By Andrew Tilghman - Staff writer
Posted : Monday Jul 25, 2011 13:24:26 EDT

A sweeping new plan to overhaul the Pentagon’s retirement system would give some benefits to all troops and phase out the 20-year cliff vesting system that has defined military careers for generations.

In a massive change that could affect today’s troops, the plan calls for a corporate-style benefits program that would contribute money to troops’ retirement savings account rather than the promise of a future monthly pension, according to a new proposal from an influential Pentagon advisory board.

All troops would receive the yearly retirement contributions, regardless of whether they stay for 20 years. Those contributions might amount to about 16.5 percent of a member’s annual pay and would be deposited into a mandatory version of the Thrift Savings Plan, the military’s existing 401(k)-style account that now does not include government matching contributions.

A critical new feature would adjust those contributions to give more money to troops who deploy frequently, accept hardship assignments or serve in high-demand jobs. It would also give the services a new lever to incentivize some troops to leave or stay on active duty longer.

FULL STORY:
http://www.navytimes.com/news/2011/...ul-072511/

I had a discussion recently with a few people about this.

Here is my thought.

If a guy comes into the military and say they are 18-19. They stay 20 years, and are 38-39 years at their time to depart the military service.

They begin to receive that entitlement, whatever their rank was at a 50% rate.

So E-7, possibly sees $1800-$2000 a month for the rest of their lives.

$2000 x 12 = $24,000

After lets say 30 years, and they reach 68-69 years of age, they had received a total contribution of around:

$720,000

They key to this, was that they were receiving it from the moment they departed the military.

So a guy lets say they want to move and retire in the Phillipines/Thailand, and live some what on a low budget, but still surviving on that retirement wage of $2000, has that option.

This new system would completely do away with it.

They would turn into a 401K plan, which I'm sure is going to have policies that they are not authorized to use the $ until they reach 65 years of age, like most retirement plans.

What does this do, and how is this going to shift the military commitments? If a guy is going to receive the same sort of retirement plan, as they would receive at most corporate organizations, whats another reason for staying those 20 years.

I found myself in a similar situation. I served 8 years in the military.

You think to yourself, is it really worth staying those 12 additional years, to fulfill, and even if you do, you find yourself, 39 years of age, and starting at the bottom once you depart back into the corporate world.

I've known many guys that are at that 9-13 year mark, use the excuse, well I am already half way, so I might as well stay and then get my retirement.

Those words will no longer exist. There wont be that extra little incentive / tactic, that the military knew, they had over people to keep those individuals in for those remaining years.

Sure this new plan, is going to cut down on long term costs for the government. But I see it also hurting the govt as well. I wonder if they will also change the policy that you dont have to get out at 20 anymore one day. If a E-7, wants to stay longer than 24 years (which is currently the max amount of years), I think one day 5-10 years after they make this policy, they will implement people can stay 30-35 years.

Why kick a guy out, when he has all those skills, and have taught the guy about those military systems they operate on. Training costs for individuals not staying their full 20, may actually go up than what they currently are, because people not staying the full 20, and the military having to re-train new recruits.

Its going to be an interesting policy if it gets approved, but it just signifies another reason why I departed when I did.

Another big question I had, was if they did make this policy, would it become retroactive to individuals already in? What happens to a guy that has been in 17 years already. This new policy builds $ into your 401K plan over time. Everyone knows, TIME IS THE KEY to these type of investment plans. What happens to the guy who, is just starting at 17 years, compared to a guy starting on day 1.

I know they wont do this, but I feel, they need to allow everyone that is currently active duty, to be grandfathered by the old policy, and any new individuals that enter, are on the new policy. Just seems unfair to yank a guys retirement, who was 3 years from starting to receive a monthly check, and then he gets told, sorry dude, but we dumped this 200K into this plan for you, and you cannot start withdrawing without penalty until your 65.

We faced PTS this last year and still will probably have to go through the stress of retention boards (ERB) next year --and the only reason why he fought so hard to stay in is because he's almost at 12 years --he wants that retirement! If he was facing the separation crap and had the above program already been in place from Day 1 --I'm sure we would have been "Okay, I'm getting out *shrug*".

To not grandfather people that are already in service would just be a slap in the face. It's not fair because many would have made other life decisions, I'm sure.

That's not going to be good news financially for those still serving when you do the math. I was surprised to see that there is no grandfathering clause for members above 15 years through 20. If you are currently at 19 years or above it may be the time to submit your retirement paperwork. Anytime a change is actually made to the military retirement system it doesn't benefit the members. Right now it isn't approved by congress, but someday something similar will get passed into law, get on the retired rolls as quickly as possible. (Just my humble advice)

It's not fair because many would have made other life decisions, I'm sure

Another reason why I left when I did. The military from many of my peers started a shift in 1986. I wasnt in during that time, but they just told me things started to get worse and worse from then.

Just to think how things were even 10 years ago serving in Japan, to how they are now.

Policies are changing quickly. Good or bad, but they are changing.

