Posted on Feb 6, 2014
Should the Military stick with its retirement program, or move to a 401K style retirement system?
13K
38
61
3
3
0
<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 12 y ago
Responses: 15
0
0
0
Here is some late breaking "news"
Just for a comparison .. my 401K lost about 40% of its value during the last recession.
Do you lifers want that?
http://www.militarytimes.com/story/military/pentagon/2015/04/30/dod-rejects-tricare-reform-does-not-oppose-retirement-changes/26638471/
Just for a comparison .. my 401K lost about 40% of its value during the last recession.
Do you lifers want that?
http://www.militarytimes.com/story/military/pentagon/2015/04/30/dod-rejects-tricare-reform-does-not-oppose-retirement-changes/26638471/
DoD rejects Tricare reform, does not oppose military retirement changes
The Pentagon for the first time has offered a detailed response to a slate of proposed military pay and benefits reforms, flatly rejecting the idea
(0)
(0)
0
0
0
I have no opinion on this subject and it doesn't effect me, so I would like to add that the first step I feel should be taken is to educate service members on finance and investment. If I had known about Roth IRAs and compound intrest I wouldn't of had to depend on a pension of any kind.
(0)
(0)
SSG Gerhard S.
SPC Jack Hunt, JR, I Agree with you wholeheartedly. Though I believe financial knowledge and the spirit of saving should be taught starting at elementary school age. It's not just compound interest, also the concepts of risk-reward, and Dollar Cost Averaging that should be inculcated early on.
(0)
(0)
SPC Jack Hunt, JR
I agree with you completely. I recall having to learn how to wright a check in freshman math but never how to ballance a budget.
(1)
(0)
0
0
0
One thing to remember, though, is that a military "pension" is not really a pension, in the sense of a retirement fund like a 401(K), it's really more of a retainer fee. When you retire, you don't really leave military. You merely move to the retired roles and are subject to recall at any time.
(0)
(0)
SSG Gerhard S.
Not necessarily so LTC Labrador. I, for instance retired from the National Guard and had the option of choosing a straight retirement whereby my pension benefit is frozen at the current level, or alternatively the option to remain in the Retired Reserve until I reach the age of 60 (when I can begin receiving benefits). Choosing the Retired Reserve DOES leave open the possibility of being called back, but my retirement benefits grow with cost of living adjustments effectively doubling my retirement benefit over the first option.
(0)
(0)
SSG Gerhard S.
It's a rare, if not unheard of occasion that a retiree is activated in a compulsory manner..
(0)
(0)
0
0
0
I have a 401k (TSP) and I say stay the same. I have not done well with 401k. You get out of 401k what you put in plus any match if any and what the stock market don't take. if you start early your chances of winning at 401k is better @ 25% or more of your pay for say 30 years.
(0)
(0)
0
0
0
Someone who serves 3-5 years on active duty early in their life has sufficient time to reintegrate into the private sector without a whole lot of lost earning potential. Beyond that, your marketability grows at a slower pace compared to civilians.
A 401k, as with most retirement savings accounts, has special penalties if withdrawals begin prior to the generally expected retirement age (around 60 or so).
Since I will qualify for retirement at the age of 38, and the likelihood of securing a comparable salary is remote (11B and 79V don't translate enough to the private sector), I would need to dramatically adjust my lifestyle without the current pension system. Even if I serve until RCP, I would need to wait 15 1/2 years before I could collect on a 401k without penalty.
Additionally, market investment based retirement plans carry a good deal of risk. I am reluctant to subject long time service members to that sort of uncertainty.
I think a good alternative would be to restructure the continuum of service to make non-regular retirement the new norm. We could impose restrictions on the length and frequency of active duty tours (e.g. a 3 year tour every 10 years) so service members will need to maintain some kind of civilian employment.
This would reduce the impact of sudden of adjustment to the private sector upon military retirement, while at the same time significantly reducing the cost to the government.
