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Retirement / Separation Considerations


Jughead

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15 minutes ago, di1630 said:

Residency question as I move to from AD to a TR position.

I live in AZ and will stay here for the TR job.

I am an Alaska resident where I hope to live part time eventually.

I run a business seasonally in WA

Do I need to change residency for tax purposes? AK and WA do not have income tax. AZ does…
 

While Alaska doesn't currently have an income tax it's likely to get one, IMO, as soon as the uncle sugar COVID/infrastructure bill money runs out. The governor is using, in many cases, one time federal funds to count as state "income" with no viable way (significantly lower government spending, greatly increased revenue i.e. income tax, or revisiting Senate Bill 21 a.k.a decrease corporate oil profits in Alaska) to replace it. Continually taking the Permanent Fund Dividend (a.k.a. universal basic income) to fund state government is akin to slaughtering the sacred cow and is truly a regressive tax. 

I'd expect to see an income tax in the next 5 years, reduced PFDs, and flat to moderately declining state spending (big chunks of state spending will be replaced by Federal infrastructure bill/COVID spending so it'll be a wash). Big Oil outspent the citizens initiative to change the corporate oil tax structure $21M to $1.3M in 2020 so don't expect any changes there. 

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If your job isn’t present any any other place in the country then you might be able to. For instance if there are only one or two places where that job is in existence then you might be able to make the argument. Especially if your argument ends with you plan to move back to the tax free state as soon as you’re done with the job. Consult a tax professional for the state. That works in our guard unit.

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  • 4 weeks later...
7 hours ago, di1630 said:

Anyone here sell back leave vs going terminal? True it’s capped at 60 days limit sell back?

 

Unless you're starting a new job while on terminal, you'll certainly make more by selling it.  I've seen it done both ways, depends on what you want, time off or more money to pad the coffers before doing 1st year pay.  If you're leaving AD, then the 60 day limit (in a career) applies.  But a FYI, assuming you're going into the ANG/RES, and may spend time as a part-timer.  This limit does NOT apply to orders less than a year, you can sell back as much of that as you want.  

Edited by SocialD
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11 hours ago, di1630 said:

Anyone here sell back leave vs going terminal? True it’s capped at 60 days limit sell back?
 

 

5 hours ago, SocialD said:

Unless you're starting a new job while on terminal, you'll certainly make more by selling it.  I've seen it done both ways, depends on what you want, time off or more money to pad the coffers before doing 1st year pay.  If you're leaving AD, then the 60 day limit (in a career) applies.  But a FYI, assuming you're going into the ANG/RES, and may spend time as a part-timer.  This limit does NOT apply to orders less than a year, you can sell back as much of that as you want.  

I fail to see how this is ever the case. If my calculations are correct, you ALWAYS make more money by taking it as terminal leave and collecting BAS + BAH + Base Pay > Base Pay. Am I missing some detail?

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2 hours ago, herkbum said:

 


Nor do TN and FL


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4 hours ago, Sua Sponte said:

Currently, WA and AK do not have state income tax.

Neither does Texas, but you pay for it in property taxes for sure. 
 
Some states that have an income tax don’t tax your mil retirement. 
 

I don’t know why you would ever sell back your leave. Just take it and get the full amount of bah/bas/fly pay for those days. 

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I fail to see how this is ever the case. If my calculations are correct, you ALWAYS make more money by taking it as terminal leave and collecting BAS + BAH + Base Pay > Base Pay. Am I missing some detail?

Base pay + retirement pay beats base pay + bah/bas/flight pay.

If you aren’t going to get a pension…you are correct.

I need my DD214 as quick as possible so selling it makes sense for time and money,
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1 minute ago, di1630 said:


Base pay + retirement pay beats base pay + bah/bas/flight pay.

If you aren’t going to get a pension…you are correct.

I need my DD214 as quick as possible so selling it makes sense for time and money,

That distinction doesn't make a difference, though. You can't get base pay + retirement pay because you can't get retirement pay until you're retired...

If you separate (not getting a pension) you can start your job, so New Job + Mil Job > New Job + Mil Job - BAS - BAH.

I guess if you need a fist full of dollars now it makes sense, but that's the only condition where it could make a difference. The end sum would always be greater if you stay on AD longer and collect everything you're entitled to.

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1 hour ago, ViperMan said:

 

I fail to see how this is ever the case. If my calculations are correct, you ALWAYS make more money by taking it as terminal leave and collecting BAS + BAH + Base Pay > Base Pay. Am I missing some detail?

