There are many reasons why volunteers join the military but, for whatever reason they join, the best thing that the military has is arguably its military retirement system. Everyone will agree that it is one of the best retirement deals compared to the civilian sector. The military provides a pension which include benefits that begin from the day a servicemember retires to the day they die. Meaning soldiers can start collecting their retirement pension as early as 37 years old and their pension check can still grow with the adjustment of the cost of living adjustment every year (unless the REDUX plan was taken at 15 years of service, then it’s one cost of living adjust at age of 60).
The new proposed retirement plan revealed last July 21 by the Defense Business Board is just one of the cost-saving initiatives that are potentially being adopted by the DoD in coming years. This new retirement plan will significantly change the military retirement system that had been in existence for more than 60 years and still needs to be approved by the Congress. According to Richard Spence, former finance executive and Marine Corps pilot, the present system is unfair, unaffordable and inflexible and the new plan will allow servicemembers the ability to build a meaningful retirement asset that is flexible for the kind of lifestyle military servicemembers are looking into. Many would argue that it is fair and just for putting their lives on the line for 20-30 years of service.
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Yes, the new plan is flexible. Most service members still see the current retirement system as still the best deal. Disappointment is quickly trickling through the ranks of the services as they see yet another benefit being stripped away from them as they have seen their overall health system disappear in favor of Tricare.
The Plan Itself
The plan in all aspects would resemble more of the corporate America type of retirement rewards. Yearly contributions and lower pensions would replace the 20-year vested retirement system currently in place. The Thrift Savings Plan (TSP) would become mandatory, which currently is not matched by the government. Potentially, the DoD will contribute approximately 16.5% of the member’s yearly salary in the TSP for future growth connected directly to the stock market success or failure. Those who deploy, complete hardship assignment, or are in hard to fill jobs would receive extra contributions. The problem with some getting more than others is not everyone has an opportunity to fulfill those much need aspects of military duty.
While the TSP offers a tax-free growth until withdraw at 59 and a half, the penalties for withdrawing early is monumental. There hasn’t been guidance on whether members would be able to access the money earlier than current rules allow. The plan in everyway saves the government substantial amounts of money, which makes it obviously a bad return for today’s service members. Any benefit to the government is always a bad deal for the recipients regardless of the spin put on it. The only members that will benefit in this overhaul are the members that do not consider making the military a career option.
1st Term Military Members
Would receive only the annual contributions from the government directly to their TSP. They can leave the service after the commitment and keep the money for withdrawal at 59 and a half, or withdrawal under certain circumstances with lower penalties. They incur no special incentive to go further in their career.
Military Members with 5 Years of Service
They receive the same as the 1st termers with annual incentives accruing, and if they reach the 20 year vesting date of today they will receive 12% of their pay. Ultimately they receive nothing for not completing 20 years except what they got out of the annual contributions to their TSP.
Military Members with 10 Years of Service
They receive everything the last two brackets do except if they complete 20 years they get about 25% of the annual pay for retirement. This is about half of the current retirement plan.
Military Members with 15 Years of Service
If this plan goes into affect today you would not get your 50% retirement like you thought. You would get everything said to this point but instead of 50% they are only going to pay you 37.5%.
Military Members with 20+ Years
If you are lucky enough to be at 20 years or more you still get what you have been promised, but you will also get the annual contributions as the previous tiers. This tier is currently the biggest winners under the new proposal.
Summing It All Up
This proposal will help the government save mounds of money from those who get paid a fifth of what their civilian counterparts currently get paid for doing the same job on the outside of military service. For most members who read this, it’s easy to see why many are not happy about what just went down without any input from those serving below the top ranks. The military members that joined in hopes of serving their country and providing a better life for themselves and the families just got one more reason to no longer serve and to bring the fight to Capitol Hill. This is a very hard pill to swallow as those making $175,000+ in Congress tell the military they are getting a serious pay decrease. Those that make the decision has no desire to cut their own benefits, but they can make an easy decision to cut millions of others.
Military members will no doubt look at legal options if this goes into affect. Many will simply walk away from the military, and only few will continue to serving. The government is about to break another promise to its own that have sworn to defend the Constitution. This new plan does more than insult, it simply breaks those that are already at a disadvantage. In a time of budget crisis and American disgust with the fatness of Washington, the military should be the last place to cut. The average military member makes $40,000/year, while the lowest grades make less than $18,000/year. These are the people who sacrifice corporate jobs to serve and they deserve what was promised. No other job in America sends it’s own people to foreign countries to fight wars, endure long hardships, or create work environments that the members themselves have no control over and cannnot quit, at least let them keep what it rightfully theirs.
I have proudly served the Air Force for 10 years and staying in now is hard when i was expecting to get the retirement i signed up for. I have saved alot already and already investing in an IRA so i am prepared for the later years. I feel that they are taking away the one thing that i was staying in for and that is the monthly retirement installments I was entitled to when i signed up. 10 years of service only getting 25% of the check is rough. Retirement to me is being able to stop working and live off what you earned, I wont be able to do so with only 25% of my paycheck. That means i will have to work another job until i hit 60. Of course i was going to get another job after 20 years, but what if i didnt want to? With the current rates i could, but if they change it i wont be able to.
This Marine that came up with this states that 83% of service members do not recieve a retirement. It is that person’s prerogative to not stay in for 20 years or invest in a retirement plan while being in the military. The TSP is there for any service member to invest into.
Thoughts?
