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Blended Retirement System Puzzle

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Something to keep in mind for guard dudes...

Any contributions to TSP (BRS or not.. but now dudes under BRS are more likely to be contributing finally... as you should) still count towards IRS personal contribution limits ($18k per year I think)?  So if you're working for another civ job and contributing to your 401k, both account contributions combined technically cant go over the annual $18k limit.

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That checks, just remember that employer matching funds don’t count toward the limit, either civilian 401(k) matches or government TSP matching under BRS or for GS employees. 

Edited by nsplayr

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That checks, just remember that employer matching funds don’t count toward the limit, either civilian 401(k) matches or government TSP matching under BRS or for GS employees. 


Don’t the matching funds count toward the 55K limit?

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Yes, but not toward the more commonly-approached $18K beneficiary contribution limit.

https://nb.fidelity.com/public/nb/default/resourceslibrary/articles/irslimits

Of note, the new limit is $18.5K for 2018, and the $55K limit is the total of employee after-tax and employer contributions.

YMMV, I'm not an accountant, and hat-tip if you're hitting that $55K limit on top of maxing 1 or 2 IRAs as well...either you're rich already, saving like a MFer, or your employer is hooking you up big time.

Edited by nsplayr

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On 1/4/2018 at 11:23 PM, rancormac said:

Something to keep in mind for guard dudes...

Any contributions to TSP (BRS or not.. but now dudes under BRS are more likely to be contributing finally... as you should) still count towards IRS personal contribution limits ($18k per year I think)?  So if you're working for another civ job and contributing to your 401k, both account contributions combined technically cant go over the annual $18k limit.

This is correct (well, $18,500 for 2018) but it's not the entire picture. 

Under IRC §415(c) there's a $55,000 limit per employer If you work for an airline and you're in the Guard and Reserve, you have a huge benefit here. 

For example, if you're at American, the company can put your 401k defined contribution and your profit sharing in, plus any contribution you make. For 2018, the sum of all three is capped at $55,000 and your contribution is capped at $18,500 (the elective deferral limit).  

Your total out-of-your-own paycheck contributions to the 401k and TSP are capped at the $18,500 elective deferral limit.* Whatever you don't contribute to the $18,500 limit at the airline you can contribute to the TSP.

*There's an additional benefit if you're deployed. Under IRC §402(g) the $18,500 limit  does not apply to traditional contributions made from tax-exempt pay earned in a combat zone. If you're earning tax-free pay in a combat zone, you can contribute above the $18,500 limit up to the $55,000 limit. 

If you make $150,000 at Delta in 2018 and deploy as an O-5 in the Guard for a few months, you could do this:

16% 401k                $24,000

20% Profitsharing   $30,000

Total Delta 401(k)  $54,000

Deployed Combat Pay to Traditional TSP  $55,000

Total Tax Sheltered Space   $109,000. 

Under USERRA, airline guys on military leave are also eligible for 401k make-up contributions for any 401k contributions you would have been entitled to while you were deployed. Generally that means whatever your pay rate is and your monthly guarantee or bid line average, multiplied by your 401k defined contribution rate. 

https://www.irs.gov/retirement-plans/retirement-plans-faqs-regarding-userra-and-sscra

Edited by JBueno
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On 1/6/2018 at 1:53 AM, JBueno said:

Under IRC §415(c) there's a $55,000 limit per employer 

Wait...what?  So you're saying, for me the 415c limit is 55k for Delta and 55k for TSP?  If I'm reading this correctly, I could contribute 18.5k to my TSP which would max my 402(g) benefit.  Then I could contribute to my Delta savings plan via 401(a) contributions, which carries a limit of 55k.  So even if I don't deploy to a tax free zone (which has been the last 2 deployments for me), I could still do the following?  

Delta Pay:  $200,000

Company 401k contributions: $32,000

Personal 401(a) contributions:  $23,000

TSP: $18,500

Total: $73,500 

I have never heard or noticed the "per employer" limit wrt 415(c).  I'm going to have to run this by the tax attorney, but if true this could be a total game changer for my savings plan.   

