Market-Based Approach Driving DHA Forward in MTF Transition
Here’s a link to the article about the DHA transition:
A Simple and Military Specific Summary of How to Save for Retirement
I’m a huge fam of Jim Lange. He’s a noted expert in financial management, saving for retirement, and estate planning. He’s written a number of books
He sends out a monthly newsletter that I get via snail mail, and it usually has a useful article in it. If you want it, you can get it here.
A previous edition had a section called “Jim’s Point-by-Point Summary of the Whole Retirement & Estate Planning Process.” It was simple but extremely useful. Below in bold are each of the points he lists for people who are still working, which is most of my readership. Let’s take each bolded point and militarize it for you so it is specific to those of us in the military.
Contribute at least the amount to your retirement plan that your employer is willing to match or partially match.
For those under the legacy retirement plan, this is not an option. For those under the new Blended Retirement System (BRS), you need to contribute 5% of your basic pay to the Thrift Savings Plan (TSP) to get the pull 5% DoD match:
You also need to make sure you contribute 5% every month and don’t fill the TSP too early. If you max it out in October, you won’t get a match in November or December.
If you can afford to, contribute the maximum allowed to your retirement plan even if your employer does not match.
This is $19,500 in 2020. You can do an extra $6,500 if you are 50 or over. You can even do more if you are in a combat zone.
Once you have maximized contributions to your plan at work, contribute the maximum you can to an IRA, even if you cannot take a tax deduction on it.
If you are able to fill your TSP account, next you’ll need to open an IRA at an investment firm. Vanguard is the obvious choice due to their across the board low investment fees and unique non-profit structure, but you can do this anywhere (Schwab, Fidelity, etc.).
If you make too much to contribute to a Roth IRA, you just use the back door Roth IRA option.
Consider your personal tax bracket when trying to decide if you should contribute to a Roth or a traditional IRA/retirement plan.
With a traditional plan, you take a tax deduction now and pay taxes later when you take the money out. With a Roth plan you pay the taxes now and the withdrawals are completely tax free.
The general principle is that if you are in a lower tax bracket now than when you are retired, you do the Roth. If you are in a higher tax bracket now, you use the traditional.
No one really knows what the future holds, though, making this decision tough. Here are some resources for you to check out when making this decision:
Traditional/Roth TSP Comparison Matrix
Roth vs. Traditional IRAs: A Comparison
Do not take loans against your retirement plan. Allow the tax-deferred or tax-free status of the account to maximize the growth of your money.
While the TSP allows loans, I refuse to link to any information about it. Once you put money away for retirement, you don’t borrow from it unless it is an ABSOLUTE EMERGENCY.
Period.
The Bottom Line
Here are the point-by-point summary of steps Jim Lange suggests you take if you are saving for retirement:
- Contribute at least the amount to your retirement plan that your employer is willing to match or partially match, which is 5% of basic pay in the BRS.
- If you can afford to, contribute the maximum allowed to your retirement plan even if your employer does not match, which is $19,500 in the TSP ($26,000 if you’re 50+).
- Once you have maximized contributions to your plan at work, contribute the maximum you can to an IRA, even if you cannot take a tax deduction on it. Use a back door Roth IRA if you need to.
- Consider your personal tax bracket when trying to decide if you should contribute to a Roth or a traditional IRA/retirement plan.
- Do not take loans against your retirement plan. Allow the tax-deferred or tax-free status of the account to maximize the growth of your money.
Flag Aide for Asst. Director for Combat Support at DHA – O3/O4
DHA is looking for a Flag Aide for the Assistant Director for Combat Support (currently Maj Gen Payne) to report NLT Nov 2020; here are the official announcement and PD. This is a rare opportunity for one of our O-3/O-4s to be at the epicenter of the readiness arm of the Defense Health Aagency.
Applications (LOI, CV, Bio) should be submitted to CDR Melissa Austin (contact is in the global) NLT 6 Jan 2020.
MHS Female Physician Leadership Course – Call for Nominations
We are announcing the call for nominations for the 2020 MHS Female Physician Leadership Course (FPLC) to be held April 15-17, 2020 at Defense Health Headquarters in Falls Church, VA. The target audience is Active Duty and Reserve female physicians (MD/DO) in the grades of O-4 select to junior O-5 (less than 2 years’ time in grade).
The nomination form, course details, and the formal advertisement are all here:
Please follow the instructions on the nomination form carefully. Submit packages as a single PDF to CAPT Nicole McIntyre (contact info is in the global) by COB (EST) on 15 JAN 2020.