Re: New Military Retirement System: A New Look at Retirement
If our elected buffoons are really serious about reducing the budget, then start with the Congress’ and Presidents’ retirements and leave our military retirement system alone! Why in the hell do military members have to do 20+ years to get a little less than 50% all the while living below U.S. poverty standards, but yet our Congress and President gets a retirement with as little as one term at more than 50%? I don’t see them putting themselves in harm’s way! As to the proposed New Military Retirement System, you can’t “model” it after the corporate sector AGAIN because I don’t see the corporate sector putting themselves in harm’s way either! The military is in a unique situation and therefore MUST be allowed to have a different standard if it is to succeed.
David, some of the issues that stand out to me are the TSP contributions, disregarding of time served and being grandfathered in, and the military retention. The TSP is directly connected to the stock market, we all know how that is going right now so they minus well just hand my 16.5% to the millions that are dumping money into the stock market as it continues to go down. I have served 15 years and I expect my 50%, otherwise I could have found another job in my field outside of the military and had a nice 401K to begin with. The biggest thing I see is people aren’t going to stay for a 401K and continue to make less than their civilian equivalents. The military is going to see numbers disappear in droves. To me that is NOT what we need currently.
Guys, I couldn’t agree with you anymore. When I was at my 8 year mark in the military I had to make a decision to stay in or get out. At that time frame, I had job offers from several companies willing to pay me more than what I was making to do the same job. Those jobs would have ensured that I was home with my family every night and would have never put me in harms way. I chose to stay in the military because those jobs would not provide me a pension in 12 more years. Does the goverment actually think people will stay in for more than 4-6 years if they don’t have a true retirement to look forward to? Why should we stay in if another company is going to pay me more and probably provide a better 401k plan? They have already taking away a lot of our benifits, and this would be one of the few big benifits that we have left. I just went over 17 years in the Air Force and you can guarantee, that if this goes through, I will punch out at 20 years and 1 day…
Will Congress change their retirement plan or thier medical at that. What happens to the militay members who are over 15 but are year or two shy of 20? You want to continue to take from us but expect us to serve willingly in a ALL VOLUNTEER FORCE. You are taking away all the reason that made it worth serving. Knowing that our benefits will take care of our families but what benefits do we really have if they are continuously being stripped away?
When we joined and every time we re-enlist, we are getting closer to that promised retirement at the 20 year mark. If they take that away from us, it will be time to say enough is enough. We work in the worst conditions for less pay than civilians. Not to mention putting our lives on the line for our country! If we allow the wealthy decision makers in Washington to strip away our best benefit of all, our light at the end of 20 years of sacrificing our health and relationships with our families, it will truly be a sad day.
I’d have to agree with the other posters. Working side-by-side with contractors, making 4-5 times my pay for the same (or sometimes less) work opens your eyes to the money. Without the robust retirement entitlements, I would certainly submit my resume to DynaCorp at the end of an enlistment. I knew this was coming. We’ve been pawns in the U.S. budget game and now we’ll be the sacrificial lambs for military spending.
When given the choice of raising taxes on those that profit from war or cutting the benefits of those that have to fight the wars, is there any question of whom the politicians will choose? The flag waving is nice, but I’d much more prefer a little promise-keeping on the part of my government.
This is not surprising. Take it away from those that give half their life to the country, and sometimes the ultimate sacrifice, but keep giving to those that contribute nothing. If this is implemented there will be a massive exodus from the military. Also, if these senior leaders think the junior people that stay, because they do not know better, can accomplish the mission they are sadly mistaken.
How can that ex marine pilot say the people do not get anything when they leave after the first tour. They received valuable skills training while earning a pay check. The junior officers receive an ivy league education while receiving a paycheck at the same time; not bad. You do not see that in the civilian sector.
If they want to save money in the defense budget, just stop hiring all those defense contractors. There are plenty of places to trim waste; pay and benifits is not it.
Can you say MASS EXITUS ???? No one is going to stay in the military. Then who are they going to get to defend our own country if something happens. It will come down to a FORCED ENLISMENT. (DRAFT). They really need to be cutting the saleries of the BIG WIGS…start @ the top……the president should only get a lifetime salary if he serves 20 years also the congress, sentae and house should get paid while they serve…not for the rest of their lives…..and make them serve 20-35 years before they get that.
First of all to compare the job Military members do to the civilian sector is just ludicrous to begin with. How many in civilian land move every 2 years, are on call 24/7/365, work endless hours? How many once they retire can be called back to service at the Nations whim? How many go into harms way? How many have their bodies used and abused to the point they are broke down? Answer? NONE.
Second, having it tied to the stock market….really? We see how that is playing out and it could mean that you would have absolutely nothing when you retire. Many in the civilian world can attest to that as they have watched their 401K’s go down the drain the last few years. This entire plan stinks to high heaven. And they will find they have no Military left if they put this through.
Many claim the Military needs to have their “entitlements” cut…these are not entitlements, these are earned rewards for years of loyalty and service. THEY ARE EARNED and Military members make a lot of sacrifices to earn these benefits.
I seem to remember a speech that Obama gave to a Veterans organization not to long ago where he stated he would not let the Military or its Veterans be harmed through cuts. Well, actions speak louder then flowery speeches.
Good luck having a strong professional Military if this goes forward.
[...] ranks need to be thinned out now because we are broke”. The DoD attempt at a possible revamp of the military retirement earlier this year and now they are looking at every tool possible to include HYT [...]
Does any one know when the presendent will be signing this 15yr retirement bill? and when will it go into affect?