Of course the main problem with retirement in both the public and private sector is the the inflationary monetary policy which makes it impossible to save a sufficient sum to provide for your own retirement.
A 401k, as with most retirement savings accounts, has special penalties if withdrawals begin prior to the generally expected retirement age (around 60 or so).
Since I will qualify for retirement at the age of 38, and the likelihood of securing a comparable salary is remote (11B and 79V don't translate enough to the private sector), I would need to dramatically adjust my lifestyle without the current pension system. Even if I serve until RCP, I would need to wait 15 1/2 years before I could collect on a 401k without penalty.
Additionally, market investment based retirement plans carry a good deal of risk. I am reluctant to subject long time service members to that sort of uncertainty.
I think a good alternative would be to restructure the continuum of service to make non-regular retirement the new norm. We could impose restrictions on the length and frequency of active duty tours (e.g. a 3 year tour every 10 years) so service members will need to maintain some kind of civilian employment.
This would reduce the impact of sudden of adjustment to the private sector upon military retirement, while at the same time significantly reducing the cost to the government.
Of course the main problem with retirement in both the public and private sector is the the inflationary monetary policy which makes it impossible to save a sufficient sum to provide for your own retirement.
(0)
(0)
SSG Gerhard S.
@SFC Stephen P. Do you feel more comfortable subjecting service-members to this sort of uncertainty?
This is an excerpt taken from the latest newsletter from TREA (The Retired Enlisted Association).
"The Army has cut 22,000 soldiers from its ranks this year with plans to trim 20,000 more next year.
Cuts had largely come through attrition and reductions in recruiting, which mostly affected low-ranking enlisted soldiers. But this summer, the cuts began to affect officers as well, including 1,188 captains and 550 majors. Some of those officers found out they would have to leave the service while they were deployed to Afghanistan, even if they were intending on making a career of the military. All must be out by April.
Initially, before they took place, the Army announced that the officer cuts would target officers with evidence of poor performance or misconduct.
But an internal Army briefing disclosed by a military website in September obtained by The New York Times showed the majority of captains being forced out had no blemishes on their records. Instead, it found that officers who had joined the Army as enlisted soldiers were three times as likely as captains who graduated from West Point to be forced to retire.
It is believed that officers who were prior enlisted are being pushed out because they are entitled to more pay and are eligible for retirement earlier, since they have more time in service than other commissioned officers."
This is an excerpt taken from the latest newsletter from TREA (The Retired Enlisted Association).
"The Army has cut 22,000 soldiers from its ranks this year with plans to trim 20,000 more next year.
Cuts had largely come through attrition and reductions in recruiting, which mostly affected low-ranking enlisted soldiers. But this summer, the cuts began to affect officers as well, including 1,188 captains and 550 majors. Some of those officers found out they would have to leave the service while they were deployed to Afghanistan, even if they were intending on making a career of the military. All must be out by April.
Initially, before they took place, the Army announced that the officer cuts would target officers with evidence of poor performance or misconduct.
But an internal Army briefing disclosed by a military website in September obtained by The New York Times showed the majority of captains being forced out had no blemishes on their records. Instead, it found that officers who had joined the Army as enlisted soldiers were three times as likely as captains who graduated from West Point to be forced to retire.
It is believed that officers who were prior enlisted are being pushed out because they are entitled to more pay and are eligible for retirement earlier, since they have more time in service than other commissioned officers."
(0)
(0)
(0)
(0)
SSG Gerhard S.
Of course the average service member serves 7 years, and one who serves 19 years and is then forced out still ends up with no pension.
(0)
(0)
SSG Gerhard S.
Actually, it had been clearly shown that those who begin saving early and consistently over a career will end up with far more than a basic pension, or Social security can provide. If, for instance the over 15% withholding for social security were invested in historical CD, T bonds, and other secured investments over a career, the results at retirement are grossly disparate in favor of the investor over the compulsion of the ponzi or extortion schemes that are SSI and federal pensions.
(0)
(0)
Read This Next
Continue with Facebook 
Continue with Google