a higher Continuation Pay bonus to members with that particular skill at the mid-career point.
The amounts paid to each career field may vary from year to year, although they will always be in the range of a minimum of 2.5 months of basic pay up to a maximum of 13 months of basic pay for an AC member, and a minimum of 0.5 months of basic pay to a maximum of 6 months of basic pay for an RC member, calculated as if that member was serving on active duty.
Active Guard/Reserve and Full-Time Support members will be paid at least the minimum of 2.5 months of basic pay if they are serving on active duty.
(4) Important CP Information for RC Members. Some members of the RC will be eligible to opt into BRS because they have less than 4,320 retirement points, but will be past the 12 year point in their career.
Those members may opt into BRS but will not be eligible for the Continuation Pay bonus.
Only those members with fewer than 12 years of service measured from their Pay Entry Base Date will be eligible for Continuation Pay.
2-55

56. Differences in the “High-3”
and BRS (Cont.)
Lump Sum
How the Lump Sum Option Works
Important Lump Sum Information for RC Members
Other Important Considerations
Lump Sum Option Regular Retirement
Lump Sum Option Non-Regular Retirement
SHOW SLIDE 2-56: Differences in the “High-3” and BRS (Cont.)
Instructor’s Note: Continue to read and discuss with students using the slide.
“High-3” and BRS (Cont.)
(1) Lump Sum. One of the most significant changes to the BRS, when compared to the High-3 system, is the opportunity for Service members to get a portion of their retired pay as a lump sum upon retirement. This means you can receive money upfront as an advance on your own retired pay. The Lump Sum Option could be a very valuable opportunity for Service members entering retirement. This payment may provide you the opportunity to pay off debts, buy a house, or even to start a business. It is important to understand, though, that there is a cost to receiving your retired pay upfront. The amount you receive will be less than you would have gotten if it were spread out over normal monthly payments. This is because the money you would receive in the future is not as valuable as money you receive in today’s dollars. If you elect the Lump Sum, your future stream of retired pay is discounted to account for the time value of money. Also, there are tax considerations to understand, and the Lump Sum payment may even impact any disability compensation you are entitled to from the Department of Veterans Affairs. The Lump Sum Option is a valuable option under the BRS and creates opportunities not available with the legacy retirement systems. But it is important to learn more about the pros and cons of this option prior to retirement.
(2) How the Lump Sum Option Works. You may choose to receive either 50 percent or 25 percent of the discounted present value of your future retirement payments in exchange for reduced monthly retired pay from when you retire until when you reach the Social Security “full retirement age”, which for most people is age 67. At age 67, your retired pay goes back to its full amount. The discounted present value is determined by estimating what your retired pay will be and then reducing it to its value in “today’s dollars” by using a formula that is based on market conditions and other factors.
(3) What this means:
90 days prior to retirement, you may elect to receive either 50 percent or 25 percent of your retirement from when you retire until age 67. Upon retirement, you will receive a lump sum payment that is the reduced “discounted present value” of this portion of your retired pay.
You will continue receiving monthly retired paychecks, but only 50 percent or 75 percent of what you would have otherwise received, depending on which lump sum option you chose. When you reach age 67, your monthly retired pay will go back to what it otherwise would have been – you will start receiving full retired paychecks again.
(4) Important Lump Sum Information for RC Members. Like their active duty counterparts, Reserve Component members participating in the BRS have the option of electing a lump-sum payment of retired pay. Like all retired pay, though, Reserve Component members qualifying for a “non-regular retirement” are not eligible to get this lump sum until becoming eligible for retired pay – after the “gray area.” Usually this is age 60, but your age of eligibility may be reduced if you have certain types of qualifying active service. Otherwise, the Lump Sum Option works the same for Reserve Component members. Upon eligibility for retired pay, you may elect 50 percent or 25 percent of your retired pay for the time period:
From: Your retired pay eligibility date (usually when you turn 60),
To: Full Social Security Retirement Age (usually age 67)
(5) Other Important Considerations. The Lump Sum Option is a valuable opportunity for members to receive a portion of their retired pay upfront; but there are important considerations:
You will get the discounted present value of this portion of your retired pay, meaning you will not get as much as you would have if you took the retired pay in normal monthly installments.
Like all retired pay, this lump sum payment is subject to tax; in many cases, receiving a large sum of money may change your tax liability considerably. This can be potentially mitigated by choosing to take your lump sum payment in installments over several years (maximum of 4 installment, 1 per year), although members need to understand the tax implications and consult a professional before electing the Lump Sum Option. Those retirees who anticipate they will receive a disability rating from the Department of Veterans Affairs need to know their disability compensation could be impacted or delayed if they take the Lump Sum Option.
2-56

57. Lump Sum Option: Regular Retirement
SHOW SLIDE 2-57: Lump Sum Option: Regular Retirement
Instructor’s Note: Instructor read and discuss with students using the slide.
Enlarged Graphic of Lump Sum Option: Regular Retirement
2-57

58. Lump Sum Option: Non-Regular Retirement
SHOW SLIDE 2-58: Lump Sum Option: Non-Regular Retirement
Instructor’s Note: Instructor read and discuss with students using the slide.
Enlarged Graphic of Lump Sum Option: Non-Regular Retirement
2-58

59. “High-3” and BRS Check on Learning
SHOW SLIDE 2-59: “High-3” and BRS Check on Learning
Note: Conduct a check on learning and summarize this portion of the learning activity.
2-59

60. “High-3” and BRS Check on Learning
Q1. The formula for retired pay under the "High-3" retirement system is x Years of Service x the average of the highest 36 months of the Service member's basic pay, while under the BRS the formula is
x Years of Service x the average of the highest 36 months of the Service member's basic pay.
o 2.0%, 2.0%
o 2.0%, 2.5%
o 2.5%, 2.0%
o 2.5%, 2.5%
SHOW SLIDE 2-60: “High-3” and BRS Check on Learning
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. The formula for retired pay under the "High-3" retirement system is ___ x Years of Service x the average of the highest 36 months of the Service member's basic pay, while under the BRS the formula is ____x Years of Service x the average of the highest 36 months of the Service member's basic pay.
o 2.0%, 2.0%
o 2.0%, 2.5%
o 2.5%, 2.0%
o 2.5%, 2.5%
A1. Answer: 2.5%, 2.0%
2-60

61. “High-3” and BRS Check on Learning (Cont.)
Q2. Under the BRS, Service members who elect to opt in are eligible for
up to an additional 4% Government-matching contributions to a TSP account
automatic 1% Government contributions to a TSP account
neither of these
both of these
SHOW SLIDE 2-61: “High-3” and BRS Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q2. Under the BRS, Service members who elect to opt in are eligible for .
up to an additional 4% Government-matching contributions to a TSP account
automatic 1% Government contributions to a TSP account
neither of these
both of these
A2. Answer: both of these
2-61

62. “High-3” and BRS Check on Learning (Cont.)
Q3. The allows Service members to take 25% or 50% of their retired pay up front as an advance upon retirement.
Continuation Pay
Lump Sum option
Thrift Savings Plan
“High-3” Retirement System
SHOW SLIDE 2-62: “High-3” and BRS Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q3. The __________ allows Service members to take 25% or 50% of their retired pay up front as an advance upon retirement.
Continuation Pay
Lump Sum option
Thrift Savings Plan
“High-3” Retirement System
A3. Answer: Lump Sum Option
2-62

63. Differences in the “High-3” and BRS
Summary
You should now be able to:
Understand the basic components of the current Uniformed Services retirement system
Understand the basic components of the Blended Retirement System
Understand the concepts of, and eligibility requirements for, Continuation Pay and Lump Sum
SHOW SLIDE 2-63: Differences in the “High-3” and BRS Summary
Instructor’s Note: Instructor read and discuss with students using the slide.
You have completed Lesson 4 on the differences between the “High-3” Uniformed Services retirement system and the BRS. You should now be able to:
Understand the basic components of the current Uniformed Services retirement system
(2) Understand the basic components of the Blended Retirement System
(3) Understand the concepts of, and eligibility requirements for, Continuation Pay and Lump Sum
2-63