This is definitely not fair to any active duty members currently serving.

I really wonder where the Secretary of Defense is on this policy? He is in the position to atleast speak up, for the troops serving. Some politicians that are making these policies may of served. But I bet they never served 20 years.

Theres a road map for those guys. 2-4 years, and they they roll out. They use the military service as a tool to get elected. I just think those in office that do have those ties to the military aren't really thinking much about the families, and those people that did sacrifice the 1/2 of their life to serving the country only to be told now, sorry dude, but we are yanking your retirement that you thought you were going to get.

I bet what they are going to do.

If your retirement papers are already in, then you will be good to go. If you haven't submitted, when they do implement the policy, you will be stuck on this new policy which is ridiculous in my opinion.

I think that if this is what they want to do, then go for it (I didn't say I agreed with it, but whatever). HOWEVER, I think that the old system should be grandfathered in for any service member that is currently serving. I know that one of the reasons why my husband and I have decided that it is best for our family to stay in, is because of the retirement. I feel like it's kind of a bait and switch tactic...... get them to commit their time (and lives), and then pull the rug out from underneath them.

And am I the only one annoyed with the fact that members of congress can serve for only a few short years, and then get a nice retirement paycheck, but they want to take that right away from military members who have served for a much longer time period?

Posted By I_Am_Annie on 07-27-2011 4:42 AM

And am I the only one annoyed with the fact that members of congress can serve for only a few short years, and then get a nice retirement paycheck, but they want to take that right away from military members who have served for a much longer time period?

No, you're not the only one.  It's an absolute disgrace. The ones who make the rules should not be setting the terms of their own employment.  They also have their own health care system and other benefits, so they don't feel the pain as the rest of us do.

Two things. First, the military retirement system is one of the best rewards for service. No job anywhere else can you spend twenty years in your job and collect half your pay, and have an awesome medical plan for the rest of your life. If we have to cut defense spending, then at least making the age where we can collect retirement pay is a sensible suggestion in my opinion. This 401k plan is absolute garbage though. Second, most politicians in Congress are already independently wealthy. The wages that they earn for their service as an elected official is really just icing on the cake for them. Who would want to be a Senator, with as much work and responsibility that goes with the office for a lousy $200K. Any one of those folks can earn at least twice as much as an executive for any company out there. Most of them have.

I don't agree with raising the age where you can collect either. For someone who serves 20+-30 years it's ridic to expect them to get out in job market and make a living on the fly in their 40s or 50s. They've already served away their best years. Yeah, they should have went to school while in and probably have contacts for a contractor job... but it's just not right. Working in the military for 30 years isn't the same as being an accountant for 30 years... service members deserve the current retirement plan where they don't have to wait around until 65 to finally take a breather.

I served on active duty for 24 years from 1970-1994 and remember this issue coming up every few years or so. Typically, the Republicans would squash it before it even got to the Senate. However, now you have the Republicans bringing up the issue. It is unfortunate that the people currently serving won't have the same retirement plan I had. Stand by for some heavy rolls with this whole budget thing goin' on in Washington. Tricare increases, 20-year retirement plans going away, the whole DADT thing. Good grief!

Elizabeth- I would also like for the retirement system to stay exactly how it is. I don't see that happening, though. If anything has to change, raising the age where we can collect makes the most sense. It will save the government $30K/yr for a 20yr E-7 who retired today. I think that is a lot better than just losing my pension altogether.

I agree with most of you...I think it should be grandfathered, it's only fair. With the budget deficit, I am afraid that change is coming, like it or not. It's not all bad though, as the people that received technical training from the military will flourish on the outside. If one stays employed for the same amount of years at a Fortune 500 company, the retirement pay is about the same. I retired at 19 1/2 years, an E8, with retirement pay of about $2000/month. Since 38 years old was still too young to retire, I started a second career. I am nearing 20 years now on this career. Company paid retirement pay from this career is about the same, about $2000/month. Easy money, considering the hardship of many cruises while in the Navy.

Posted By Mike LNCM Ret. on 07-27-2011 1:34 PM
I served on active duty for 24 years from 1970-1994 and remember this issue coming up every few years or so. Typically, the Republicans would squash it before it even got to the Senate. However, now you have the Republicans bringing up the issue. It is unfortunate that the people currently serving won't have the same retirement plan I had. Stand by for some heavy rolls with this whole budget thing goin' on in Washington. Tricare increases, 20-year retirement plans going away, the whole DADT thing. Good grief!

I completely agree.  It is scary.  It seems like the politicians want to cut everything.  We are involved in two ongoing wars.  I think slashing the services to our soldiers and sailors is a slap in the face.  It is a hard job, nothing like being in the civilian sector.  All the deployments and time away from family.  Also, our military personnel don't need the added stress.  Am I going to get paid if Congress doesn't reach a budget deal?  I hope there is a shake up in the next elections.  Our leaders are not representing the people... they are squabbling amongst themselves.  The republicans aren't sticking up for the military like they did in the past because they are scared of the tea party.