Report Suggests Reform of Military Retirement Benefits

The Center for American Progress suggests military personnel with more than a decade of service could choose to stay in the current system or switch to a 401(k)-like plan; those with less than 10 years of service could enroll in the new system or a modified version of the current pension setup, which would vest at 10 years but “provide slightly less retired pay—40% of base pay at 20 years, rather than 50% permitted under the current system.”

The Pentagon now has a 20-year cliff-vesting retirement system, which some would like to replace with one that provides benefits to all service members regardless of their tenure. Personnel who serve less than 20 years (about 83%) do not receive a retirement benefit, which some say is unfair given their multiple deployments during the wars in Iraq and Afghanistan. Those who do spend a career in the military can hit the 20-year mark relatively early, retire from service in their 40s or 50s, draw a pension and work elsewhere. About 17% serve 20 years or more in the military.

Last year, the DOD proposed a retirement system that would give some benefits to all troops and phase out the 20-year cliff vesting system. (see “DoD Panel Proposes Retirement Benefit Change for Troops”). 

“Military pay and health reform will allow the Pentagon to achieve substantial savings in the near term,” the report said. “Retirement reform, however, presents the greatest opportunity for savings.”

The report is here.