64. Important Factors to Consider
Lesson 5
SHOW SLIDE 2-64: Important Factors to Consider
Instructor’s Note: Splash Page for transition to Lesson 5 on Factors to Consider.
2-64

65. Important Factors to Consider
Introduction
Covered in this lesson:
Important factors you may need to think through before deciding whether to participate in the legacy “High-3” retirement system or the BRS.
SHOW SLIDE 2-65: Important Factors to Consider Introduction
Instructor’s Note: Instructor read and discuss with students using the slide.
In this lesson, you’ll learn about some important factors you may need to think through before deciding whether to participate in the legacy “High-3” retirement system or the BRS.
2-65

66. Important Factors to Consider
Objective
After completing this lesson you will be able to:
Understand important factors necessary in order to make an informed retirement system selection (whether to opt into the Blended Retirement System or remain in the legacy “High-3” system) by December 31, 2018
SHOW SLIDE 2-66: Important Factors to Consider Objective
Instructor’s Note: Instructor read and discuss with students using the slide.
After completing this lesson, you will be able to:
Understand important factors necessary in order to make an informed retirement system selection (whether to opt into the Blended Retirement System or remain in the legacy “High-3” system) by December 31, 2018
2-66

67. Personal Goals and Other
Considerations
Short-Mid-Long Term Goals (1-2 yrs., 2-5 yrs., and 5 yrs. on)
Your Service Career Goals
Personal and Family Considerations
SHOW SLIDE 2-67: Personal Goals and Other Considerations
Instructor’s Note: Instructor read and discuss with students using the slide.
Personal Goals and Other Considerations
Short-Mid-Long Term Goals. Someone in your life has probably talked to you about goals and goal-setting. It may have been your parents, your High School counselor, or a member of your Service leadership. Among the many good reasons to set goals are that they direct your attention to the things that are most important to you, and help you sustain the effort and motivation to achieve them. You can have short-term, mid-term, and long-term goals.
Short-term goals are goals that can be accomplished in 1-2 years. An example of a short-term goal in your Service career might be to complete training program for a set of skills you are trying to develop.
Mid-term goals are those that take between 2 and 5 years to accomplish. You may have a mid-term goal to get a promotion or complete a Bachelor’s degree.
Long-term goals are those that extend beyond five years. Your retirement goals are long-term goals.
You need to consider your goals when you are thinking about the Uniformed Services retirement system you plan to choose. How long do you plan to serve, and what factors may influence that decision?
(2) Your Service Career Goals. How do your Service career goals relate to any goals you might have for working in the private sector? These are just a few important things to think about that might impact your retirement system decision. While you’re thinking about these things, you might want to write them down for future reference. A worksheet has been provided as an attachment to this document for this purpose. Take some time to think about your career in the Uniformed Services.
What are your Service career goals? Have you thought about serving 20 years or more? Maybe you’re looking for a college degree, or a professional military education. What do you want to achieve?
Do you expect to be active duty for your full career, or have you considered continuing with the Reserve Component later on? At the end of this lesson, you’ll have an opportunity to review some examples of what other Service members are considering with regards to their family, career, and long-term financial planning.
(3) Personal and Family Considerations. Your personal and family obligations, plans, and goals may be some of your most important considerations as you plan for retirement and select a Uniformed Services retirement system.
For example, do you have a spouse? Does he or she have a career and, if so, what is their income?
Is your family situation going to change? For example, maybe you’re single now, but planning to get married soon.
And what are your current family expenses? Things like saving for children to go to college, providing care or financial support for aging parents, or large purchases such as a new home, car, or boat.
Also, if you are part of the Reserve Component and have a civilian job, should discuss limitations on contributions between your civilian and military retirement accounts with your PFM.
These are all items that must be considered in your long-term financial and retirement plans. If you have a family, you need to discuss your retirement options with them as part of your process for getting ready to make your retirement system selection.
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68. The “Working-Age Retiree”
Retired Service member that continues to work after leaving the Service
Example - An 18 yr. old entering the Service and putting in 20 YOS qualifies for military retirement at age 38
o Work will likely need to continue for 20 or 25 years
Working age retiree advantages:
Additional income provided by military retirement pay
Access to health care benefits and installation services
Programs that provide cost savings to the beneficiary
Members leaving the Service lose
non-taxable allowances and inexpensive healthcare
SHOW SLIDE 2-68: The “Working-Age Retiree”
Instructor’s Note: Instructor read and discuss with students using the slide.
The “Working-Age Retiree”
Even if you choose to remain in the Service for a full career or 20 years or more, you may eventually become a “working-age retiree,” someone who has retired from the Service, but continues to work after leaving the Service.
(2) Consider a Service member who enters military service at age 18 and serves 20 years. While that member qualifies for military retirement, at age 38 they will likely continue to work in another job capacity for another 20 or 25 years or more.
(3) These members have the advantage of military retiree benefits, but may still have children at home and living expenses that exceed the monthly retirement pay they receive. So, while they are retired when viewed from the military perspective, they are not retired in the “no longer working” sense.
A great advantage of being a working age retiree is the additional income provided by the military retirement pay. This extra income can mean that a member can pursue a passion with less regard for total salary since their retirement pay provides a bit of cushion.
In addition, military retirees have access to health care benefits, installation services, and programs that provide cost savings to the beneficiary.
Perhaps one of the greatest surprises for military members who leave service is the loss of non-taxable allowances and health care with little or no out of pocket cost. These issues must be considered as part of long-term planning for retirement.
2-68

69. Factors to Consider Check on Learning
SHOW SLIDE 2-69: Factors to Consider Check on Learning
Note: Conduct a check on learning and summarize this portion of the learning activity.
2-69

70. Factors to Consider Check on Learning
Q1. Which of the following are important considerations when you are thinking about and planning which retirement system you will participate in?
(Select all that apply)
Long-term goals
How long you plan to serve
Personal and family considerations
Whether you’ll be a “working age retiree”
SHOW SLIDE 2-70: Check on Learning
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. Which of the following are important considerations when you are thinking about and planning which retirement system you will participate in?
(Select all that apply)
Long-term goals
How long you plan to serve
Personal and family considerations
Whether you’ll be a “working age retiree”
Q1. Answer: ALL answers are correct
2-70

71. Activity #1: Review Service Member Profiles (Factors to Consider)
AC, E-6, 20 YOS
SHOW SLIDE 2-71: Activity #1: Review Service Member Profiles (Factors to Consider) AC, E-6, 20 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Activity 1 Purpose: This activity is designed to give you an opportunity to review the important factors some Service members may be considering as they plan to make their own decision whether to stay in the “High-3” retirement system or opt into the BRS.
Example:
AC, E-6, 20 YOS: Mike Smith
2-71

72. Activity #1: Review Service Member Profiles (Factors to Consider)
AC, O-1, 6 YOS
SHOW SLIDE 2-72: Activity #1: Review Service Member Profiles (Factors to Consider) AC, O-1, 6 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC, O-1, 6 YOS: John Wright
2-72

73. Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, E-4, 20 YOS
SHOW SLIDE 2-73: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, E-4, 20 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, E-4, 20 YOS: Jason Rice
2-73

74. Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, E-3, 8 YOS
SHOW SLIDE 2-74: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, E-3, 8 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, E-3, 8 YOS: Erika Harris
2-74

75. Activity #1: Review Service Member Profiles (Factors to Consider)
RC, W-2, 20 YOS
SHOW SLIDE 2-75: Activity #1: Review Service Member Profiles (Factors to Consider) RC, W-2, 20 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
RC, W-2, 20 YOS: Ryan McCormick
2-75