Edited by SocialD

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3 hours ago, SocialD said:

I'm going to have to run this by the tax attorney, but if true this could be a total game changer for my savings plan.

You gotta spend something man!  Go to Europe for 2 weeks!

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say im maxing out my company 18,500 401k limit and receiving the company match and profit sharing that maxes out the 55,000 total limit.

i'm also deploying to a tax free location for a couple months. Is there any financial advantage to making TSP contributions?

My plan is to spend all my deployed pay on bitcoins. Does this make sense?\

Edited by torqued

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7 hours ago, nunya said:

You gotta spend something man!  Go to Europe for 2 weeks!

Lol, I spend plenty...especially since starting the process of building a plane.  I also spent a decent amount of time in Europe last year (and will again this year), not including my layovers in Amsterdam, Paris, Rome, etc...  I'm just thinking this plan could allow me to funnel a decent amount of cash into a SDIRA  (via the 401a -> Roth IRA), while still taking advantage of the 18.5k tax deduction for my TSP contributions.  I plan on using this money to fund another rental property anyway, might as well do it with tax sheltered money.  This is still a relatively small percent of my income.  Being single with no kids helps.  

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56 minutes ago, SocialD said:

Being single with no kids helps

That would be a different ballgame.  And with your savings plan, your options are endless. :notworthy:

main-qimg-6af3dedf517d6e5cef49392097376e

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On 1/7/2018 at 8:34 PM, SocialD said:

Wait...what?  So you're saying, for me the 415c limit is 55k for Delta and 55k for TSP?  If I'm reading this correctly, I could contribute 18.5k to my TSP which would max my 402(g) benefit.  Then I could contribute to my Delta savings plan via 401(a) contributions, which carries a limit of 55k.  So even if I don't deploy to a tax free zone (which has been the last 2 deployments for me), I could still do the following?  

Delta Pay:  $200,000

Company 401k contributions: $32,000

Personal 401(a) contributions:  $23,000

TSP: $18,500

Total: $73,500 

I have never heard or noticed the "per employer" limit wrt 415(c).  I'm going to have to run this by the tax attorney, but if true this could be a total game changer for my savings plan.   

BLUF: Generally no, you can't do this. You'd have to do a little research into Delta's Summary Plan Description and see which contributions count towards the $18,500 limit. If the 401a contributions count towards, it, you can't do what you've proposed. If they don't count, you should be able to.  

The $18,500 elective deferral limit applies across both employers. Traditional contributions made from tax-exempt pay do not count towards the $18,500, so you have to be deployed to a combat zone to make contributions above $18,500. 

On 1/8/2018 at 6:47 AM, torqued said:

say im maxing out my company 18,500 401k limit and receiving the company match and profit sharing that maxes out the 55,000 total limit.

i'm also deploying to a tax free location for a couple months. Is there any financial advantage to making TSP contributions?

My plan is to spend all my deployed pay on bitcoins. Does this make sense?\

Yes, this is the huge upside I was talking about. You have an additional $55,000 of traditional TSP space available. You've used up all your $18,500 limit under 402(g), but traditional contributions from tax exempt pay don't count towards that limit. They count towards the $55,000 limit under 415(c) which is per employer, so you've got another $55,000 available.

If you've opted into the BRS the Tetris bricks stack up a little differently against the cap, but the caps are still the same. 

On 1/8/2018 at 7:49 AM, SocialD said:

I'm just thinking this plan could allow me to funnel a decent amount of cash into a SDIRA  (via the 401a -> Roth IRA), while still taking advantage of the 18.5k tax deduction for my TSP contributions. 

Just curious; why would you flow money through a 401a to a Roth IRA? Why not just go straight to a Roth IRA? There's no income limit to a backdoor Roth IRA, and it leaves your 401a space available. 

Also, for the married folks here with stay-at-home spouses, there's $5500 for a non-working spousal IRA. It phases out at That might help a little bit, too. 

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The 5% match is a joke. If you were an 0-1 for 2 years, an O-2 for 2 years, and an O-3 for 6 years, your total compensation would be $459,000.

