When it comes to participating in the federal 401(k) plan the Army trails all the services. A higher percentage of sailors, marines and Air Force and Coast Guard personnel are investing for their future in the TSP. So how come?
In yesterday’s column we posed the question and asked for comments as to why. Lots of responses.
Here are some of them:
“This comment pertains to your ‘conspiracy theory’ regarding the reason why TSP participation is so low in the Army relative to the other uniformed services. As one who advised three different Army DCSPERs (Deputy Chiefs of Staff for Personnel, the senior personnel officer for the Army) over a four-year period regarding retention goals and strategies for effecting same, I can guarantee you that downplaying TSP participation as a means to further strengthen the ‘golden hand-cuffs’ was most certainly never a factor. Please remember that it has only been five years since the services have been authorized to participate in the TSP – in a military heavily preoccupied with fighting two regional wars, I conclude that the focus is simply on the short-term (immediate recruitment and retention goals) and not the long-term. The military has considerable experience tinkering with recruitment and re-enlistment bonuses and can predict with high accuracy the immediate effect of various incentives on manning the force; it has lesser predictive accuracy regarding correlating various retirement designs on long-term retention; and (notwithstanding difficulties with certain skill-sets which directly correlate to positions in the civilian economy) it has generally had few problems in getting sufficient folks to remain in service beyond their first retirement eligibility point. The military tends to put the grease where the wheel is squeaking, and to this point, TSP participation has not been a squeaking wheel in the military. No senior leadership has more than a five-year history of participating in the TSP themselves, and so, they tend to not advocate that which they themselves have little experience with.
“I personally feel that the military should alter the rules regarding TSP such that all newly joined are automatically signed up for participation in the L-fund that is twenty years out at time of their joining, at the sign-up rate of 5% of base pay. This will establish that level of participation as being the base-line culture for the military. The military could further encourage participation by allowing ‘windfalls’ (re-enlistment and retention bonuses) to be sweetened by up to 5% of their value for that portion directly deposited into TSP accounts and held for a minimum of five years there…
“The military radically altered uniformed retirement plans three times (during my 30 years in service) and there is no reason to expect that the future will be any different. During times of economic slow-down, it is only natural for our national leadership to focus on the size of the military budget, most of which is personnel cost, and ask what can be done to pare it down – military retirement quickly gets into the gun sights during these times. This will happen again ‘soon enough’ when U.S. forces are no longer so heavily engaged in Afghanistan and Iraq. As retirement funding again gets scrutinized for squeezing, it only makes sense that the military will push TSP participation at that time. It makes better sense to push TSP participation now, and not wait for that time. Rick Ballard
“The answer is simple – the TSP is a pre-tax savings vehicle. Much of a soldier’s income is already tax free. Soldiers are a very smart group and realize that they’re probably at the lowest tax bracket they will ever be in their life. Now if the TSP had a Roth-401(k) aspect, military participation would jump.” Anon
“It’s the demographics of Army soldiers. They have less education, come from lower socio-economic groups, are younger, and have less background from families where saving, much less savings for retirement is prevalent. That is compared to the Navy and Air Force.
“Like the GIs in my day waiting to go on patrol who were told the cigarette in their mouth would kill them (in 30 or 40 years), they were unconcerned.” Ken Harvey
“I am under the impression, correct me if I am wrong, that pay for the uniformed services is quite low. When we talk about young people, we have to remember that they tend to think of themselves as supermen and superwomen who are going to live forever and a day. They tend to be like the merry grasshopper in the Aesop Fable because they do not see the need to store up food (and money) for the coming winter (and retirement) like the diligent ant. After all, who wants to think of themselves as an ant?
Who is that Senator proposing at this time that all Federal new-hires be mandated to participate in the Thrift Savings Plan because it is an essential part of the FERS retirement plan? HE should be encouraged to include all uniformed service members in his proposed mandate.” Veronica F.
“I do NOT agree that the government should match soldier TSP contributions. These folks are under what amounts to a federal law enforcement/fire 20-year retirement package to start with. They also earn health care for life on retirement. Many other incentives likewise are added. If soldiers want the matching TSP funds, I suggest they fall into the same federal retirement package as a Park Service law enforcement officer in Yellowstone for example.
“Also know that all of us career federal decoys are NOT under any 20-yr retirement package here in the war zone. Never mind we must wear the uniform, be familiar with the M9 (9mm hand gun) and in many cases follow the same rules and regulations as the soldiers we support. My thought is since we receive the Dept of State war incentive called ‘Danger Pay’ we are in harms way at least as hazardous as that Park Service gun carrying ranger.” Stationed in Kuwait
“The Army needs to educate the soldiers about TSP. When I was in the Army we didn’t have TSP but I used saving bonds… If they become proactive in the same way they were promoting saving bonds back then… there would be at least 50% of the soldiers in TSP, especially if the Army matched the first 5%. Educating the soldiers about TSP is the key.” Peter, USA Retired
Nearly Useless Factoid
There are 293 ways to make change for a U.S. dollar. But only 292 if you don’t count swapping a dollar coin for a dollar bill.
To reach me: mcausey@federalnewsradio.com
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