76. Activity #1: Review Service Member Profiles (Factors to Consider)
RC, E-2, 8 YOS
SHOW SLIDE 2-76: Activity #1: Review Service Member Profiles (Factors to Consider) RC, E-2, 8 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
RC, E-2, 8 YOS: Samantha Baker
2-76

77. Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, O-3, 10 YOS
SHOW SLIDE 2-77: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, O-3, 10 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, O-3, 10 YOS: Derek Roberts
2-77

78. Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, O-2, 10 YOS
SHOW SLIDE 2-78: Activity #1: Review Service Member Profiles (Factors to Consider) AC to RC, O-2, 10 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, O-2, 10 YOS: Andrea Knowing
2-78

79. Important Factors to Consider
Summary
You should now be able to:
Understand important factors necessary in order to make an informed retirement system selection (whether to opt into the Blended Retirement System) by December 31, 2018.
SHOW SLIDE 2-79: Important Factors to Consider Summary
Instructor’s Note: Instructor read and discuss with students using the slide.
You have completed Lesson 5 on the important considerations you need to think through before deciding which Uniformed Services retirement system you’ll choose to participate in.
You should now be able to:
Understand important factors necessary in order to make an informed retirement system selection (whether to opt into the Blended Retirement System) by December 31, 2018.
2-79

80. Tool and Resources Lesson 6 SHOW SLIDE 2-80: Tool and Resources
Instructor’s Note: Splash Page for transition to Lesson 6 on Tool and Resources.
2-80

81. Tools and Resources Introduction
Covered in this lesson:
Tools and resources available to you to help you with retirement planning and decision making
Informed decision making
Remember: Only YOU can decide whether to remain in the legacy “High-3” retirement system or
opt into BRS.
SHOW SLIDE 2-81: Tool and Resources Introduction
Instructor’s Note: Instructor read and discuss with students using the slide.
In this lesson, you’ll learn about the tools and resources available to you to help you with retirement planning and decision making so you can make an informed decision about which retirement system you want to participate in. As previously discussed, the decision whether to remain in the legacy “High-3” retirement system or opt into BRS is your decision to make. These resources are available to support you making that decision, not to tell you what decision to make.
2-81

82. Tools and Resources Objectives
After completing this lesson you will be able to:
Identify (and access) tools and resources available to provide you with information and education for making financial decisions
Understand how to use the BRS calculator to perform a financial comparison of your retirement planning options
SHOW SLIDE 2-82: Tool and Resources Objectives
Instructor’s Note: Instructor read and discuss with students using the slide.
After completing this lesson you will be able to:
Identify (and access) tools and resources available to provide you with information and education for making financial decisions
Understand how to use the BRS calculator to perform a financial comparison of your retirement planning options
2-82

83. Tools and Resources
You are the person who will decide which retirement plan to choose
No one else should make this decision for you
But that doesn’t mean you have to make this decision in a vacuum
Where to Go for Guidance
SHOW SLIDE 2-83: Tool and Resources
Instructor’s Note: Instructor read and discuss with students using the slide.
Tool and Resources
You are the person who will decide which retirement plan to choose.
No one else should make this decision for you.
But that doesn’t mean you have to make this decision in a vacuum. There are a variety of tools and resources available to inform and educate you about financial planning for your future.
Where to Go for Guidance. Your Service has personal financial counselors and educators, and Retirement Services Officers (RSOs), who can help guide you through the financial planning process.
You will have the opportunity to attend classes and seminars on financial planning over the course of your career, and instruction on the Opt-In Decision, in addition to this course, is available.
On an installation, the primary source of financial education or counseling is the Personal Financial Manager (PFM). Members who do not have access to an installation PFM may contact Military OneSource.
In addition, Personal Financial Counselors (PFCs) and RSOs may be available through your unit. Navy and Marine Corps personnel can access training and counseling at the unit level through the unit Command Financial Specialist (CFS). RC, as well as AC, personnel living near a military installation may have access to an installation PFM or RSO. Other resources for RC personnel include PFCs assigned to units or installation and Military OneSource.
Remember, these counselors are there to provide you with information and education that will help you make an informed decision on your retirement system, not to make the decision for you.
2-83

84. Tools and Resources (Cont.)
BRS-related Websites:
Thrift Savings Plan:
Military Pay:
Military OneSource:
My Army Benefits (includes National Guard):
Navy:
Air Force (NOTE: Requires CAC access):
Marines:
USCG/NOAA:
USPHS:
SHOW SLIDE 2-84: Tool and Resources (Cont.)
Instructor’s Note: Continue and discuss with students using the slide.
Tool and Resources (Cont.)
BRS-related Websites. Various websites are available to provide you with information. A comprehensive list of those links is provided below. And the BRS calculator will enable you to run the numbers to help decide which system is your best option.
Thrift Savings Plan:
Military Pay:
Military OneSource:
My Army Benefits (includes National Guard):
Navy:
Air Force
Note: Requires CAC access:
Marines:
USCG/NOAA:
USPHS:
2-84

85. BRS Calculator
Online comparison calculator to estimate your potential retirement savings and income
Use this tool while consulting with one of your Service’s financial counselors or educators
You can compare the results of different TSP contribution rates over time
Active Component Information Required
Reserve Component Information Required
SHOW SLIDE 2-85: BRS Calculator
Instructor’s Note: Instructor read and discuss with students using the slide.
BRS Calculator
The BRS calculator is an online comparison calculator that will enable you to enter information about your current and projected Service status in order to estimate your potential retirement savings and income.
You will be able to access and use the BRS calculator on your own, but it is recommended that you use it while consulting with one of your Service’s financial counselors or educators so they can help you fully understand the results.
(3) The BRS calculator will enable you to compare, side-by-side, your potential retirement benefits from the legacy “High-3” retirement system and the BRS. The calculator will also enable you to compare the results of different TSP contribution rates, allowing you to see the significant difference over time between contributing 1% or more of your basic pay.
(4) Active Component Information. Current Component: Active
Anticipated Separation/Retirement Component: Active/Reserve Personal Information
Date of Birth
Pay Entry Base Date (PEBD) Current pay grade
Estimate of Service at Separation/Retirement (years, months)
Anticipated BRS Opt-In Date
Anticipated Transition to RC Date (if applicable)
Retirement Information
Life Expectancy TSP Withdrawal Age
TSP Contribution Rate TSP Rate of Return Other
Anticipated Career Progression
Anticipated Bonuses and Payments (if applicable)
Anticipated Lump Sum (if applicable)
(5) Reserve Component Information Current Component: Reserve
Anticipated Separation/Retirement Component: Reserve Personal Information
Estimate of Service at Separation/Retirement (years, months) Anticipated BRS Opt-In Date
Points earned to date Current creditable years
Number of Active Service days served during your career
Future RC points
Anticipated creditable years at retirement
2-85

86. How to Opt-In
Complete the BRS Opt-In Course, have your plans in place and your financial literacy education in check
Army, Navy, and Air Force members who elect to opt-in, will be able to do so by logging onto MyPay on or after January 1, 2018.
Marine Corps members will make their elections through Marine Online.
Coast Guard, Public Health Service, and NOAA members will be advised by their Service on the procedures for opting in, if they choose to do so.
SHOW SLIDE 2-86: How to Opt-In
Instructor’s Note: Instructor read and discuss with students using the slide.
How to Opt-In
Let’s say you have completed the BRS Opt-In Course, discussed your retirement system options with your Service-provided financial professional and your family, and participated in retirement planning and financial literacy education provided by your Service, and you decide you want to opt into the BRS. How do you opt in?
(2) Members of the Army, Navy, and Air Force who elect to opt-in, will be able to do so by logging onto myPay on or after January 1, 2018 to make their election.
(3) Members of the Marine Corps will make their elections through Marine Online.
(4) And members of the Coast Guard, Public Health Service, and NOAA will be advised by their Service on the procedures for opting in, if they choose to do so.
2-86

