Posted on Feb 6, 2014
Should the Military stick with its retirement program, or move to a 401K style retirement system?
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<p>It seems that the current system leads to a dead-end for many service members who don't serve 20 years. This includes the majority of military personnel. So after 10, or even 15 years of service a service member could leave the service, or in a downsizing environment be encouraged, or forced to leave, and end up with nothing. A 401K type system would allow for contributions throughout one's career, long, or short, and can be taken with the service member whenever he/she leaves the service. </p><p> </p><p> I understand there is the issue of defined benefit vs defined contribution, but the crux of the issue lies in the fact that the majority of those who serve leave with very little as far as retirement goes. It's also important to note that the earlier one starts saving for retirement, the greater the benefit, and a 401K system would get new enlistees and officers on the right track of saving for retirement whether they decide to make the military their lifelong career, or as a spring-board toward future civilian careers.</p>
Posted in these groups: 
Retirement
Pension
Retirement Pension
Posted 10 y ago
Responses: 15
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I think this discussion is flawed if the edict is that we MUST change the retirement system. The Rand study needs to show us that this area is the area that is easiest to modify with the greatest amount of savings.
Are we wisely spending money procuring equipment for wars that we may never fight? Are we being efficient with costs to equip the force with new uniforms (for operations and training in garrison or PT)? Has there been analysis to determine if it is cost effective to analyze and change ARs and our doctrine so frequently? Is there a study that determines what other costs/pay/benefits COULD also be on the table that could save/reduce our personnel costs.
Retirees made it -- one could say that they are able to get into another career, that they can do this and that...but retirees invested the time and ASSUMED THE RISK. They completed their end of the bargain. Reward them. The thanks alone for a CAREER of service to military retirees who complete 20 years or more should not be trivialized by percentages, which as I stated above, really don't compare to other costs in the big picture. One less ship? A few less fighters? Less tanks (what tank force are we going to fight and where)?
While I am a retiree now, my beliefs in honoring and supporting are careerists has remained constant. I'm not interested in attacking an area in isolation -- compare the impacts on this benefit with other potential cost savings and let's see what makes the most sense then.
Are we wisely spending money procuring equipment for wars that we may never fight? Are we being efficient with costs to equip the force with new uniforms (for operations and training in garrison or PT)? Has there been analysis to determine if it is cost effective to analyze and change ARs and our doctrine so frequently? Is there a study that determines what other costs/pay/benefits COULD also be on the table that could save/reduce our personnel costs.
Retirees made it -- one could say that they are able to get into another career, that they can do this and that...but retirees invested the time and ASSUMED THE RISK. They completed their end of the bargain. Reward them. The thanks alone for a CAREER of service to military retirees who complete 20 years or more should not be trivialized by percentages, which as I stated above, really don't compare to other costs in the big picture. One less ship? A few less fighters? Less tanks (what tank force are we going to fight and where)?
While I am a retiree now, my beliefs in honoring and supporting are careerists has remained constant. I'm not interested in attacking an area in isolation -- compare the impacts on this benefit with other potential cost savings and let's see what makes the most sense then.
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SSG Gerhard S.
I refer to the axiom that government does few things effectively, and fewer efficiently. Trusting one's future to politicians is a risky proposition at best, a foolhardy proposition under predictably normal circumstances. The TSP hasn't caught on because there are not matching funds for military contributions. (at least that's my understanding). To make this proposition enticing matching funds should be offered at an increasing rate to keep service members interested in saving for their own retirements in an account under their own name. This reduces enormously the possibility of having their benefits lost to the arbitrary axe of politics.
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Lt Col (Join to see)
A big part of the difference between a 401(k) and TSP is that most companies with a 401(k) will provide some contribution towards your retirement. TSP is essentially no different than getting an IRA from a commercial bank...you make all the contributions, the military pays nothing into it.
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SSG Gerhard S.
My wife works for the VA and they have employer contributions into their TSP accounts.... So it can be done...
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Pvt Diane Pownall
I think a 401 K could be wiped out in a stock market crash but military retirement is protected I think
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I think it would be good to give people leaving early than 20 years something better than a pat on the back.
