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Time to reform military retirement?

By Jennie L. Phipps ·
Wednesday, August 24, 2011
Posted: 11 am ET

The Defense Business Board, which advises the U.S. Department of Defense, mostly on matters of civilian contracting, will report in October on ways to cut costs and modernize military retirement plans.

A preliminary retirement planning report calling for reform has raised the hackles of a wide swath of military and other types who oppose any cuts, especially while we have soldiers at war. It's true that the timing isn't ideal, but the business board's report makes some good points. In calling for a 401(k)-type plan to replace the pension that military retirees get after 20 years of duty, it pointed out that 83 percent of military personnel don't get a pension at all because they don't make it 20 years.

The report said the current military retirement system is more than 100 years old and was designed when times were different:

  • Life spans were shorter.
  • Military pay wasn't competitive with civilian pay. (Current enlisted military pay is in the top quartile for high school graduates.)
  • Second careers were rare because military skills didn't transition to the private sector.

The board said that because military retirement benefits are received after 20 years, 76 percent of those who do qualify for retirement benefits leave the military at 20 years -- when they are in their 40s -- which makes retaining trained people difficult. The current retirement system also doesn't provide extra compensation for those who serve in combat areas.

Costs for today's plan are skyrocketing. Current liability is $1.3 trillion of which $385 billion is funded. By 2034, the military calculates that its liability will reach $2.7 trillion.

The board suggests substituting a 401(k)-like plan based on the government's Thrift Savings Plan with Department of Defense and military personnel contributing. Military personnel could access their plans without penalty at age 65 and the plans would be part of their estates. Fully disabled participants would qualify for an immediate pension. There would be no impact on existing retirees.

Is this kind of plan fair? I think so. The idea that you can retire in your 40s and receive 50 percent of your salary for the rest of your life isn't feasible in a world where people routinely live to be 85 and increasingly hit 100.

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August 25, 2011 at 4:07 pm

Wow, this is what you get from gratefull patriotic politicians if you are in the military; we will send you any where in the world and have you fight and die for your country regardless if the war they sent you to was legit (still don't know how Osama morfed into Saddam and we are still looking for weapons of mas destruction) but if you make it back alive we will then take your benefits. Now there is something these guy under estimate no true American will support such abuse to our men and women of the armed forces. It's time to let them know that they will be voted out of office if this abuse ever happens.

It's time to cut where it really needs to be done, congress; no more 5 years in office with all the perks you get then a nice retirement and medical. Pork barrel projects, another place you can completly cut. How about aid to countries hostile to US interest (Pakistan comes to mind). Maybe you should look at nationalization of our pharmaceutical and while your at it Wall Street bonuses with tax money that even soldiers have to pay I could go on and on and on...

August 25, 2011 at 4:04 pm

If the mercenary military were not as desireable, there would be far fewer wars and the nation would not be bankrupt. The empire would not be owned by the military industrial complex. As it stands, the clown Panetta now running the pentagon still spreads FUD to make the big bucks for the oil companies and, lets say GE, which didnt see fit to contribute a dollar of tax to a soldiers salary... or funeral.

Retired Veteran
August 25, 2011 at 3:07 pm

I retired from the Air Force in 1985. I'm on the Agent Orange Registry. I lost my Gall Bladder, have had a Triple Bypass,
have Hypertension, Diabetes, Type 2, all of which are the results of direct exposure to dioxin contaminants in herbicides such as AO, and other Agents(purple, red, blue, yellow, etc.) sprayed indiscrimantly on US troops from 1964 through 1975, in Thailand, Laos, Cambodia, Viet Nam, Guam, and some 278 places in the USA and Europe! I was definitely exposed from 1966 through 1969, in SEA.

So, if the retirement were less, I would have the right to sue the government, right?

Our oath of enlistment negates ALL our Rights, and we pledged our very life in service to our nation, without question.

How much is 20 years of hard service, toxin exposure, and the misery of this life of pain, really worth? I get $1300 per month, fully taxed at 28%. I copay the VA over $2,000 each year for treatment!