87. Tool and Resources Check on Learning
SHOW SLIDE 2-87: Check on Learning
Note: Conduct a check on learning and summarize the learning activity.
2-87

88. Tool and Resources Check on Learning
Q1. Which of the resources listed are available to inform and educate you about financial planning for your future? (Select all that apply)
Personal financial counselors and educators
Retirement Service Officers (RSOs)
Classes and seminars on financial planning
Websites
BRS calculator
SHOW SLIDE 2-88: Tool and Resources Check on Learning
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. Which of the resources listed are available to inform and educate you about financial planning for your future? (Select all that apply)
Personal financial counselors and educators
Retirement Service Officers (RSOs)
Classes and seminars on financial planning
Websites
BRS calculator
A1. Answer: ALL answers are correct
2-88

89. Tool and Resources Check on Learning (Cont.)
Q2. Which of the items listed is information Service members must enter into the BRS calculator?
Current pay grade
Date entered the service
Current creditable years (RC only)
Average future active duty days (RC only)
All of the above
None of the above
SHOW SLIDE 2-89: Tool and Resources Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q2. Which of the items listed is information Service members must enter into the BRS calculator?
Current pay grade
Date entered the service
Current creditable years (RC only)
Average future active duty days (RC only)
All of the above
None of the above
A2. Answer: All of the above
2-89

90. Activity #2: Review Service Member Profiles (Calculator Results)
AC, E-6, 20 YOS
SHOW SLIDE 2-90: Activity #2 Review Service Member Profiles (Calculator Results) AC, E-6, 20 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Activity 2 Purpose: This activity is designed to give you an opportunity to see the inputs some Service members entered into the BRS calculator, compare the results, and gain familiarity with the capabilities of the calculator to enable you to compare the potential retirement benefits of the legacy “High-3” retirement system and the BRS.
The calculator results you’ll see in these profiles and the information used to generate those results, are only examples to help you understand your options, and may not precisely fit your specific individual circumstances. The Service member profiles shown here should NOT be used as the model for making your personal and individual retirement system choice.
Example:
AC, E-6, 20 YOS: Mike Smith
2-90

91. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-91: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: After discussing retirement plans with his wife, reviewing the calculations, and talking to a professional military financial counselor, Mike decide to remain in the legacy retirement system, as it is more advantageous for his family’s long-term financial goals.
Mike’s Decision
2-91

92. Activity #2: Review Service Member Profiles (Calculator Results)
AC, O-1, 6 YOS
SHOW SLIDE 2-92: Activity #2 Review Service Member Profiles (Calculator Results) AC, O-1, 6 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC, O-1, 6 YOS: John Wright
2-92

93. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-93: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: John elects to enroll in BRS. He later leaves active duty at the completion of his term, and takes five years’ worth of contributions, matching, and interest with him. He is hired by a private-sector employer. He considered rolling over his TSP to a civilian 401(k), but decided to keep his Uniform Services TSP because of the lower fees associated with TSP versus a civilian 401(k). He continues to contribute to a separate employer 401(k) plan in order to reach his retirement goals.
John’s Decision
2-93

94. Activity #2: Review Service Member Profiles (Calculator Results) AC to RC, E-4, 20 YOS
SHOW SLIDE 2-94: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, E-4, 20 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, E-4, 20 YOS: Jason Rice
2-94

95. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-95: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: Upon completion of his enlistment, Jason leaves active duty and joins the National Guard. Jason and his partner considered his eligibility for Continuation Pay at year 12 in the National Guard in order to pay for his school, but finally decided that he will use the Post-9/11 GI Bill to fund his education. They also discussed the fact that the loss of TSP matching for the 8 years he had already served would affect the long-term growth of his retirement annuity under BRS. He and his partner discussed their options and Jason decided remaining in the legacy retirement system was the right decision for him.
Jason’s Decision
2-95

96. Activity #2: Review Service Member Profiles (Calculator Results) AC to RC, E-3, 8 YOS
SHOW SLIDE 2-96: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, E-3, 8 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, E-3, 8 YOS: Erika Harris
2-96

97. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-97: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: After talking to a military educational counselor and a professional financial military counselor, Erika decided to major in nursing and will likely leave the Reserve at the end of 1 enlistment term. She decided to opt into BRS, so she could take advantage of the Government-automatic and matching contributions. After fulfilling her 8-year obligation, Erika will leave the Service and take her Uniformed Service TSP benefit with her under the BRS System.
Erika’s Decision
2-97

98. Activity #2: Review Service Member Profiles (Calculator Results)
RC, W-2, 20 YOS
SHOW SLIDE 2-98: Activity #2 Review Service Member Profiles (Calculator Results) RC, W-2, 20 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
RC, W-2, 20 YOS: Ryan McCormick
2-98

99. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-99: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
(1) 3% Contribution Rate: see left graphic
(2) 5% Contribution Rate: see right graphic
(3) Service Members Decision: After talking with his wife and evaluating their long-term goals, Ryan opts into BRS and his wife will remain in the legacy retirement system. While the legacy retirement plan is more beneficial monetarily for Ryan, his goal of using the 50% Lump Sum to open a Bed and Breakfast was the overriding factor in his decision. With only 9 current years of service, he will soon receive Continuation Pay to stay in the Reserve at his mid-career point, which he can add to his TSP. Ryan understands the time value of money, and considered the long-term growth difference in his retirement annuity if he takes a Lump Sum, but this will fulfill his retirement goal of owning a business with his wife. Furthermore, as a TSP contributor now, he is interested in receiving the automatic and matching contributions immediately to grow his Uniformed Services TSP account that much more quickly. Total points at 20 YOS will equal 4,120.
Ryan’s Decision
2-99

100. Activity #2: Review Service Member Profiles (Calculator Results)
RC, E-2, 8 YOS
SHOW SLIDE 2-100: Activity #2 Review Service Member Profiles (Calculator Results) RC, E-2, 8 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
RC, E-2, 8 YOS: Samantha Baker
2-100

101. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-101: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: After reviewing her options, Samantha wants to start her TSP account so she can take advantage of the Government’s automatic and matching contributions, otherwise when she completes her service, she would leave with no tangible Government retirement benefit.
Samantha’s Decision
2-101

102. Activity #2: Review Service Member Profiles (Calculator Results) AC to RC, O-3, 10 YOS
SHOW SLIDE 2-102: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, O-3, 10 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, O-3, 10 YOS: Derek Roberts
2-102

103. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-103: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: Derek and his wife worked together on their retirement planning, and Derek decided to opt into BRS. They chose not to take the Lump Sum in order to maximize the future value of their retirement annuity. They will contribute to the TSP, but only up to the 5% Government contribution since Derek has a company 401(k) that also matches up to 6%. After speaking to a financial counselor who made him aware of the IRS contribution limits per individual, he will contribute the maximum amount to both accounts up to the IRS limit and when the time comes to buy their dream retirement home in Florida, he will take advantage of one of the TSP allowable non-penalty withdrawal options to put a down-payment on their primary home.
Derek’s Decision
2-103

