The National Interest
After half a decade of study, the Pentagon has proposed to Congress a radical overhaul of the military retirement system. The new plan addresses the unfairness of a system in which most who serve in uniform earn nothing toward their future retirement but makes serving a full career less attractive. More importantly, while the primary incentive for the new plan is to improve military readiness by reducing the cost of retirees, it’s doubtful the plan will actually save money given its reliance on retention bonuses and failure to address the massive issue of healthcare costs.
For generations, the Department of Defense has enticed people to make a career of the military by offering a generous pension after at least twenty years of service. Known as “cliff vesting,” those who served for fewer than twenty years got nothing while those who made it to twenty get 50 percent of their base pay for life upon retirement. Those who stay in past twenty years defer that benefit but accrue an additional 2.5 percent of their pay a year, maxing out at 75 percent at thirty years.
While there has been some modest tinkering with the system over the years, the basic concept has remained the same for some seven decades. When my father retired from the U.S. Army in 1982, his pension was based on his highest paycheck; nowadays, they are based on the average of the highest three years of pay. Additionally, for a brief time starting in the mid-1980s, the pension was reduced to 40 percent at twenty years but with an additional 3.5 percent per year thereafter to entice people to stay in through thirty years; it reverted to the old system very quickly.
If the new plan is adopted, future personnel would get only 40 percent of their base pay at the 20 year mark but they would ostensibly be made whole by a higher payout starting at the age of fifty nine and a half years. And, for the first time, those who served honorably at least two years would get at least something at that 59.5 year mark.
It should be emphasized that the new plan would not affect those currently in uniform unless they opt into it. While it would be mandatory for new personnel, those serving now would have a choice between the existing system and the new one. Indeed, the proposal would phase the plan in starting in 2018 to give the services time to educate their force on the best choices given their personal situation.
Picture: MCRMC (https://www.dvidshub.net/image/1506281) [Public domain], via Wikimedia Commons