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Time to reform military retirement?

By Jennie L. Phipps · Bankrate.com
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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28 Comments
Active11B
September 03, 2011 at 9:14 am

Obviously this is the opinion of someone who is clueless as to why we deserve the few benefits we have. Oh sure, our military members continue to sacrifice their lives and time with their families, we'll just cut their benefits and roll it all up into useless civilian programs! Lord knows we need to spend thousands of dollars to put up highway project signs to inform people how their money is being spent!

Augie
September 03, 2011 at 5:54 am

Clearly Ms. Phipps, your journalistic skills are "not sustainable". Quote: "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." Ms. Phipps, with multiple combat deployments under my belt, and a Purple Heart...I think you're in absolutely NO position to opine about the feasibility of my retirement. Join the service and go do a tour of duty....go earn that freedom you so openly enjoy. The brave men and women of our Armed Forces have provided you that Freedom as a modern day "welfare benefit" that you never earned!

Gary
August 31, 2011 at 3:34 pm

Ms. Phipps, I assume you are maybe at starbucks now with your laptop open enjoying a triple latte skinny no foam no whip! Ya we thought so...... We are the ones that give you the freedom to enjoy your wonderful life! We do this so you can sit there at your laptop and say things like 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.

FYI when the senate gives up there retirement then I will give up mine!

Jeff
August 27, 2011 at 10:58 am

Oil+Islamofacism+AQ Khan=nuclear terrorism. With all the stockpiles and capabilities out there it's only a matter of time,,,9/11 would only be a warmup. We've got to fix this.

jerry
August 27, 2011 at 9:15 am

for those trying to change the mil ret system, in the mil you do not work an 8 hr day, you are on duty 24/7, in combat that means 3 8 hours shifts per day, in the us when you are on fild traning its 3 days for one, no double or triple pay for weekends or holidays. stop giving our money away, we have only had one war everything else is figthing other countries wars an paying them to let us do it. STOP BUYING FRENDS every elected offical in DC should have to spend one year in the mil as a pvt E-1. then i'll bet you would see things differant,. SFC USA RET.

Dave
August 26, 2011 at 5:07 pm

yes it is time to change the military retirement system for new members. I am a veteran and use the VA medical system and there are many veterans well over 75 years of age. This includes my dad who is 91.

Today many military people have skills that move into good jobs with the government and private industry. Those who don't have the ability to find work outside the military should have protection. Those that are disabled already have a good VA program to protect them.

Mario
August 26, 2011 at 11:12 am

Came back. Read this again.
Still makes no sense.

It just sounds like a bitter opinion from someone who couldn't retire at 40 and had to wait til later, more than anything else.

David
August 25, 2011 at 6:02 pm

This is completely not fair that you civilians are sitting at home watching World War 2 while we are in the battle fields seeing our comrades getting killed or dying. If any of you would dare to take the risk to come out here to fight for your country a day, you would not be so judgemental on the 50 percent military retirement pension. You think life is hard when you watch movies without popcorn, then join the military to find out what life is all about. People take up a lot effort and sacrifices enable to stay in for 20 years, and those years are the most precious time for all adults.

RMM
August 25, 2011 at 5:23 pm

If we were never at war, then this would be an OK plan because Military vets can get another job in their 40's with additional retirement. I think the age should be 62 without reduction of benefits. And the author's best point is that they may Serve less than 20 years, and NOT qualify for ANY pension. Those who serve less than 20 years Should be invested in a 401 type fund so when they leave the Service, they have some type of retirement awaiting at age 62. And the contribution by the Military should be increased when in a War Zone. And the only Military that might be too broke down physically at age 40 would be Marines, Army and Navy Seals. I have been on Subs and Ships, and the Duty is not that strenuous.

Lonnie
August 25, 2011 at 4:37 pm

So many holes in this article and the hypothesis behind your assessment of "fairness".
1. Military service takes a much larger physical toll and requires a constant infusion of young blood. Life spans may be longer across the population, but how about a targeted study looking at numbers of post retirement military life spans instead of a generalized statement of opinion. Most retiring military leave service with substantial disabilities that also have an effect on life span.
2. 17% of any population receiving a pension is outlandish? Really?
3. Enlisted pay information and education levels statement is woefully misstated. Though a HS education is required (can be waived) most enlisted Soldiers with a fair amount of time in service have a higher education. There are many young Americans who enter service with some education and there are increasing numbers of senior enlisted with advanced degrees. Military payscales don't allow for credit for advanced education, they are strictly based on rank which is based on level of responsibility. Try averaging between an E-1 and an E-9 and apply that math to the deduction that enlisted service members make more than the average HS grad.
4. Second careers were also rare because, for years, public law did not allow a retired service member to be hired into federal and in some instances state jobs, of which federal jobs were had on all military installations. Additionally, age restriction in some career fields limited the ability of retired members to obtain gainful employment upon retirement.
5. "Fair"? Is it fair that many, over a 25 year career, spend 14 years total away from their family? Is it fair when a father/mother misses a graduation because they are on their fourth deployment?