104. Activity #2: Review Service Member Profiles (Calculator Results) AC to RC, O-2, 10 YOS
SHOW SLIDE 2-104: Activity #2 Review Service Member Profiles (Calculator Results) AC to RC, O-2, 10 YOS
Instructor’s Note: Instructor read and discuss with students using the slide.
Example:
AC to RC, O-2, 10 YOS: Andrea Knowing
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105. Contribution Rates (3% and 5%) and Decision
SHOW SLIDE 2-105: Contribution Rates (3% and 5%) and Decision
Instructor’s Note: Instructor read and discuss with students using the slide.
Contribution Rates (3% and 5%) and Decision
3% Contribution Rate: see left graphic
5% Contribution Rate: see right graphic
(3) Service Members Decision: As prior service, upon her return to military service, Andrea is given the option to choose between her legacy retirement system or the new BRS. Andrea chooses BRS because she still doesn’t plan to stay in the military for 20 years and she spends the majority of her extra time taking care of her father. She realizes that when she decides to leave the National Guard, she can receive a portable Government retirement benefit by opting into the BRS. She can add 4% Government matching on her base military pay plus the 1% Government-automatic contribution while receiving 4% Federal-agency matching plus a 1% Government-automatic contribution on her federal civilian pay—maximizing both retirement plans. She will eventually roll her Uniformed Services TSP over into her Federal-government TSP, or another qualifying 401(k)-type savings plan at retirement.
Andrea’s Decision
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106. Tools and Resources Summary
You should now be able to:
Identify (and access) tools and resources available to assist (provide information, assistance, and education) in making financial decisions
Understand how to use the BRS calculator to compare your retirement planning options
SHOW SLIDE 2-106: Tools and Resources Summary
Instructor’s Note: Instructor reads ad summarize this portion of the learning activity.
You have completed Lesson 6 on the tools and resources available to help you with retirement planning and understanding the factors associated with your decision to choose one of the available Uniformed Services retirement systems.
You should now be able to:
Identify (and access) tools and resources available to assist (provide information, assistance, and education) in making financial decisions Understand how to use the BRS calculator to compare your retirement planning options
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107. BRS Opt-In Summary SHOW SLIDE 2-107: BRS Opt-In
Instructor’s Note: Splash Page for transition to BRS Opt-In summary
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108. BRS Opt-In Summary
The Blended Retirement System takes effect on January 1, 2018
You are eligible to opt into the BRS if, as of December 31, you are either an Active Component (AC) member who has served fewer than 12 full years from your Pay Entry Base Date, or a Reserve Component (RC) member with fewer than 4,320 points
Most Service members will have the entire 2018 calendar year to decide whether to remain in the legacy “High-3” retirement system or opt into the BRS
Your decision whether or not to opt into the BRS is an individual decision. No one else can make it for you
If you choose to opt into the BRS, your decision is final. It cannot be changed at a later date
SHOW SLIDE 2-108: BRS Opt-In Summary
Instructor’s Note: Instructor read and discuss with students using the slide.
Congratulations! You have completed the BRS Opt-In Course.
Here are some important points to keep in mind:
The Blended Retirement System takes effect on January 1, 2018.
You are eligible to opt into the BRS if, as of December 31, 2017 you are either an Active Component (AC) member who has served fewer than 12 full years from your Pay Entry Base Date, or a Reserve Component (RC) member with fewer than 4,320 points.
Most Service members will have the entire 2018 calendar year to decide whether to remain in the legacy “High-3” retirement system or opt into the BRS.
Your decision whether or not to opt into the BRS is an individual decision. No one else can make it for you.
If you choose to opt into the BRS, your decision is final. It cannot be changed at a later date.
Note: Continue summary on next slide
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109. BRS Opt-In Summary (Cont.)
There are significant differences between the legacy “High-3” retirement system and the BRS - take full advantage of the financial literacy information and education available to you through your Service
Members of the Army, Navy, and Air Force who elect to opt into the BRS, will be able to do so by logging onto MyPay on or after January 1, 2018 to make their election
Members of the Marine Corps will make their elections through Marine Online.
Members of the Coast Guard, Public Health Service, and NOAA will be advised by their Service on the procedures for opting in, if they choose to do so.
SHOW SLIDE 2-109: BRS Opt-In Summary (Cont.)
Instructor’s Note: Continue and read summary for BRS Opt-In with students using the slide.
Key Points continued: There are significant differences between the legacy “High-3” retirement system and the BRS, and you should take full advantage of the financial literacy information and education available to you through your Service including:
Completing this course
Discussing your retirement system options with your Service-provide financial professionals
Participating in upcoming classes or workshops on the retirement systems being provided by your Service
Members of the Army, Navy, and Air Force, who elect to opt into the BRS, will be able to do so by logging onto MyPay on or after January 1, 2018 to make their election.
Members of the Marine Corps will make their elections through Marine Online.
And members of the Coast Guard, Public Health Service, and NOAA will be advised by their Service on the procedures for opting in, if they choose to do so.
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110. Questions? SHOW SLIDE 2-110: Questions?
Instructor’s Note: Splash Page for transition to Q & A
Note: Ask students if there are any questions needing answers before starting on the next and final session of the learning activity.
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111. Thrift Savings Plan (TSP)
Benefits:
Easy to Enroll
Easy to Maintain
No up-front Cost to the Individual
Management costs < .03% per $1,000
Money can be contributed under the Traditional or the ROTH option
SHOW SLIDE 2-111: Thrift Savings Plan (TSP)
Instructor’s Note: Instructor read and discuss with students using the slide.
In addition to your Defined Benefit Plan (High-3, CSB/REDUX), you and all other service members will have access to a Defined Contributions Plan—the Thrift Savings Plan.
We will discuss the basics of TSP.
You can go to the TSP website to learn more about the program and the various investment funds.
We’ll look at how it works and what it can do for you.
Benefits of TSP
(1) It's easy to enroll and maintain your investment plan.
(2) Costs for management of the program by the TSP Management Board was .029% per $1,000 invested annually (for 2016).
(3) Money contributed to a Traditional TSP account is Pre-Tax Dollars. It is NOT counted as taxable income. You will eventually have to pay taxes upon withdrawal.
(4) Money contributed to a ROTH TSP account is taxed when earned. When withdrawn in retirement ROTH TSP withdrawals may be tax free.
How to Enroll in TSP.
Enroll at the myPay website or by completing and submitting a paper form.
Note: Unit should provide TSP-U-1 forms for the students.
Your local Finance Office or PAC will have the forms. Forms are also available at Follow the prompts to download and/or print.
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112. Thrift Savings Plan (TSP) (Cont.)
Contribution Sources:
Base Pay (Mandatory before contributions from other sources can be made)
Special Pay(s)
Incentive Pay(s)
Bonus Payment(s)
SHOW SLIDE 2-112: Thrift Savings Plan (TSP) (Cont.)
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP Contribution Sources.
(1) You can begin making regular employee contributions at any time. These are payroll deductions that are made from your basic pay. Each pay period, your agency or service will deduct your contribution to the TSP from your pay in the amount or percentage that you indicated when you submitted your contribution election information.
(2) You can elect to contribute from incentive pay, special pay, or bonus pay, even if you are not currently receiving them. These contributions will be deducted when you do receive any of these types of pay.
(3) You cannot contribute from sources such as housing or subsistence allowances.
If you are receiving tax-exempt pay (i.e., pay that is subject to the combat zone tax exclusion), your contributions from that pay will also be tax-exempt. You may also contribute more of your pay to the TSP during the year.
Note: Be aware that if you do contribute tax-exempt pay, your total contributions from all types of pay must not exceed the Internal Revenue Code (I.R.C.) section 415(c) annual addition limit for the year. This limit does not include catch-up contributions you may make during the year (see next slide for more information on catch-up contributions).
(5) You cannot make catch-up contributions from incentive pay, special pay, or bonus pay. You are allowed to use tax-exempt pay to make Roth catch-up contributions but not to make traditional catch-up contributions.
(6) Select all the contribution sources boxes on the TSP Enrollment Form even if you are not receiving special, incentive, or bonus pays. If you do not select the special, incentive, or bonus blocks and then start receiving them, you cannot contribute those moneys into TSP until you resubmit the form.
(7) Especially important is the bonus selection. If you do not select the contributing from bonus block and you eventually receive one, you cannot put any of the money into TSP. Once you receive the bonus money, you cannot put it into your TSP account.
(8) If you stop contributing from base pay all other sources of contributions stop.
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113. Thrift Savings Plan (TSP) (Cont.)
How Much Can You Contribute:
Up To 100% Of Base Pay
Up To 100% Of Special and/or Incentive Pays, and Bonuses
IRS Maximum Contribution per Year, $18,000
This is a combined limit for traditional TSP and Roth TSP contributions.
SHOW SLIDE 2-113: Thrift Savings Plan (TSP) (Cont.)
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP Contribution Amounts.
You can contribute up to 100% of your base pay and up to 100% of any special pays, incentive pays, or bonuses up to the IRS maximum, currently at $18,000 per year (2017). If you are age 50 or older, you can make an additional $6,000 in catch-up contributions. In a combat zone, the limit is higher, up to $54,000 per year (2017). However, contributions to the Roth TSP are still limited to $18,000. These limits change periodically.
If you are a member of the Ready Reserve and you are contributing to both a uniformed services and a civilian TSP account as a FERS employee, the elective deferral and catch-up contribution limits apply to the total amount of employee contributions you make in a calendar year to both accounts. If you are called to active duty and make tax-exempt contributions to the TSP while deployed in a designated combat zone, the sum of the employee and agency contributions to your civilian account as well as the tax-exempt contributions made to your uniformed services account cannot exceed the annual addition limit ($54,000).
