So Long 20-Year Military Retirement?


*This post was updated on 7/28 (see below)*

"Ten military years are equivalent to 20 civilian years." That's what one military spouse told me not too long ago. When I tell people that my husband would be eligible for retirement in his 40s, they can hardly believe it. It's one of those things that sounds too good to be true, but actually IS true. People join the military for all sorts of reasons, but I'd venture to say that the 20-year "fixed" retirement is a huge, juicy carrot which many prospective service members find hard to resist. And who can blame them?

Today brings news of a proposal by the Defense Business Board to overhaul one of the most attractive benefits of military service, the 20-year fixed pension.

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, the Military Times newspapers reported.

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.

The move would save the Pentagon money -- at a time when it's being asked to cut at least $400 billion -- and benefit troops who leave with less than 20 years of service.

It's important to point out that this is just a plan and has not been signed off on by lawmakers. So this is by no means a done deal, but the proposal is causing consternation among service members, and rightly so. Traditionally, when you hear of major changes to a system, there is a grandfather clause. Alarmingly, according to this article, that may not be the case here:
Unlike past changes to the military retirement plan, which shielded current service mem bers from the changes, the plan presented by the Defense Business Board would not grandfather current service members. The plan would go into effect immediately and includes current and future service members.

Under that plan, new recruits would start immediately earning TSP contributions, but, would have no incentive to stay in the military for 20 or more years since they would not get a fixed-benefit pension. Current service members would begin receiving TSP contributions immediately and would earn a grad u ated percent age of their pay if they stay in the military for 20 years or more years. Their fixed pension rate would be based on their years of service when the new plan kicks in. For example a service member who has 15 years of service would get 37.5 per cent of their base pay at 20 years in addition to the new TSP contributions.

While some may argue that this proposal helps service members who separate before the 20-year mark, there's a major problem here:
It’s unclear whether troops would have immediate access to all the retirement money or whether it would be partially or completely withheld until a traditional retirement age, such as 65. Under the current TSP, troops cannot withdraw money until age 59½ without incurring a significant penalty, except in certain specified circumstances.
Richard Spencer of the Defense Business Board says:
“The current system is unfair, unaffordable and inflexible,” said Richard Spencer, a former finance executive and Marine Corps pilot who led the board’s eight-month retirement study.
As for the unfair part, I ask, unfair to whom? If someone chooses to stay 20 years, they will receive their pension immediately upon retirement (as of now). If they choose to leave early, they know what they're leaving on the table. It's a choice. Further, life's not fair. And the sooner we all learn that lesson, the better off we will be. Unfortunately, "fair" has become a buzz word people toss around to skirt sensible reforms and play on the emotions of others.

I'll be the first to say that times are tough and everyone needs to tighten their belts. I don't think the DoD is, or should be, immune to "responsible" cuts (and I fully realize that "responsible" is in the eye of the beholder....). However, you don't send your warriors to battle for over a decade and then pull the rug out from under them in this manner. You don't tell the service member with 19 years in that everything he thought and planned for when he hit that 20-year mark has radically changed. Looking at changing future policy is one thing, and can certainly be considered and debated, but not grandfathering in those who signed on the dotted line with a clear understanding of what they could expect in 20 years is an entirely different matter.

Just yesterday, the DoD announced that all four branches met or exceeded their recruiting goals.

Good luck with retention if this plan ever sees the light of day!

UPDATE (7/28): Click here to see the slide deck of the DBB's findings and their suggestions for overhauling the system. I would encourage everyone to read through the slide deck. This will answer some of the questions that have been tossed around in the comment section.

Semi-related news: Click here to read about a bill to protect military pay.

UPDATE (8/3): Admiral Mike Mullen addressed this issue saying, "[T]he service chiefs would recommend that if such a change were considered, troops with some years of military service would be grandfathered in, so they would not be affected. He did not specify how many years of service that would be."  Click here for the full article.

Show Full Article

Related Topics


Military Spouse Videos

View more