I can only recommend that no one should enter the Armed Forces!
Just go look at the lies and deceit about Pat Tilman!

August 25, 2011 at 1:29 pm

This advisor/writer is very biased. She continually blasts any kind of pension plan. Pension plans have their place, but you need to get rid of abuser of the pension plans. Salary spiking and big payouts at the end of the pensioner's career. Getting rid of the abuses would help put a dent in the deficits. Maybe Bankrate can get a "Pro Pension" point of view once in awhile!!!

Not Onesided
August 25, 2011 at 1:15 pm

The self-interested here are howling as loudly as they can. Welcome to the world that the rest of us live in. Living by the same terms is not disrespect for the military; it's the military coming to respect the rest of us.
And why would anyone serve without financial incentives? How about patriotism?

August 25, 2011 at 12:54 pm

I did serve in the military and changing the military retirement system is long overdue. I use the VA hospital system and there are lots of veterans that are over 75 years old. I myself am 62 and I am a long ways from being old.

Many military people retire after twenty years service and are able to go to work in government and private jobs that pay very well. You just have to have a system that takes care of those that can not work after the military. However, that is a very small number.

R. Richardson
August 25, 2011 at 8:08 am

So, why would anyone ever want to make the military a career? Do you want soldiers to still be serving in their sixties when their bodies can not handle the physical demands of combat? Being able to "access" the proposed 401-k type pension at 65 is NO Inducement whatsoever to a military career. Jennie Phipps evidently wants soldiers to endure hardships of family separation, to fight and die or get seriously maimed long before they can get any retired pay. Send her to Afghanistan and let her serve IN THE FIELD with a combat unit for two or three tours. Maybe she will get rid of her cynical, dollar-influenced ideas.

August 25, 2011 at 7:57 am

yea,thats about right. a bunch of wimpy civilians that never spent one day in the military want to make sure that we (the military) dont recieve any benifits that they dont get.theres no way you can compare 20 years of military service to a civilian job. have you ever pulled C.Q,staff duty? thats where you stay AWAKE for 24hours on duty, and thats here in the states during peace time. have you had to pack up your whole office and everything you and your company works with and go out to a remote field location for 2-3 weeks,eat food out of a bag,drink water out of a old water trailor (hot water).dig a hole to use the bathroom.(but make sure no female sees you or your in trouble).get orders to move to another COUNTRY in a monets notice,and have to leave your wife and kids behind for a year or 2.have to go thru the gas chamber every year, like getting pepper sprayed.have to wake up at 0500 so you can do P.T. at 0630 everyday mon-fri.(can you run 2 miles)?i could go on for a long time with all of this, but the point is this. yes they get a younger retirement but 20 years of active duy takes a hard tole on your body,and your family that the civilian does not even come close to.i challange you to spend 2 years in the branch of your choice. then see if you still want to change the retirement system.i have always said they should bring back the draft. that way lottie/dottie and everybody will serve their country. and that draft should include women as well. and one more thought, the president of the united states should be required to have military service.

August 24, 2011 at 7:48 pm

Disclaimer: I have not served in our country's military. But I firmly believe that there is no salary, and no benefit, that can fully make up for the sacrifice that our people in uniform (and their families) make for the United States. Leave well enough alone -- you want to save money? Start by zeroing out the salaries and benefits of our members of Congress, the Executive branch, and the Supreme Court. Quite a few of these people are already millionaires and hardly need the help that our service members deserve.

August 24, 2011 at 12:38 pm

Is this kind of plan fair? I think so. The idea that you can retire in your 40s and receive 50 percent of your salary for the rest of your life isn't feasible in a world where people routinely live to be 85 and increasingly hit 100."

Huh? A lot of these people in the military put their minds and bodies through more "stress" in those 20 years than you would do in your lifetime.

I'm not in the military, but I can tell you right now, this ISN'T fair. But I can tell you what this IS going to do. It'll make sure that people think twice before joining the military.

I guess now they can thin out the herd in the armed forces.

Don't post an article saying that people routinely live to be 85 and hit 100... how many of those people that live to be 85 are vets? Your comparison is very unbalanced.