Note: Currently there is no employer matching dollars from the Government, unless you opt-in for the Blended Retirement System (see slide 13).
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114. Thrift Savings Plan (TSP) (Cont.)
You Control Your Contributions
You Decide Which Of The 6 Investment Funds To Invest In
Invest In One Or All Of Them
The 6 Funds Are Known As The G, F, C, S, I and L Funds.
SHOW SLIDE 2-114: Thrift Savings Plan (TSP) (Cont.)
Instructor’s Note: Instructor read and discuss with students using the slide.
Control of your TSP Funds.
Your contributions belong to you and you have control over them.
This control is exercised by directing which of six funds your money is invested in.
These funds are known as the G, F, C, S, I and L funds.
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115. TSP “G” FUND Invests in Government Securities Guaranteed Against Loss
No Risk - Has Never Lost Money
Lower Rate Of Return - Usually Between 1.5% and 7%
SHOW SLIDE 2-115: TSP “G” FUND
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP “G” FUND
(1) The G Fund will invest in Government securities and is guaranteed against loss.
(2) Invested in non-marketable U.S. Treasury Securities with 1 to 4 day maturities.
(3) No risk of loss (negative returns) in "G" Fund.
(4) The "G" fund has never lost money although the rate of return on your investment is usually between 1.5 and 7%.  It has averaged 5.43% since its inception date of 04/01/87.
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116. TSP “F” FUND Corporate and Government Bonds Some Risk
Slightly Higher Rate of Return Than “G” Fund
Rate Of Return - Between (-1.68%) and 18%
SHOW SLIDE 2-116: TSP “F” FUND
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP “F” FUND
(1) The F Fund will invest in corporate and Government bonds.
(2) Invested in a bond index fund.
(3) U.S. Government: U.S. Treasury and Agencies.
(4) Mortgage-backed securities.
(5) Rate of Return - Between (-1.68%) and 18%. It has averaged 6.66% since its inception date of 01/29/88.
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117. TSP “C” FUND Invested in the Stock Market
Uses Standard & Poors (S&P) 500 Stock Index Fund
Risk Associated With Stock Market Fluctuations
Historical Returns Between (-37%) and 37%
SHOW SLIDE 2-117: TSP “C” FUND
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP “C” FUND
(1) The C Fund will basically track performance of the stock market.
(2) Invested in a Standard & Poor's (S&P) 500 stock index fund.
(3) S&P 500 index contains common stocks of 500 companies that represent the U.S. stock markets.
(4) Historical Returns Between (-37%) and 37%. It has averaged 10.43% since its inception date of 01/29/88.
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118. TSP “S” FUND Invests in Small/Medium Size U.S. Companies
Risk Associated With Stock Market Fluctuations
Historical Returns Between (-38%) and 43%.
SHOW SLIDE 2-118: TSP “S” FUND
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP “G” FUND
(1) The S Fund invests in small to medium sized U.S. companies.
(2) Invested in a Wilshire 4500 stock index fund.
(3) Wilshire 4500 index contains all common stocks (except those in the S&P 500 index) actively traded in the U.S. stock markets on a daily basis.
(4) Historical Returns Between (-38%) and 43%. It has averaged 9.19% since its inception date of 05/01/01.
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119. TSP “I” FUND Invests Entirely In Foreign Companies
Includes Risk of Foreign Currency Fluctuations
Rate Of Return - Between (-42%) and 38%
SHOW SLIDE 2-119: TSP “I” FUND
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP “I” FUND
(1) The I Fund invests entirely in non-U.S. companies.
(2) Will be invested in a Europe, Australasia, and Far East (EAFE) stock index fund.
(3) EAFE contains stocks that cover approximately 60% of the stock markets of the 20 countries included in the index.
(4) Historical Returns Between (-42%) and 38%. It has averaged 4.51% since its inception date of 05/01/01.
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120. TSP “L” FUND
Provide you with a convenient way to diversify your account among the G, F, C, S, and I Funds.
Use professionally determined investment mixes tailored to different time horizons.
Rate of return varies based on asset mix.
Mix changes based on target date and how close you are to that date.
SHOW SLIDE 2-120: TSP “L” FUND
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP “L” FUND
The L Funds, or "Lifecycle" funds, use professionally determined investment mixes that are tailored to meet investment objectives based on various time horizons. The objective is to strike an optimal balance between the expected risk and return associated with each fund.
The strategy assumes that:
(1) The greater the number of years you have until retirement, the more willing and able you are to tolerate risk (fluctuation) in your TSP account value to pursue higher rates of return.
(2) For a given risk level and time horizon, there is an optimal mix of the G, F, C, S, and I Funds that provides the highest expected return.
(3) Use the L Funds if you are looking for a simple, low maintenance way of investing money in your TSP account. The L Funds make the investing process easy for you because you do not have to figure out how to diversify your account or how and when to rebalance.
(4) The L Funds are designed so that 100% of your TSP account can be invested in the single L Fund that most closely matches your time horizon (or in the two L Funds closest to your time horizon). Any other use of the L Funds may result in a greater amount of risk in your portfolio than is necessary in order to achieve the same expected rate of return.
Choose If your target date is:
L or later
L through 2044
L through 2034
L 2020 Now through 2024
L Income If you are already withdrawing your account in monthly payments.
(5) Historical Returns Between (-32%) and 26%. It has averaged 4.42% (L), 5.98 (L2020), 6.56% (L2030), 6.93% (L2040), and 10.83% (L2050) since their inception date of 08/01/05 (L – L2040) and 01/31/11 (L2050).
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121. TSP Contribution Allocation
First Contribution Will Go Into “G” Fund
You Will Then Receive a TSP PIN
Allocate Contributions To Various Funds Using TSP Thrift-Line or TSP Website
Must Acknowledge “Risk” For All Funds Except “G”
Allocate Between Funds In 1% Increments
SHOW SLIDE 2-121: TSP Contribution Allocation
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP Contribution Allocation
(1) After your initial enrollment and election request has been processed, TSP will deposit your first contribution in to the G Fund.
(2) Once the first contribution is received you will then receive a TSP PIN. You can then begin making contribution allocations among the various funds using the TSP Thrift line, Website, or via mail.
(3) Allocations must be made between the funds in increments of 1%. E.g. If you elect to contribute 3%, you may want to put 1% in the "G" Fund and 2% in the "C" Fund.
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122. Additional TSP Benefits
Loans
Rollovers
Inter-fund Transfers
Emergency/Hardship Withdrawals
Easily Change Contribution Allocations for Each Fund
SHOW SLIDE 2-122: Additional TSP Benefits
Instructor’s Note: Instructor read and discuss with students using the slide.
Additional TSP Benefits
(1) Loans. Two types of loans can be made from your TSP account, a general purpose loan, or a loan for a primary residence. All loan payments, plus interest, is paid back directly into your TSP account. Remember, TSP is an investment for your retirement. It is not recommended to take a loan from your account as it has a negative impact on the compound interest feature of the TSP plan.
(2) Rollovers. On separation or retirement, you can roll the funds in TSP to a qualified 401k plan. While on active duty, you can rollover a qualified Individual Retirement Account (IRA) into TSP.
(3) Interfund Transfers. You can move your invested money between the various funds, once a month, 12 times a year.
(4) Financial hardship withdrawals. Verifiable financial hardship. E.g. Medical bills. All contributions to TSP will be terminated for six months after a hardship withdrawal.
(5) Contribution allocations. You can increase or decrease the percentage you allocate to each fund as often as you are paid, or twice a month.
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123. TSP Options upon Retirement or Separation
Leave Money In TSP
Single Lump Sum Payment
Monthly Payments
Substantial Penalties for Withdrawing Money Prior to Age 59½. However, if you retire or separate in the year you turn 55, and you withdraw funds, there is no tax penalty
SHOW SLIDE 2-123: TSP Options upon Retirement or Separation
Instructor’s Note: Instructor read and discuss with students using the slide.
TSP Options upon Retirement or Separation
(1) Leave your money in the TSP. You cannot make further contributions but your money continues to accrue.
(2) Take a Single payout. The payment is made directly to you after a deduction for Federal Income Tax as required. Rollover into an IRA or 401k.
Receive Monthly payments starting at age 59 ½. There are substantial penalties for withdrawing the money prior to 59 ½.
You may decide that you want income from your TSP account every month. You have a couple of options:
If you have a specific monthly dollar amount in mind, you can indicate it when you complete your withdrawal request form. You will receive payments in the amount that you request until your entire account balance has been paid to you. Note: The amount of each monthly payment must be at least $25.
If you want the TSP to compute a monthly amount for you based on your life expectancy, you can choose that option when you complete your request form. Your initial payment will be based on your age and your account balance at the time of the first payment. Each year thereafter, the TSP will recalculate the amount of your monthly payments based on your age and your account balance at the end of the preceding year.
You may have certain expenses in retirement that you know will continue throughout your lifetime. If you need a guaranteed stream of payments to cover some of those expenses, you could consider purchasing a life annuity. A life annuity is a monthly benefit that is paid to you every month for the rest of your life. The cost of an annuity depends on the type you choose and the options and features you select. You don't have to use your entire TSP account balance to purchase the TSP annuity, but the minimum purchase amount is $3,500.
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124. Your Responsibilities
Make Contribution Elections
Make Investment Decisions
Make Allocation Decisions
Keep Accurate Personal Info
Designate a Beneficiary
SHOW SLIDE 2-124: Your Responsibilities
Instructor’s Note: Instructor read and discuss with students using the slide.
Your responsibilities with TSP.
Once enrolled in TSP you have additional responsibilities:
(1) Make contribution elections.
(2) Make investment and allocation decisions.
(3) Keep accurate up-to-date personal information.
Designate a beneficiary.
TSP Website:
For more in-depth information on the TSP program go to
Then look under Uniformed Services. Frequently Asked Questions is an excellent source.
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125. Savings Vs. Investment Savings: Investments: Savings Accounts
Certificates of Deposit (CD)
Money Market Accounts
U.S. Savings Bonds
Investments:
Equity Assets
Debt Assets
SHOW SLIDE 2-125: Savings Vs. Investment
Instructor’s Note: Instructor read and discuss with students using the slide.
Saving vs. Investing.
Recall that the third leg of our retirement planning stool is investment income. There are several differences between investing money and merely saving it. Recognize that the ultimate purpose of saving money is to eventually spend it. Savings accounts are virtually 100% safe, as most are insured by the Federal Government.
Conversely, the purpose of investing money is to allow it to grow. Investing is generally thought of in terms of a significant time span, five years or more. Even optimum savings instruments have limited ability to overcome the effects of inflation and taxes, both of which decrease the value of our money. Wise investments will mitigate these effects.
Investing involves some degree of risk. However, the greatest risk is not making prudent investments, and therefore not growing your money to meet your retirement needs. Because saving and investing have different purposes, different instruments are used for each.
Instruments of Savings. Savings instruments that are highly safe, and liquid, but provide relatively low yields include:
Regular or share savings accounts.
Certificates of deposit (CD).
Money market accounts.
U.S. savings bonds. Series I bond is tied to rate of inflation.
Investment Assets. Investment instruments fall into one of two categories:
Equity assets, you invest as an owner.
Growing assets are designed to grow your investment. They include investments such as shares, alternative investments and property.
Hard assets are investments with intrinsic value such as oil, natural gas, gold, silver, farmland, natural colored diamonds and commercial real estate.
Debt assets, you invest as a lender. Bonds (some can be used by companies and varying levels of government).
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126. Investment Instruments
Individual Retirement Account (IRA)
Roth and Traditional options
Direct Purchase of Stocks – 9.8% Average Return Since 1926
Bonds – 5% to 6% Average Return Since 1926
Mutual Funds Offer Security of Diversity
SHOW SLIDE 2-126: Investment Instruments
Instructor’s Note: Instructor read and discuss with students using the slide.
Instruments of Investment.
As you become more financially capable and knowledgeable about investing you may want to consider other investment instruments in addition to TSP, such as:
(1) Individual Retirement Account (IRA). Similar to TSP funds, but purchase through financial institutions like banks, credit unions, or investment firms. Note: Unlike TSP, there will be fees, paid to the financial institution, associated with opening an IRA.
(2) Direct purchase of bonds or stocks through a brokerage house. Note: Unlike TSP there will be fees, paid to the brokerage house, associated with purchasing bonds or stocks.
(3) Mutual Funds. Purchase of stocks and bonds with a pool of investors who have similar goals. Note: Unlike TSP there will be fees associated with purchasing mutual funds.
Note: Historically, since 1926, large stocks returned an average of 9.8%, while long-term government bond returns averaged 5% to 6%. However, you should recognize that there are years, and periods of several years, where bonds significantly out-performed stocks.
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127. Rule of 72
Divide 72 by the expected annual return to determine the number of years required for the investment to double.
72  3% = 24 years
72  7.2% = 10 years
72  10% = 7.2 years
72  15% = 4.8 years
SHOW SLIDE 2-127: Rule of 72
Instructor’s Note: Instructor read and discuss with students using the slide.
Rule of 72:
One quick and way to determine the effect of any particular return on an investment is to use the Rule of 72. To apply the Rule, divide 72 by the expected annual percent of return on your investment. The answer will be the number of years it will take for your investment to double at the expected rate of return.
For example, if you earn 3% on your investment, it will take 24 years to double your money. If you earn 7.2% on your investment, it will take 10 years to double your money. If you earn 10%, you will double your money in 7.2 years. If you can earn a 15% annual return, your money will double every 4.8 years.
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128. 7 Steps to Accumulate Wealth
Pay Yourself First!
Develop A Spending Plan
Maximize Tax-Deferred Investments
Don’t Lose Money
Persevere
Compound Your Money
Dollar Cost Averaging
SHOW SLIDE 2-128: 7 Steps to Accumulate Wealth
Instructor’s Note: Instructor read and discuss with students using the slide.
7 Steps to Accumulate Wealth:
No matter how you choose to invest your money, there are seven proven techniques that will assist you in accumulating the funds necessary for savings and investment:
(1) The first rule is "Pay yourself first." Develop a spending plan that reduces debt and provides a positive cash flow, set aside a certain amount for savings and investment at the top of your plan. Savings allotments and contributions to the TSP are two excellent ways to "pay yourself first." You never miss the money because you never see it.
(2) The second rule is to establish a realistic spending plan to systematically put money aside.
(3) The third rule is to maximize tax-deferred investment opportunities. The TSP and civilian 401(k) plans are excellent vehicles for this purpose. Individual Retirement Accounts, or IRAs, are another. Make sure you increase your knowledge about investing before looking at the many instruments available to you.
(4) The fourth rule is to don’t lose money. Greed causes people to invest in scams that promise unrealistic returns – Taking prudent risks are OK but speculation is at best a 50/50 deal.
(5) The fifth rule is to persevere. If you see your account has grown, resist the urge to spend it. After all, if it’s spent, it’s gone for good.
(6) The sixth rule is to compound your money. The royal road to riches is compounding. Its the safe road, the sure road, and fortunately, anybody can do it. But it takes perseverance.
(7) The seventh rule is dollar cost averaging. Invest a set amount every month regardless of market performance. No one can predict the market. Over time, dollar cost averaging will compensate for the market ups and downs.
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129. Creative Savings Strategies
Shift Debt Payment to Savings
Put Unexpected Money Into Savings
Cut Back Spending One Month a Year
Watch Spending on Fast Foods and Snacks
Cut Back on Utilities
SHOW SLIDE 2-129: Creative Savings Strategies
Instructor’s Note: Instructor read and discuss with students using the slide.
Creative Savings Strategies
Some of you may be saying this is all well and good, but where do you get the money to save and invest? Let's look at a few things you can do:
(1) One way to quickly pad a savings account is to shift debt payments to savings when the debt is paid off. Just start banking this amount when the loan is paid.
(2) If you unexpectedly receive a sum of money, put it directly into your savings account and watch it grow.
(3) Select one month during the year and really be a miser. Only doing it for a month may help to develop some excellent habits that will carry over into the future.
(4) Be very aware of just how much you spend on fast food and snacks. Keep a list of what you spend for fast food and snacks for one month. That could be $50 a month going into your savings and investment accounts.
(5) When living off-post, see how much you can cut back on utilities for one month. Be energy conscious. You could easily save 10% - 20% on your utility bill. Put the difference in savings!
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130. Savings Deposit Program
Eligible if serving in an SDP-eligible combat zone
May deposit a total of $10,000
Earns 10% interest annually, compounding quarterly
You can withdraw money for an emergency withdrawal, but must be approved by CO
SHOW SLIDE 2-130: Savings Deposit Program
Instructor’s Note: Instructor read and discuss with students using the slide.
Savings Deposit Program
(1) Eligible if serving in an SDP-eligible combat zone , once you are deployed for a minimum of 30 consecutive days or at least one day in each of three consecutive months.
(2) A total of $10,000 may be deposited for each deployment
(3) Earns 10% interest annually, compounding quarterly. Interest is taxable. This is guaranteed, so it compares favorably to the stock market.
(4) Cannot close account while deployed. Money will continue to draw interest for 90 days after you have returned.
(5) 120 days after returning, your money will be direct deposited, but you may request it before the 120 days, via myPay.
(6) You can withdraw money for an emergency withdrawal. This must be approved by CO.
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131. Sources of Assistance American Savings Education Council (ASEC)
“Ballpark Estimate”
Financial Magazines and Newspapers
Commercial Financial Planners
Commercial Web Sites
SHOW SLIDE 2-131: Sources of Assistance
Instructor’s Note: Instructor read and discuss with students using the slide.
There is an art to choosing ways to invest your savings.
Good investments will make money; bad investments will cost money.
Do your homework.
Gather as much information as you can.
Seek advice from personnel at your bank or other trained financial experts.
Read newspapers, magazines and other publications.
Identify credible information sources on the Internet.
Join an investment club.
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132. LSA 2 Check on Learning SHOW SLIDE 2-132: LSA 2 Check on Learning
Note: Conduct a check on learning and summarize this portion of the learning activity.
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133. a. Savings is for short term buys and emergencies
LSA 2 Check on Learning
Q1. What is the difference between savings and investing?
a. Savings is for short term buys and emergencies
b. Savings is for your retirement
c. Investing is for short term buys and emergencies
d. Investing is for impulse buying
SHOW SLIDE 2-133: LSA 2 Check on Learning
Instructor’s Note: Conduct a check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q1. What is the difference between savings and investing?
a. Savings is for short term buys and emergencies
b. Savings is for your retirement
c. Investing is for short term buys and emergencies
d. Investing is for impulse buying
A1. a. Savings is for short term buys and emergencies.
a. Savings is for short term buys and emergencies
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134. LSA 2 Check on Learning (Cont.)
Q2. Which of the following is an example of an investment instrument?
a. Passbook Savings Account
b. Term Life Insurance
c. Certificate of Deposit
d. TSP/IRA
SHOW SLIDE 2-134: LSA 2 Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q2. Which of the following is an example of an investment instrument?
a. Passbook Savings Account
b. Term Life Insurance
c. Certificate of Deposit
d. TSP/IRA
A2. d. TSP/IRA
d. TSP/IRA
2-134