Finance Friday Articles
Here’s an article about the upcoming change in the TSP I Fund. They are adding emerging markets like China to the I Fund’s international stock holdings:
Viewpoint: Let’s Keep a Level Playing Field for TSP Investors
Here are my favorite articles of the week:
Step By Step Guide to Opening a Brokerage Account
The 1% Rule and How It Can Save You Time When Evaluating Rental Properties
Here are the rest of this week’s articles:
10 Questions to Ask Yourself About Your Investments
Conflicts of Interest: Are You Getting Good Advice?
Creating a Dynasty: Building Family Wealth Across Generations
How much can we earn in retirement without paying federal income taxes?
If It Doesn’t Cash Flow, Don’t Buy It
Missing the Target with Target Date Funds
Monte Carlo Analysis: Understanding What You’re Dealing With
Oldies But Goodies – Financial Books You Should Read
The End of the Year Unwanted Payday
This Anesthesiologist Retired At 43 By Avoiding The Normal Traps That Trip-Up Doctors’ Savings
This Law Lowers Interest Rates for Active Duty Servicemembers
Throwback Thursday Classic Post – The $121,500+ Guest Room
(This is one of the most popular articles I’ve ever written, and I’m on my 3rd exchange student, so this room has cost me way more than indicated in the title.)
I have a wife, two children, two dogs and the need for three bedrooms and two bathrooms. In March 2015 I purchased what I consider to be a modest 4 bedroom, 3.5 bath, 3000 square foot house in a nice neighborhood with quality public schools. The 4th bedroom is largely unnecessary, but like many people we occasionally have visitors and feel that it is nice to offer them a bedroom as opposed to a hotel. This is the story of how that 4th bedroom cost me over $100,000, far more than it would cost to provide our visitors with a hotel room…a REALLY NICE hotel room.
The Guest Room
The guest room and its accompanying full bathroom are approximately 600 square feet. The house sold for $140/square foot, meaning that this extra room and bathroom cost me $84,000. Where I live, you can get a decent hotel room for $100/night. In other words, I could have purchased 840 nights in a hotel room for any guests we have and I don’t think we’ll ever have 840 guest-nights unless we stay in this house for a very, very, long time. In addition, we have a quite comfortable queen size Lazy Boy sleeper couch that could have substituted for the guest room.
Running total: $84,000
The HVAC Incident
“The way they installed this, I don’t even think I can fix it.” That is not what I wanted my HVAC repair man to say, but that is what he said. The guest room did not have its own HVAC zone and because it is above the garage and the insulation is not what it could be, the guest room is always too hot or too cold. And what’s the point of a nice guestroom if it’s not comfortable? After spending $5,000, the guest room had its own wall mounted HVAC unit and zone.
Running total: $89,000
The Exchange Student
Since we have an $89,000 extra room with a bathroom and its own HVAC, we are hosting a Spanish exchange student during the upcoming school year. Hosting an exchange student will likely be a great experience for us all, as I assume it will expand our horizons and hopefully forge a lasting relationship with someone for us to visit in Spain.
I suspect this student, like most humans, will eat and drink and cost some money, so I’m adding that to the running total.
Running total: $89,000 plus whatever a 16-year-old boy eats and drinks during a school year.
Despite the fact that he is of driving age, he is not allowed to drive in the US. This, of course, led to…
The Manny Van
Sometime in August, I will have a wife, two kids, two dogs, and an exchange student. It is (was) going to be tough to get around and do the traveling we’d like to do in our Toyota Prius and Ford Fusion Hybrid. Having a 12, 15, and 16-year-old in the back seat, while technically feasible, was not going to be fun for anything other than the shortest of trips. Plus, we like to bring the dogs.
Enter the $32,500 2015 Toyota Sienna minivan, which I like to call the “manny van” when I’m driving it. I can now haul all living beings for whom I am responsible in the manliest of vans.
Running total: $121,500 plus whatever a 16-year-old boy eats and drinks in a school year
The Moral of the Story
One of the classic financial mistakes that almost all physicians make (including me apparently) is that they spend too much money, buying too expensive a car and too large of a house. Sometimes something as simple as wanting a guest room can lead to unintended and expensive consequences. If we didn’t have a guest room, I would probably have an extra $100,000 and I wouldn’t be driving a “manny van”.
GI Bill Transfer Exception to Policy Expires 12 JAN 2020
The Department of Defense exception to policy (ETP) that extends the ability of service members with over 16 years of service to transfer Post 9/11 GI Bill benefits to their dependents expires on 12 January 2020. As outlined in NAVADMIN 178/19, as of 12 July 2019, any member who has greater than 16 years of service will no longer be eligible to transfer education benefits to their dependents.
