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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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82 Comments
donald purkey
January 17, 2014 at 8:56 pm

Did they cut retirement for congress? Fat Chance!

Patti O’Brien
January 17, 2014 at 8:53 pm

I have one for you. Why not take a look at widows benefits for retired military and if they make over $100,000 per year in other income, cut their military benefit income. Some of these widows don't even live in the U.S.

Gary Durbin
January 17, 2014 at 8:29 pm

"FALLCITY"
I can only wonder what goes on in that small and over tasked head you must have. No one put a gun to your head and told you not to join the military either. Military get a retirement after 20 years of being away from their family and loved ones, for months and sometimes years, along with the emense stress that is dealt with on a day to day issue; when were you last shot at; have you done that working at a hospital..no! you went home, you enjoyed the accolades of living in the states enjoying family life and Holidays. The stress in the military is well more then you have ever faced: because see, you could have walked away from it. We are there and have to deal with it until our contract is up; you cannot put your gun down and say "this is too rough, I want to go home"; you could have said I quit and been in your warm bed every night, as you were. So until you grow a pair...I say to you "If you cannot get behind the troops, feel free to get in front of them", or are you too much of a coward, and SCAT talker to do so? People like you making comments like you did, make us wonder why we did what we did. But then we remember what Paul Harvey would say "the rest of the story". So enjoy your constitutions that we defended and and go suck on a slug. I am retired and 90% disabled for life. Until you can walk in our shoes, please remain silent and do not show your stupidity, you do not amuse us. And by the way, I vote YES on every contract/raise thatcomes up for our firemen and Police, because I can relate.

Gary Durbin
January 17, 2014 at 8:23 pm

"FALLCITY"
I can only wonder what goes on in that small and over tasked head you must have. No one put a gun to your head and told you not to join the military either. Military get a retirement after 20 years of being away from their family and loved ones, for months and sometimes years, along with the emense stress that is dealt with on a day to day issue; whe were you last shot at; have you done that working at a hospital..no! you went home, you enjoyed the accolades of living in the states enjoying family life and Holidays. The stress in the military is well more then you have ever faced: because see, you could have walked away from it. We are there and have to deal with it until our contract is up; you cannot put your gun down and say "this is too rough, I want to go home"; you could have said I quit and been in your warm bed every night. So until you grow a pair...I say to you "If you cannot get behind the troops, feel free to get in front of them", or are you too much of a coward, and SCAT talker to do so? People like you making comments like you did, make us wonder why we did what we did. But then we remember what Paul Harvey would say "the rest of the story". So enjoy your consitutions that we defended and and go suck on a slug. I am retired and 90% disabled for life. Until you can walk in our shoes, please remain silent and do not show your stupidity, you do not amuse us.

ranger
January 17, 2014 at 8:08 pm

Fallcity, that you have no idea what sacrifices are made by military personnel is crystal clear. There is no comparison to police officers or firefighters regarding long-term separation from loved ones, continuous and immediate deployment readiness, frequent and disruptive moves for service members and their families, threat of harm/death, physical hardship and deprivation, etc. You may have SEEN frequent death in a hospital (so have I, as a Trauma Center chaplain) and witnessing trauma is, I agree, a traumatic experience, itself. But I cannot recall a time when I was chronically, or frequently, or even seriously in fear of my own life while working in a trauma bay. You do valuable work, I'm sure, but you are NOT the kind of self-sacrificing hero that military service members are, especially today. My advice would be to get over yourself and put the work you do into some coherent perspective vis-a-vis the military. Peace!

jesus
January 17, 2014 at 7:41 pm

like always the poor go to jail for been poor...the rich live free !hoop...

audiracer
January 17, 2014 at 7:34 pm

Fallcity, you my friend are an idiot! Of the people you've seen die which ones would you die for? Which ones were like brothers? Which ones did you have a lifelong bond with? Others sacrifice so that you and I can speak our minds, don't deny them what we owe them IF they make it 20 years. Why don't our elected officials include their retirements in the cuts? They sacrifice nothing, and take everything.

Dan
January 17, 2014 at 7:32 pm

GARY
You say you are a 100% disabled vet and you get no retirement from the US Army and that you only get VA Compensation and social security. That would only be possible if you were retired with a service connected disability and retired with less than 20 years service. With 100% disability and 20 years service you would be getting VA compensation Social Security and retirement from the US Army
You need to talk to some one. I retired with 22 years service with combat related disability and I get all of the above.

old soldier
January 17, 2014 at 7:14 pm

Fallcity, you sir, are an idiot.

fallcity
January 17, 2014 at 7:01 pm

Time to wake up and smell the roses with the rest of us. Pensions for Police and firefighters have been disappearing for years. Nothing special about the military. No one puts a gun to their head to join. Don't we all wish we could get a nice little package deal like that! 50% for life after 20 years!!! Hell Ive worked at a hospital for 40 years. I've seen more folkes die than anyone I know in the military and I'll be lucky to ever see a return from my pension. Face it too, most these guys go to the military because they can't find work that only takes a grade school education. I apologize to the exceptions.

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