If you max out the 5% match, the TOTAL DOD contributions OVER TEN YEARS is $23,000. $1900 a year.

That's what you're getting for giving up 10% of your pension.

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Since your example gets out of the military at 10 years it’s not a fair comparison because you haven’t given up a pension at all. You never qualified. You need to run those numbers out to 20 years of service and compare the 50% pension payout to the 40% payout plus matching TSP until the end of life (say 85 years old). 

Edited by Homestar
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25 minutes ago, Jaded said:

The 5% match is a joke. If you were an 0-1 for 2 years, an O-2 for 2 years, and an O-3 for 6 years, your total compensation would be $459,000.

If you max out the 5% match, the TOTAL DOD contributions OVER TEN YEARS is $23,000. $1900 a year.

That's what you're getting for giving up 10% of your pension.

See above for valid critiques.

It’s also well known that BRS isn’t as great of a deal for those who make it to 20 when compared to legacy. It is however a fantastic deal for everyone who doesn’t make it to 20. Your hypothetical captain walks away with $23,000 more than he/she would have under legacy. Plus I don’t think you’re taking into account compound interest on those investments over time - you need to plug in an assumed long term interest rate and run your numbers with that as well.

That being said, I would like to see the Feds offer a better match across the board, both for GS and now BRS mil savers. Unfortunately though 5% is honestly IVO market standard for large orgs. 

Edited by nsplayr
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3 hours ago, Jaded said:

The 5% match is a joke. If you were an 0-1 for 2 years, an O-2 for 2 years, and an O-3 for 6 years, your total compensation would be $459,000.

If you max out the 5% match, the TOTAL DOD contributions OVER TEN YEARS is $23,000. $1900 a year.

That's what you're getting for giving up 10% of your pension.

No...because in your example, the captain is getting out at 10 years.  10% of zero dollars a month is...let me do some math here...carry the one...ZERO DOLLARS.  That captain could, alternatively, walk away with $23,000 IN INVESTMENTS which will continue to grow for the next 30+ years before said captain is ready to use it.  At 7%, that $23,000 is worth about $175,000 in 30 years.  

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1 hour ago, pawnman said:

No...because in your example, the captain is getting out at 10 years.  10% of zero dollars a month is...let me do some math here...carry the one...ZERO DOLLARS.  That captain could, alternatively, walk away with $23,000 IN INVESTMENTS which will continue to grow for the next 30+ years before said captain is ready to use it.  At 7%, that $23,000 is worth about $175,000 in 30 years.  

What percentage of 10 year captains do you think do not end up getting a reserve retirement of some sort? How many aren't sure?

You can be as condescending as you wish, but the choice is not between $23,000 and $0. A non-flyer with a 4 year commitment gets $8000 of matching. If they are sure they don't want to make the military a career, maybe their choice is between $8000 and $0. A 10 years captain is choosing between $23,000 and 10% of what is most likely an O-5 retirement check.

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11 minutes ago, Jaded said:

A 10 years captain is choosing between $23,000 and 10% of what is most likely an O-5 retirement check.

While an O-5 pension would be nice and I hope to get one, 10% of an 0-5 RESERVE pension is not life-changing money.  $300-500/mo difference when you turn 60 in today's dollars.  

$23,000 (which is low anyway) left to grow from age 32 to 60 is $153K.  So the comparison if you assume that dude goes ARC is $153K lump sum vs $550-$850/mo, accounting for 2% inflation adjustments in base salaries.  An immediate annuity can rival that.

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10 hours ago, JBueno said:

BLUF: Generally no, you can't do this. You'd have to do a little research into Delta's Summary Plan Description and see which contributions count towards the $18,500 limit. If the 401a contributions count towards, it, you can't do what you've proposed. If they don't count, you should be able to.  

Yup, I was aware of the 402g limit of 18.5k applying across all employers, but until your post, I did not realize the 415 limit was per employer.  After doing some research, the bolded text above, and my previously posted example, are correct.  

