career status bonus

This topic contains 7 replies, has 3 voices, and was last updated by  Anne 3 years, 1 month ago.

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  • #13020

    Brandon moore

    Is it a good idea to take the career status bonus (30,000) and invest it directly to TSP? Looks like it is tax deferred if it is deposit directly to TSP. A lot of people do not take this bonus because it is deducted from your monthly earnings after retirement. I feel like I can really make my money work and will pay off in the end. What is everyone’s opinion?

    #13040

    TS Paul
    Keymaster

    I have not done any research into the pros and cons of the career status bonus, so I don’t feel qualified to have an opinion and will defer to your military brethren.

    I am curious about one thing: would you be able to deposit the entire $30,000, or would your annual contribution limit apply?

    The TSP Allocation Guide www.TSPallocation.com

    #13058

    Brandon Moore

    Thanks for the response! There are 5 options. Single lump sum of $30,000, two installments of $15,000, three installments of $10,000, four installments of $7,500, or five installments of $6,000. I would not be able to deposit the entire amount. At least I do not believe so. Either way, seems like the best option is to put it away in TSP, heck some people go out and blow it on cars, houses, and vacations!!

    #13079

    TS Paul
    Keymaster

    If you aren’t already maxing out your TSP, receiving it in multiple installments to allow you to do so over the course of a few years sounds ideal. Or you could buy a Camaro… 😉

    There is probably a mathematical solution to the question. In your situation, what would the decrease in your retirement pay roughly amount to per year and how many years do you have until you plan to retire?

    The TSP Allocation Guide www.TSPallocation.com

    #13107

    David

    For most people, the cost of choosing the CSB is really high.

    You would need to earn in excess of 17% per year on that $30,000 until the day you die to make up for the CPI-1% and reduction in overall percentage of base pay.

    It is only a good deal for the government.

    #13124

    TS Paul
    Keymaster

    I have played around a bit with a calculator and, without knowing your specific situation, agree with David that the CSB appears to be a much better deal for the government than it is for the vast majority of service members.

    Plug your numbers into this and see where your different options would take you:

    http://militarypay.defense.gov/retirement/calc/04_compare.html

    The TSP Allocation Guide www.TSPallocation.com

    #19059

    van cleef bagues réplique

    cartierbraceletlove Again a foolish statement regarding attendance.GF has 13,000 residents,Stockton has 300,000!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    van cleef bagues réplique http://www.collanaqualitagioielli.cn/fr/van-cleef-ring-replica-c3_84/

    #19060

    Anne
    Participant

    Based on Army Benefit Fact Sheet Retired Pay
    At year 15, you are basically trading 10% reduction at 20 years (5 years in future) for $30K now. If you invested this and made 10% (approximate average annual rate of return for S&P 500) per year you would have about $48K in 5 years. If you divide this by the number of years you think you will live, you can compare this to the 10% difference in pay for rough estimate to see if it makes sense for your situation. Notes: a. 10% per year in current market may be unrealistic and it is possible to lose money. b. Since you are probably too young to withdraw from TSP, it will continue to grow over time but your reduction will be immediate when you retire. c. Options vary depending on if you invest in Roth or Traditional contributions but so do tax implications. d. If you are married any decision you make will impact your spouse. e. A lot depends on your job/career prospects after getting out of the military. One thing I like about FERS is that my TSP account will go to my designated beneficiaries, hopefully way off in the future.

    I hope you are currently taking advantage of TSP contributions. Good luck in your decision. Pros & Cons on either side. Below is info that may be helpful.

    REDUX article seems to paint more of a negative picture
    Today’s troops reject REDUX retirement option

    Links
    TSP Contribution Limits

    2016 Thrift Savings Plan Contribution Limits

    Military Retirement Redux Calculator

    Some of the TSP Calculators may be helpful in making your decisionhttps://www.tsp.gov/PlanningTools/Calculators/index.html

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