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Military cuts retiree COLAs

By Jennie L. Phipps · Bankrate.com
Friday, January 17, 2014
Posted: 10 am ET

This week's congressional budget deal included a provision to reduce cost-of-living adjustments by 1 percent for military retirees younger than 62, starting in 2016. Disabled veterans will be exempt from the cut. The Military Officers Association of America, or MOAA, estimated that the typical soldier who retires after 20 years at age 40 will lose $83,000 over 20 years. The typical retired officer will get $124,000 less over 20 years. In all, the cuts are expected to save the government $6 billion over the next decade.

The military is outraged over these cuts to promised retirement plans and several groups, including MOAA and the Veterans of Foreign Wars, the VFW, have vowed to seek repeal.

In the meantime, J. Scott Spiker, CEO of First Command Financial Services, financial planners specializing in helping members and veterans of the military manage their money, says, "Military people understand that the sanctity of their retirement benefits have been violated. The government has stepped into prospective retiree benefits and said, 'We're willing to tinker.' These benefits have been inviolate for a long time and people are very worried."

Spiker says only about one-sixth of the people who initially enlist in the military stay for the minimum 20 years and earn retirement benefits. After 20 years of service, a retiree gets 50 percent of his final base pay for life, plus cost of living or COLA adjustments. If he stays 30 years, he gets 75 percent of his base pay for life plus the COLA.

Spiker says that in today's competitive military, making the 20-year mark isn't easy and certainly isn't a given. In previous years, an experienced noncommissioned officer could expect automatic promotions, he says. Today, "If you have a single blemish on your service record, they are going to say you aren’t eligible to re-enlist or ask you to resign.

"In areas where there is a surplus of personnel, they make random cuts and they do it to people at a stage where there are no retirement benefits. If you are at the 14-, 15-, 16-year point, they may say to you, 'We'll give you retirement, but it will be a fraction of what you would have gotten if you had made it to 20.'"

For anybody choosing a military career today, Spiker says what all this boils down to is the need to start retirement planning early. He tells his clients to put three things in place the moment they enlist. What  he has to say is good advice for non-military workers as well because if military retirements can be trimmed, can Social Security be far behind? Spiker says:

  • Have a contingency plan for what sort of alternative career you would pursue if your military service ended abruptly.
  • Open a military thrift savings account and fund it regularly. Thrift accounts are like 401(k)s. There are both regular and Roth versions, but there is no government match. Members of the military who don't qualify for military retirement must build their nest eggs without help.
  • Watch your spending. The military provides benefits beyond salary that can reduce the amount of cash its members need to live. When these benefits disappear, it can be a shock, so members of the military need to be prepared for that eventuality.

Spiker thinks that a further overhaul of the military retirement system is likely -- one that will take into account today's structure. "I think we are going to get to a point where the military is going to have to put incentives in place to get people to overlook uncertainty," Spiker says.

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81 Comments
SirHenry
July 30, 2014 at 11:29 pm

Our elected official in Washington D.C. do not know what they are doing, no one in their right minds would enjoy the safety of their Military, give them what they deserve/worked for, thank them for their service and then take it back. I would feel much better if our so call leaders in Washington would lead the way by cutting their benefits first. This is what true leadership would do, anything else is not leading.

Colorado
January 21, 2014 at 3:08 pm

fallcity, I agree with you. If you didn't want to be away from your family you should not have joined the military. Most take the cash for the combat pay and relist for the relist bonus. It's your decision, its my decision to make it less appealing our military to stay out of the military.

Marine
January 18, 2014 at 12:09 am

Sarah Palin was loud when the government shut down the WWII memorial but sure was silent when her party put this bill through.

Joan
January 17, 2014 at 11:53 pm

I agree we want to give everything to people who invade this country by the millions but not to the people who defend it. I cant even think this administration is remotely doing what is best for this country. It's like they want to destroy us and they are doing a bang up job.Why aren't the people of this country peacefully marching and holding our leaders (?) responsible for this mess.

FREDRICK M DUNCAN
January 17, 2014 at 9:31 pm

As a 20 year retired E-7 I add this. I was glad to serve my God and my country. I willingly sacrificed the best 20 years of my life. I wanted to have a family while I was young enough to enjoy and cope with it. Paid at the poverty level and housed in dorms with less space and amenities than federal or state prisoners I was happy to get separate rations and a quarters allowance when I got married. However My wife had to work in the local economy for us to make ends meet or to have a decent car. Today many military families qualify for food stamps. "Free" medical care and the savings in commissary bolstered our meager income.
Upon my retirement we were persona non grata at the local military clinic because of cutbacks and mission needs. I noticed that OBGYN, Obstetrics, and delivery beds were gone and now military sick call send active duty people downtown.
We now have Tri Care for life and we pay for that along with Medicare part B so we avoid the ACA.
COLA is the one thing that we have to help us keep our heads above water and now as the actual cost of living goes up it is reduced. The same for our Social Security.
Why is it that we who have already sacrificed are tasked with further sacrifice when our leaders have no compunction about raising their own pay and refuse to cut needless waste? Have they all taken up Hillary's mantra, So you served: What difference does it make now?

Idon’t know
January 17, 2014 at 9:29 pm

Why is everybody in the military treated equally? For someone going to some (usually stupid) war why are they treated the same way one of our 89,000 military people in europe.......which reminds me, why do we have 89,000 military people on the payroll in europe? Do you know how to spell bloated? Give the combat people what's due them, the rest are on holiday.

Joe lewand
January 17, 2014 at 9:16 pm

I, as a retired Marine am only thankful that I retired 32 years ago. After serving 22 years I was appreciative of my retirement check. If I were in the service now I would be appaled at the way the young service men and women are treated by our govt. they are thrown to the wolves and left to fend for themselves, no support from anyone. I hve a son in law now serving in the Army on recruiting duty. As a Sgt with a wife and 2 small children THEY are on wic. That is a shame that our military has to be below the poverty level while the B****h in the wh has all the lavish parties and vacations they can squeeze in. Disgusting. Even more disgusting is congress which also heaps more $$ and benefits on themselves while proclaiming they are trying to help our servicemen/women. All of our elected officials are pure garbage and only servethemselves.

robert quinn
January 17, 2014 at 9:06 pm

raise the taxes on all liberals to make up the difference

19Delta
January 17, 2014 at 9:03 pm

fallcity

3216 nights away from my wife and children, serving in 7 countries, everyone in combat zones. You are who you are and I understand you totally. Blanket statements such as yours surely are the property of cry babies, whiners, and losers. You wear all three well.

19Delta

Lewstien
January 17, 2014 at 8:56 pm

I am writing this trying to keep a level head. the fact that they join willingly speaks volumes about their patriotism and call to duty. The same goes for all the fine men and women who serve as peace officers, firefighters and EMT's. However the pay discrepancy is enormous, enlisted service members starting out are near poverty level. The salary for Illinois State Police approaches six figures after minimal service time. The days of high school drop-outs populating the military are over.Your apology ought to go to everyone who has served, is serving, or enlisting!

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