 

10 hours ago, JBueno said:

Just curious; why would you flow money through a 401a to a Roth IRA? Why not just go straight to a Roth IRA? There's no income limit to a backdoor Roth IRA, and it leaves your 401a space available.

Contribution limits do NOT apply when rolling over funds, such as 401a, into a Roth IRA.  For example, last year I contributed $5,550 to my Roth IRA (via the backdoor...sts) AND rolled over ~$7,000 from my 401a, for a total of ~12.5k into my Roth IRA.  I do this because 401a is after tax money in which gains are taxed, which is obviously not ideal.  I just wait for my 401a money to post into my account then immediately roll it into my Roth IRA.  I only pay taxes on the small gains it makes in the day it sat in the account before being rolled.  

It's often referred to as the "Mega backdoor Roth IRA."    

https://momanddadmoney.com/mega-backdoor-roth-ira/

https://thecollegeinvestor.com/17561/understanding-the-mega-backdoor-roth-ira/

Edited by SocialD
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6 hours ago, Jaded said:

The 5% match is a joke. If you were an 0-1 for 2 years, an O-2 for 2 years, and an O-3 for 6 years, your total compensation would be $459,000.

If you max out the 5% match, the TOTAL DOD contributions OVER TEN YEARS is $23,000. $1900 a year.

That's what you're getting for giving up 10% of your pension.

 

You have to remember you are not losing 10% of your pension... you are losing 20%. People say this all the time and it doesn't sound that bad. Going to 40% from 50% is a loss of 20% of your military retirement pay.

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13 minutes ago, SocialD said:

Yup, I was aware of the 402g limit of 18.5k applying across all employers, but until your post, I did not realize the 415 limit was per employer.  After doing some research, the bolded text above, and my previously posted example, are correct.  

 

Contribution limits do NOT apply when rolling over funds, such as 401a, into a Roth IRA.  For example, last year I contributed $5,550 to my Roth IRA (via the backdoor...sts) AND rolled over ~$7,000 from my 401a, for a total of ~12.5k into my Roth IRA.  I do this because 401a is after tax money in which gains are taxed, which is obviously not ideal.  I just wait for my 401a money to post into my account then immediately roll it into my Roth IRA.  I only pay taxes on the small gains it makes in the day it sat in the account before being rolled.  

It's often referred to as the "Mega backdoor Roth IRA."    

https://thecollegeinvestor.com/17561/understanding-the-mega-backdoor-roth-ira/

Awesome, sounds like you've got it pretty well figured out!

 

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For guard guys who have every intention to become full time after UPT and stay past 20, is BRS still something to look into just for the slim chance of something happening between my ADSC and 20 years?

Edit to add: I was very fortunate to have good mentors who told me to contribute early and what each fund (C, S, I, F, lifecycle) meant, so I'm roughly 2 years into my civilian job and already have almost $20k in my TSP account.

Edited by tk1313

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Do you have the option? I don't know the details of who is eligible to opt out.

Anyways, here is something you need to consider - things change. Some day you may not want to do this job anymore, regardless of how you feel about it now (pre-UPT?). That's a difficult concept to wrap your mind around, but just trust me. As you get older, your priorities change too and maybe you'll decide to leave the military for some reason (i.e. Family) even if you enjoy it still.

That being said, BRS is a great option if you want flexibility. I don't know the math because I'm over 15 years in but, if I was a new guy, I would totally jump on BRS so I had options instead of opting for the traditional all or nothing retirement.

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On 4/3/2018 at 6:55 AM, tk1313 said:

For guard guys who have every intention to become full time after UPT and stay past 20, is BRS still something to look into just for the slim chance of something happening between my ADSC and 20 years?

Edit to add: I was very fortunate to have good mentors who told me to contribute early and what each fund (C, S, I, F, lifecycle) meant, so I'm roughly 2 years into my civilian job and already have almost $20k in my TSP account.

Note that Title 32 technician program will most likely die in the next decade. NGB is converting 10% of Title 32 technicians per year to AGR coupled with the mandated Title 5 conversion until we get a 65/35 split between AGR and technician force. So in essence, being guard will look no differently than being active. 

 

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