The good news is that these changes DO NOT impact Servicemembers who previously submitted and have an approved Transfer of Education Benefits (TEB) application in the Defense Manpower Data Center (DMDC) milConnect web portal at https://milconnect.dmdc.osd.mil.
Eligible Servicemembers who have served 16 or more years may transfer Post 9-11 GI Bill benefits to their eligible dependents until 12 January 2020 with an additional 4-year service obligation on Active Duty or in the Selected Reserve (SELRES).
Who isn’t eligible? (NOT an exhaustive list, just most common reasons):
- Approved retirement or fleet reserve. – Can’t obligate the required four
years. - LIMDU, Medboard, etc. have not been found fit for full duty and are not retainable for four years.
- Less than four years to high year tenure (HYT) date or statutory retirement.
***There are ZERO exceptions for the 4-year additional service obligation.***
SG’s Talking Points from Specialty Leader Business Meeting
Here are the SG’s talking points from last week’s Specialty Leader Business Meeting in one slide:
November Message from the Assistant Secretary of Defense for Health Affairs
MHS Team:
On October 25, 2019, Deputy Secretary of Defense David L. Norquist signed a memo officially directing the transfer of authority, direction, and control of Military Treatment Facilities across the United States to the Defense Health Agency. While this formal directive marks an important milestone in the MTF transition process, it is only the most recent. The Military Health System’s work to date has resulted in significant progress to implement key provisions of the Fiscal Year 2017 National Defense Authorization Act. We transitioned the first phase of hospitals and clinics to the DHA last October and published more than 100 standardized policies since January 2018, with 29 more projected for publication by the end of the year. This progress reflects great momentum toward standardizing performance measures across the military medical enterprise and eliminating unnecessary variability, while moving to a more integrated system of readiness and health care delivery.
Earlier this month, I joined DHA Director LTG Ron Place and the Service medical leadership to share updates on MHS reform efforts with the Military/Veterans Service Organizations (MSO/VSO) Executive Council – a key stakeholder group that has long provided the MHS with invaluable insights into our beneficiaries’ experience within the health system. In recent months, MHS senior leadership has tackled head-on many of the issues MSO/VSOs have raised on behalf of beneficiaries. We reaffirmed to the MSO/VSO group that we’ve put in place a conditions-based, direct-support framework to ease the transition of MTFs to the DHA, which will help us to ensure we continue to provide our beneficiaries with access to quality care during this period of change.
I commend the teams across the MHS – at all levels – for your continued commitment to successfully implement the multiple reforms we have launched. Across Health Affairs, the Military Departments, DHA, the Uniformed Services University and the Office of the Joint Staff Surgeon, we recognize that success is a collective endeavor; our partnership to expeditiously solve problems, address gaps, and communicate successes and challenges remains key. A special thanks to senior leadership for forging this collaboration, and a warm welcome to Rear Adm. Bruce L. Gillingham, the Navy’s new Surgeon General and Chief of the Bureau of Medicine and Surgery. We look forward to your contributions in your new role – welcome to the team!
Outside of reform, military medicine continues to advance the Department’s three lines of effort in support of the National Defense Strategy. Earlier this month I had the opportunity to witness this first-hand when I visited the USNS Comfort in Haiti as part of its five-month deployment to provide medical assistance in support of regional partners across the USSOUTHCOM AOR. It was an honor to join USSOUTHCOM Commander Adm. Craig Faller, Task Force 49 Mission Commander Capt. Brian Diebold, USNS Comfort MTF Commander Capt. Patrick Amersbach, and the entire USNS Comfort team as they carried out this critical medical mission. This mission is a great example of the strategic role military health care plays in advancing the NDS’s focus on building relationships with our partners and allies.
Looking ahead, I anticipate seeing many of you at next month’s AMSUS (the Society of Federal Health Professionals) annual convening at National Harbor, Maryland, where I’ll join other senior leaders to discuss our progress to date implementing significant organizational change across the MHS and to outline what’s ahead for the system.
For those who are able to take some R&R for Thanksgiving, I hope you are able to spend time with friends and family and return refreshed. As I reflect on this uniquely American holiday, I’m grateful for the men and women who protect and defend our freedom and for the families who support them, and I thank all of you for what you do to sustain the health system that supports them.
Tom
Director of Mental Health – NMCP – O5/O6
NMC Portsmouth is looking for their next Director for Mental Health. This position is open to anyone inbound to the command or eligible with Detailer clearance. Announcement/Position Description is right here.
Packages are due to Ms. Cynthia Jones (contact in the global and in the announcement above) NLT 2 DEC 2019.
Joel Schofer's Career Planning Blog 