135. LSA 2 Check on Learning (Cont.)
Q3. True or False?
ROTH TSP contributions are tax free.
SHOW SLIDE 2-135: LSA 2 Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q3. True or False? ROTH TSP contributions are tax free.
A3. False (unless contributions are made in a combat zone)
False.
(Unless contributions are made in a combat zone)
2-135

136. LSA 2 Check on Learning (Cont.)
Q4. How many investment funds are available in the Thrift Savings Plan?
a. 3
b. 4
c. 5
d. 6
SHOW SLIDE 2-136: LSA 2 Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q4. How many investment funds are available in the Thrift Savings Plan?
a. 3
b. 4
c. 5
d. 6
A4. d. 6
d. 6
2-136

137. LSA 2 Check on Learning (Cont.)
In the Thrift Savings Plan, you must contribute first from what pay source in order to contribute from future bonus pays?
a. Incentive Pay
b. Base Pay
c. Combat Pay
d. Hazardous Duty Pay
SHOW SLIDE 2-137: LSA 2 Check on Learning (Cont.)
Instructor’s Note: Continue check on learning with the students.
Note: Animated slide, click enter to reveal answers.
Q5. In the Thrift Savings Plan, you must contribute first from what pay source in order to contribute from future bonus pays?
a. Incentive Pay
b. Base Pay
c. Combat Pay
d. Hazardous Duty Pay
A5. b. Base Pay
b. Base Pay
2-137

138. LSA 2 Summary Retirement Yesterday and Today
Sources of Retirement Income
Army Retirement Systems
High Three Plan
CSB/REDUX
Thrift Savings Plan (TSP)
Investing vs. Savings
Investment Types and Opportunities
Techniques for Saving and Investing
Sources of Assistance
SHOW SLIDE 2-138: LSA 2 Summary
Instructor’s Note: Inform students that retirement may look a long, long way off to most of you right now, and may not be high on your priority list. Unfortunately, there are many people who reach an age where they would like to retire, but fail to have the resources necessary to do so; people didn't plan to fail, they simply failed to plan!
Summary:
During this long lesson, we’ve covered a lot of very important information during this lesson. We started by looking at how the concept of retirement has changed in just a few short years. We then examined the three-legged stool of retirement income. We talked about Army retirement systems, with particular emphasis on those that will affect you. We discussed the Thrift Savings Plan, a new benefit that can significantly assist you in saving for your retirement years. We examined the differences between saving and investing and talked about why each is important. We examined various vehicles you may use to invest for your future and discussed proven techniques that will assist you in forming sound financial habits.
Instructor’s Note: Prep to transition into LSA #3 titled, Analyze Leave and Earning Statement / myPay.
2-138