If you work up to the day you get out, you get BAS + BAH + Base Pay + any special pays and THEN get paid for 60 days of base pay when you get out. If you take it as terminal you get out without that 60 days of buyback. 

Each situation is unique, especially if you have a follow on job, but for a 12 year O-4 that doesn't sell any leave back, that's approximately $16,000 extra you get when you get out,

Edited by Bigred
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I fail to see how this is ever the case. If my calculations are correct, you ALWAYS make more money by taking it as terminal leave and collecting BAS + BAH + Base Pay > Base Pay. Am I missing some detail?

Mandatory retirement date. You stay on til the final date, and sell the remaining leave as opposed to taking terminal. Probably only advisable if you don’t have a job lined up you can start while on terminal.


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Just now, Bigred said:

If you work up to the day you get out, you get BAS + BAH + Base Pay + any special pays and THEN get paid for 60 days of base pay when you get out. If you take it as terminal you get out without that 60 days of buyback. 

Each situation is unique, especially if you have a follow on job, but for a 12 year O-4, that could be an approximately $16,000 extra you get when you get out. 

I get that, but the day you work until is the day you work until. If you work until that day you get paid all of your normal compensation. If you then sell back 60 days of leave you get your base pay (you lose some pay). If you start terminal leave on that day, instead, you get all of that PLUS BAH/BAS. So you get more money by NOT selling it back. What am I missing?

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3 minutes ago, CaptainMorgan said:

Mandatory retirement date. You stay on til the final date, and sell the remaining leave as opposed to taking terminal. Probably only advisable if you don’t have a job lined up you can start while on terminal.

Ok, there's an instance you actually DO get more money.

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That distinction doesn't make a difference, though. You can't get base pay + retirement pay because you can't get retirement pay until you're retired...
If you separate (not getting a pension) you can start your job, so New Job + Mil Job > New Job + Mil Job - BAS - BAH.
I guess if you need a fist full of dollars now it makes sense, but that's the only condition where it could make a difference. The end sum would always be greater if you stay on AD longer and collect everything you're entitled to.

If you sell back a month of leave you get base pay for that.

If you retire, you can sell back that month for base pay amount plus you’ll get retirement.

For me, the $4500 retirement pay out earns my BAH/BAS/Flight pay

So retiring = sell back is usually worth more money.



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15 hours ago, SocialD said:

 

Unless you're starting a new job while on terminal, you'll certainly make more by selling it. 

I thought so.  I worked until the retirement date minus PTDY date.  I sold back the rest of my leave.  Airline job start date was 5 weeks after retirement date. 

9 hours ago, ViperMan said:

 

I fail to see how this is ever the case. If my calculations are correct, you ALWAYS make more money by taking it as terminal leave and collecting BAS + BAH + Base Pay > Base Pay. Am I missing some detail?

Another job.  If you don't have another job to work while on terminal, then all you're doing is a regular AF salary paid vacation.  Then you're out, no leave to sell, while you wait for the other job to start.  That's where working to the last day and selling leave works out to a pay advantage.  But if you have another job while on terminal, then yes, don't sell the leave.

8 hours ago, ViperMan said:

That distinction doesn't make a difference, though. You can't get base pay + retirement pay because you can't get retirement pay until you're retired...

But you can get retirement pay and regular pay at the same time, ask me how I know.  Ok, I'll share.  I set a retirement date but interviews were kinda slow at the time, so I pushed it back about 5 months (easily approved).  Well, the AF DFAS told the retired DFAS my 1st date, but didn't tell them about the change.  The DFAS's don't really interact with each other I guess.  So 2 months after that original retirement date, I start getting weird deposits and duplicate allotments to my IRAs (yep, they can transfer from one DFAS to another, but not supposed to).  I called the only DFAS I knew, our AF one.  They had no record of the deposits, no idea where they came from.  I tell the companies getting th duplicate allotments to return the funds, they're not mine.  Then I get my 1st Retirement DFAS statement 30 days before my new, actual retirement date and see the issue.  I was getting retirement backpay and distributions to my IRA.  I called to tell them to stop.  No, they say, we can't stop paying you retirement pay even if you're not retired.  I shit you not, that was the first answer.  The resolution to fix the pay, calculations, and oh we overpaid you and now you own us and btw we're charging you interest for our mistake, and such, took a whole year!  I'm not kidding here, its a classic office space thing where you can't talk to the people that make changes to pay accounts.  It took multiple letters, scathing online feedback forms, and a handy e-mail to an upper DFAS mgmt gal to get a fixer involved.  Oh, and try doing taxes on a screwed up 1099-R. 

