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Military cuts retiree COLAs

By Jennie L. Phipps ·
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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JR Rabbit
January 17, 2014 at 6:34 pm

Brainwashing at work with you guys. how do you blame the liberals, when it is the republicans in charge of congress...and oh the ones who have the montra of cutting government spending etc. when the conservatives cut programs you blame liberals...amazing brainwashing at work.

January 17, 2014 at 6:34 pm

WOW!!!!!!! That is f...ed up!! These people have chosen to be in the military, not forced, and knowing they may not ever return from their duties, tells me they have the most courage in this country than anyone, and your going to TAKE AWAY from them which they have clearly earned so you can save the gov. tons of money????? That is pathetic, to say the least. What happened to the power of the people, seniority rules, out-voted hands down. I...don't know what to think about this government anymore when you have to stoop SO LOW and attack the only ones who PROTECT this country.

January 17, 2014 at 6:23 pm

Gary that is congress they spend no time there and still get retirement

January 17, 2014 at 6:19 pm

As a 100% disabled service connected vet, I get absolutely NO retirement FROM the US Army, ALL my retired comes from VA Compensation and Social Security!

Name me one other job where the time you spent there=NO RETIREMENT INCOME???

Ed Fitzgerald
January 17, 2014 at 6:19 pm

As comedian John Byner used to say: Military benefits are great, and all the government asks in return "is for once in a while to let strangers shoot at you."

NK Hagen Jr
January 17, 2014 at 6:14 pm

Are we capable as the American public to hold discourse without rancor, insults and name-calling?

This if from this web site-
"Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, RESPECT other people's opinions, and avoid profanity, offensive statements"

robert quinn
January 17, 2014 at 6:05 pm

why are you people surprized this is what liberals do- the gutless worms think they are smarter than everyone else- they have global warming on the brain-lmao!

January 17, 2014 at 6:04 pm

Healthcare to cover the illegals,and those that haven't worked for it,free cell phones,food stamps,more countries hating us even more than pre-911,HOMELAND SECURITY has more bullets than all those used to fight WW2,military vehicles given to our local police dept's that are used on the battlefield,more taxes put on us in the last 4 yrs than the 4 previous administrations,our phone conversations are being monitored without a warrant from the courts,more unemployed that have fallen of the radar and not counted unless it makes good news for the democrats in one of their scams etc etc.Come on military,you've got to do your fair share to,these freeloaders are really suffering out here.I'm going to see what my father can cut to help these good citizens,after all he had to serve in ww2 in a couple of battles,and after all the KENYAN BOY is a victim of your selfishness.

January 17, 2014 at 6:02 pm

Hotrodlee couldn't hack the military. He would be crying the whole time about his pay and benefits. How many times has he been shot at in his life? And for 800 bucks a month. They are hiring if you think the benefits are so great why not sign-up for them.

robert quinn
January 17, 2014 at 5:57 pm

hotrodlee you liberal handjob-go watch msnbc u loser-lmao