The change to the Military retirement system will enable the system to be fiscally sustainable and recruit and retain the highest personnel required for our nation's defense.
With the all volunteer force proving to be an outstanding success, congress showing consistent support for the Military through increases in both compensation and benefits, Military compensation is higher than that of average civilians with similar education levels. Enlisted pay ranks in the top quartile of that of high school graduates and Officer pay ranks in the top quartile of that of college graduates. Retiree healthcare (TRICARE) is significantly more generous than civilian programs and Military retirement exceeds levels in the private sector, yet 83% of Military personnel receive no retirement benefits. Those 83% contribute towards the retirement of the 17% of personnel that serve more than 20 years.
Over the last few decades, private sector plans have shifted from defined benefit to defined contribution to address longer life spans and unaffordable costs. The current Military retirement funds are not able to be invested in higher yielding equities and bonds due to the Military receiving a defined benefit. A defined contribution (percent contributed towards your retirement by the Government each month) would allow Servicemembers to invest that money.
The current plan is highly inflexible and especially poorly suited for periods of significant change such as downsizing the force. It will be very difficult to release personnel with 15 or more years of service, yet these age groups are a likely target for downsizing. As a result, DoD will likely require special pay to ease transitioning out of the military (as was done in the 1990s), therefore, increasing costs.
Personnel serving 5, 10, even 15 years receive no retirement pay while those serving 20+ years are endowed with a lifetime benefit. The risky nature of military service is an important justification for the 20-year plan. However, most of the troops engaged in combat serve far less than the required 20 years.(Only 12%-13% of enlisted troops earn retirement pay). There is also no difference in retirement benefits between those that served in high risk and low risk positions.
Changing the retirement system would enable all Servicemembers to accrue retirement based on contributions from the Government based on a percentage of their base pay plus the possibility of other factors such as level of risk associated with their job in the Military. The new Military retirement would give Servicemembers more control of their money by instituting a program similar to a 401K commonly found in the private sector. The new Military retirement system will enable personnel that do not serve 20+ years to leave the service with money (the contributions) that they have earned while serving. Those 83% of personnel that do not serve 20+ years walk away with no money towards retirement at this time.