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10 hours ago, cragspider said:

 

Neither does Texas, but you pay for it in property taxes for sure. 
 
Some states that have an income tax don’t tax your mil retirement. 
 

I don’t know why you would ever sell back your leave. Just take it and get the full amount of bah/bas/fly pay for those days. 

Texas waives all property tax for 100% disabled veterans FYI

https://tax-office.traviscountytx.gov/properties/taxes/tax-breaks/disabled-vet-exempt

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1 hour ago, di1630 said:

If you sell back a month of leave you get base pay for that.

If you retire, you can sell back that month for base pay amount plus you’ll get retirement.

For me, the $4500 retirement pay out earns my BAH/BAS/Flight pay

So retiring = sell back is usually worth more money.

Alright, I'm tracking. So if you have 30 days to sell and retire on 1 Mar (for instance), you're saying you'll collect your base pay ($9,000) and get your retirement pay ($4,500) collecting $13,500 in total? for example? At the end of your second month (30 Apr) retired you'd have collected $18,000. Ok I'm tracking this gameplan now. I wasn't before.

By my math, if you take the leave (starting 1 Mar), you'll go on terminal, collect $9,000 + ~$1,500 (BAH) + ~$300 (BAS) + $1,000 (Flight pay) = $11,800 and then one month later you'd get that first retirement check (~ $4,500) and come out at around $16,300 so you're short about $1,700 - given a hypothetical (lowish) BAH rate.

That said, something everyone who is approaching retirement should be familiar with is exactly how retired pay is calculated. If you stay active that extra month, you're not only bumping one of your lowest months of pay off the bottom and replacing it with one at your highest pay, you are also getting a multiplier bonus - which I don't think everyone is necessarily aware of. So when you retire with exactly 20 years of service your multiplier is .5000. When you retire with 20 years and 1 month, your multiplier is .5 + 2.5 * ( 1 month / 1200) = .5021. With 20 years and 2 months, it's .5042. I think most people think you need to trip another full year of service to collect another 2.5%.

With this in mind, if you're a Lt Col at 17 years in Jan of 2020, your retired pay would wind up as $4,732.13. If you retire with 20 + 1 mo, it becomes $4,766.99 (+$34.85); with 20 + 2 it becomes $4,801.97 (+$69.83).

Eventually, in about 4 years, you make that original $1,700 back and then have more retired pay forever. Choose your adventure.

https://www.law.cornell.edu/uscode/text/10/1401

https://www.law.cornell.edu/uscode/text/10/1409

Edited by ViperMan
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Alright, I'm tracking. So if you have 30 days to sell and retire on 1 Mar (for instance), you're saying you'll collect your base pay ($9,000) and get your retirement pay ($4,500) collecting $13,500 in total? for example? At the end of your second month (30 Apr) retired you'd have collected $18,000. Ok I'm tracking this gameplan now. I wasn't before.
By my math, if you take the leave (starting 1 Mar), you'll go on terminal, collect $9,000 + ~$1,500 (BAH) + ~$300 (BAS) + $1,000 (Flight pay) = $11,800 and then one month later you'd get that first retirement check (~ $4,500) and come out at around $16,300 so you're short about $1,700 - given a hypothetical (lowish) BAH rate.
That said, something everyone who is approaching retirement should be familiar with is exactly how retired pay is calculated. If you stay active that extra month, you're not only bumping one of your lowest months of pay off the bottom and replacing it with one at your highest pay, you are also getting a multiplier bonus - which I don't think everyone is necessarily aware of. So when you retire with exactly 20 years of service your multiplier is .5000. When you retire with 20 years and 1 month, your multiplier is .5 + 2.5 * ( 1 month / 1200) = .5021. With 20 years and 2 months, it's .5042. I think most people think you need to trip another full year of service to collect another 2.5%.
With this in mind, if you're a Lt Col at 17 years in Jan of 2020, your retired pay would wind up as $4,732.13. If you retire with 20 + 1 mo, it becomes $4,766.99 (+$34.85); with 20 + 2 it becomes $4,801.97 (+$69.83).
Eventually, in about 4 years, you make that original $1,700 back and then have more retired pay forever. Choose your adventure.
https://www.law.cornell.edu/uscode/text/10/1401
https://www.law.cornell.edu/uscode/text/10/1409

That’s a decent point. I’d do that but need my dd214 asap.
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