One Potato…Two Potato…Retirement Decisions
One Potato-Two Potato is not a bad decision tool for deciding who is “It” in a game of tag, but retirement planning requires a more sophisticated approach. For a lot of Reservists it’s pretty straight forward: go into the Retired Reserve (grey area) in four or five years, continue to live where they are for now, keep the same civilian job and maybe when older, say 65, move to Oregon to be near the grandkids. That’s all well and good if that’s what you want to do and have actually thought about it – but is that really planning or just going with the flow and making decisions based largely on emotion?
Nothing wrong with emotion-based planning, and many decisions are often based on emotion such as when buying a car. But retirement is a serious step and deserves a little thought and planning. There are a lot of things that should be considered before one leaves drilling status and enters into the Retired Reserve. Income sources, debt loads, kid’s education and support, taxes, Survivor Benefit Plan (SBP) payments, benefits, potential employment opportunities, weather and available healthcare and insurance can all impact your quality of life or help make possible your full retirement. Or you can just be near the grandkids.
Unless you have adopted the planning philosophy of “I’ll work until I die!” or “Accumulate debt and die out from under it!” understanding and maximizing your available income is perhaps the most important component in actually planning your retirement. Knowing and understanding what your benefits are and how they work can help predict what your financial health will be. Is your military retired pay going to be taxed by the state where you’ll live? Will you be exempt from paying property taxes? Will your disabilities qualify you for additional income such as Combat Related Special Compensation or Concurrent Retirement and Disability Payments and how do you get them? Are there low or no interest loans available to purchase a home or to make improvements? Will your children be eligible for low rate loans or grants to attend state colleges and universities? For a Soldier planning retirement all these questions are answered in the official U.S. Army benefits website, MyArmyBenefits, federal and state fact sheets.
When you first start thinking about retiring, a good initial step is to look into the future and get an estimate of what your military retirement pay is going to be. There are several calculators that can give you estimates of your retired pay but the MyArmyBenefits Retirement Calculator uses your personal data and is the most accurate. This is because it determines non-regular retired pay just like DFAS does – which means unlike other calculators, it does not assume annual 3% Cost Of Living Adjustment (COLA) that can give an inflated estimation, nor does it make an estimate to accommodate all three possible pay systems – Final Pay, High Three or REDUX. Nor does it use your birth year as an approximation; MyArmyBenefits uses your actual birthdate so longevity counting is accurate to the day and determines the appropriate pay system that matches your Date of Initial Entry to Military Service (DIEMS) date and then includes longevity pay table increases while you are in the Grey Area.
Besides more than just being accurate, the MyArmyBenefits Retirement Calculator is tailored specifically for the Army Reserve, capturing current points and personal data from the Army Human Resources Command (HRC) and DEERS, considering Mandatory Removal Dates and applying the impacts of time in grade requirements for all ranks and reducing your Retired Eligibility Date based on time spent in support of contingency operations or mobilized since January 28, 2008. It works for National Guard Soldiers as well but because their points and data are not maintained in a central database for the calculator to draw on, Guard Soldiers have to put in some personal data and load in their own points. One of the real advantages of the MyArmyBenefits calculator is the ability to make adjustments to the input data with just a few clicks and run excursions to see the impacts extra time, more or less points or promotion makes on retired pay. And having information on all your benefits right at your fingertips is a big plus.
Here is an example of where planning and knowledge is key that came to light at a Reserve Component Pre-Retirement Seminar held by the 99th RSC at Ft. Belvoir in January. A 56-year old drilling Sergeant First Class could see from the MyArmyBenefits Retirement Calculator that she had enough mobilization time to reduce the age 60 full retired status to age 57. She wondered if she should get out at 57 or keep drilling three more years to age 60 to add more points and then start drawing her retired pay? What would the difference in money be? The calculator clearly showed three more years of minimum points wouldn’t have much impact on her pay; but hang on, there was something she hadn’t considered: by accepting the early out she would fall into a financial trap that researching and understanding her benefits would help her to avoid. If this Soldier left active drilling status, Tricare Reserve Select for her family would change to TRICARE Retired Reserve. By law, even though the Soldier is authorized to draw retired pay at a reduced age, Tricare Standard doesn’t become available until age 60. As a result, this sergeant’s TRICARE coverage bill for the family would jump from $205 to almost $1000 a month for three years and take a big whack out of her retired pay.
So, One Potato, Two Potato or Rock, Paper, Scissors as tools to help with retirement decisions? Or MyArmyBenefits? You decide. But here are some things you can do to better plan for your retirement: use the MyArmyBenefits website to calculate your projected retirement pay and read the state military benefits for where you’re going to live; understand the federal benefits that will impact your retirement and there’s no better way of doing this than by attending a Reserve Component Pre-Retirement Seminar held in communities and installations near you; and then visit the Department of Labor website to see the cost of living and employment potential by skill and profession considerations in the town or county where you intend to retire, and, if employment is a consideration, use the VA eBenefits website to access the Veteran’s Employment Center (VEC) database, or the Army Reserve’s Private Public Partnership’s (PPP) very helpful assistance program of Army Career Employment Specialists and Transition Employment Liaisons who provide local and regional job assistance. For more information visit the PPP website at http://www.usar.army.mil/resources/Media/ACES_TEL%20Geographical.pdf .