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I think you are asking an excellent, and very important, question here SSG. The current military retirement system is extremely expensive and leads to some perverse incentives when combined with the "tenure" policy that kicks in when service members reach certain ranks. For example after a Marine is promoted to Major at 12-16 years of service the retirement program encourages him/her to stay until 20 years whether or not their performance is up to par (Let me be very clear here, this is an intentionally vague example, and is not meant to disparage or characterize anyone who serves or has served 20 years).<div><br></div><div>The military pension system is the most generous system for any employees that I can find. More generous than any private company. More generous than fire fighters and police officers as well. I can go on, but I think everyone gets the idea. It can be said that our service members deserve this, but the fact is our country can no longer afford it. Continuing to demand pension benefits that an employer can no longer afford is partly what led to our government having to bail GM out and could very easily lead to a loss of all benefits when the country's love for her troops fade as does memory of our last 2 wars.</div><div><br></div><div>Additionally, it is important to keep in mind that 73% of the military never sees 20 years. That means that the vast majority of our warfighters see no benefit from our retirement program.</div><div><br></div><div>A 401(K) would go a long way to fixing both of these issues. First, the government could match a very generous percentage of every individuals' contributions and still not spend nearly as much as they currently do on retirement. Second, a 401(K) that starts on day one and is vested immediately would ensure that every service member has a nest egg, if they desire it, when they leave the service. </div><div><br></div><div>Obviously, current retired pensioners should maintain their benefits and I would argue that a one time government contribution to current service members' 401(K) accounts could be made to make up for any service given prior to the change. A formula based on number of years served, deployments, and overseas posts could be used to determine what size of payment needs to be made.</div><div><br></div><div>This system would be more equitable to all service members and cheaper for the government. Even better, it would be portable to future career opportunities.</div>
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Capt Whitney Davis
LTC (Join to see), you're right, and I hadn't considered it, that compulsory savings would disproportionately affect the junior enlisted. That would certainly be an issue, though leaders like you help right now by providing sound counsel to others regarding savings.
I think that the civilian world does want senior service members in the market. This is an entirely different subject on which I have many ideas and gripes, but bottom line up front: we do a terrible job of selling ourselves. There are many reasons for this, to include: lack of a vocabulary in the civilian world, non-transferable (though still applicable) training certifications, lack of education regarding opportunities, and a general reluctance to "toot our own horns." Additionally, many transitioning service members (myself included) have to take a step back in terms of responsibility and pay rate because there is a lack of understanding in the civilian world about the scope of responsibilities that relatively young service members have in relation to their civilian counterparts. If that is not understood and accepted by people before they leave the service it can lead to a very difficult job search.
I think that the civilian world does want senior service members in the market. This is an entirely different subject on which I have many ideas and gripes, but bottom line up front: we do a terrible job of selling ourselves. There are many reasons for this, to include: lack of a vocabulary in the civilian world, non-transferable (though still applicable) training certifications, lack of education regarding opportunities, and a general reluctance to "toot our own horns." Additionally, many transitioning service members (myself included) have to take a step back in terms of responsibility and pay rate because there is a lack of understanding in the civilian world about the scope of responsibilities that relatively young service members have in relation to their civilian counterparts. If that is not understood and accepted by people before they leave the service it can lead to a very difficult job search.
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Capt Whitney Davis
There is a lot of fat in the budget, no doubt. That said, my argument regarding the military's pension system addresses concerns beyond the basic expense of it. It provides no benefit to the vast majority of service members and can present some perverse incentives for people who should get out to stay in (thanks to the "tenure system").
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SSG Gerhard S.
MAJ Carl Ballinger Great points sir. Providing for the Common defense IS a Constitutional mandate, though much of the military budget is questionable Constitutionally speaking, but that's an argument for another thread. The basic fact IS that the government should pay for the military. It was my contention above to take the arbitrariness of political whims out of the retirement equation. Capt Whitney Davis It makes little sense to tell recruits what a great retirement they have to look forward to when only 16-17% of military members actually make it to retirement with the average person in the Military serving only 7 years. So even those who serve for 19 years leave with absolutely nothing in the form of retirement. If the political aspects of funding retirements can be removed through TSP or a non-governmental system, those who leave, or are forced to leave early will still have something to show for their average of 7 years of service, or more, and those who actually make it to retirement should receive their Federal pension as well as their (non-military) contributions and growth. My opinion.
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Capt Whitney Davis
From my experience, in the Marine Corps, once an officer made O-4 or an enlisted member made E-7 they did not have to be promoted again to make 20 years. That may have changed, but it was what I was referring to.
From what I've seen, military to civilian pay is pretty darn comparable. The monthly dollar figure of base pay may seem a bit low, but BAH and other allowances more than make up for what a civilian with similar years of experience and responsibility makes.
From what I've seen, military to civilian pay is pretty darn comparable. The monthly dollar figure of base pay may seem a bit low, but BAH and other allowances more than make up for what a civilian with similar years of experience and responsibility makes.
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