Proposal by DoD to radically change military retirement

[HawkeyeNFO]

IF TSP ever becomes DoD's retirement program, expect a mass exodus of personnel after serving 4-8 years. After that point, experience and/or a clearance generally results in multiple job offers from all kinds of different employers. The military will have a very tough time retaining personnel at the E-6 level and above among enlisted, and the best and brightest O-3's and field grade officers will get out in search of better opportunities, unless the pay is increased significantly. In other words, such a plan will backfire, costing the taxpayers even more money.
$.02

[BLS53]

Without the traditional 20 year retirement, you will be left with careerist that love the military. And there has always been many more careerist that love the 20 year retirement,and tolerate the military, rather than love it. How those numbers would pan out in today's environment is anybody's guess.

I always considered the benefit of serving 5 or 10 years, was entitlement to the G.I. Bill and Veteran's benefits. Want a pension? Continue your service in the Guard or Reserves. Which brings up the question, who would serve in the Guard and Reserve if they already have a pension from serving on active duty for 5+ years?

[Ed_The_Gypsy]

The policy of having continuous war should reduce the number of military retirees by attrition and non-reenlistment.

Have you read 1984 recently?

[samclem]

Quote:

Originally Posted by BLS53 And there has always been many more careerist that love the 20 year retirement,and tolerate the military, rather than love it.

I disagree with you on this. The folks I observed probably wouldn't have said they "love the military," but most would cite the challenge and rewards of the work they did, the feeling that it was important, and getting to work beside great folks on a tight team as reasons they stayed in uniform. Yes, there were frustrating/cr*ppy days and even entire assignments, and the "carrot" for 20 years kept a lot of folks in the traces through those rough times, but I wouldn't say more folks were there for the retirement than for the job, mission, and people.

Quote:

Originally Posted by BLS53 Which brings up the question, who would serve in the Guard and Reserve if they already have a pension from serving on active duty for 5+ years?

That military pension for 5 years of service will be fairly miniscule. So, I'd bet lots of folks would still be motivated to go Guard and Reserve even if they had a small AD pension.

[JDARNELL]

Quote:

Originally Posted by samclem The folks I observed probably wouldn't have said they "love the military," but most would cite the challenge and rewards of the work they did, the feeling that it was important, and getting to work beside great folks on a tight team as reasons they stayed in uniform.

I would agree with this also. It was first the sense of doing something important, challenging, and fun. Then it turned to working with great people. Fast forward a few years and now as a Sqdrn DO or Commander you had to deal with all the "duds" and even some of your peers which in these cases I pretty much cleaned their clock. Near the end it was no fun but by that time we all were eyeing just getting to 20. I made it to 21. The assignment teams knew this also. I think most of us got the "do I have a deal for you" offer.

I don't know many that ever said I am here for the retirement and did well.

JDARNELL

[BLS53]

I didn't mean to imply that people just sit around and mark off their calendars. But you can't deny that there's very few occupations, where someone can immediately draw a pension at around 40 years of age, and that alone is a very powerful influence. I would also say many stay in the military because of personal insecurity with the civilian job market.

As for doing well, I think anyone who successfully serves 20 years in the military, has done well.

I come to this from an enlisted perspective, and a post-Zumwalt, peacetime Navy. Those who have served as officers, in elite units, or in wartime, may have a different viewpoint. Those who served pre-1973 or post-2001, may see this differently as well. I can only speak to the 1974-95 timeframe.

[Bimmerbill]

I do think the 20 year retirement keeps a lot of folks in when they hit 15 or 16 years. Or I should say it is a serious factor in getting them over the hump and the BS.

I've seen a lot of people retire where I work and most just go back to work in a non-military job. They always say "I need the money" or "I am too young to retire."

I see a lot of good E5 or E6s getting out as well. All the nuke sailors get job offers pretty fast at the shipyard where I work. Some of them stay in the reserve as well.

I got out at 16 from the Guard. The BS was too much. But it ate at me, and I had to go back to finish my 20. I missed the people and serving my country, but the 20 year pension offset the BS and stupidity I had to endure for the last few years.

[rescueme]

Quote:

Originally Posted by Texas Proud my dad worked for a mega back in the 60s and they had a 10 year cliff vesting....

I worked for a company '71-'79 and "lost" my pension when I left, after eight years there.

Went to another company which had better pay/benefits (including pension), but the pension was eliminted in the early '80's and replaced with the 401(k).

The result was that I didn't start saving/investing for retirement till my mid-30's. At least the young folks today have no "promises" (other than federal government workers) that can be pulled, as in the private sector.

But that's life ...

[bssc]

Based on the latest proposals, today's Pentagon in cross hairs of debt ‘trigger’ - The Washington Post notes

Quote:

Even the military’s generous pension system, which allows troops to collect half their salary for the rest of their lives after 20 years of service, might be scrapped in favor of a cheaper 401(k) system. “Those kinds of changes would have been a nonstarter before, but given the cuts the Pentagon is facing it is more possible,” said Harrison of the CSBA.

Unfortunately, the 401(k) system does not support retention.

[Bimmerbill]

Well, the 401k system could support retention if they had a huge matching %. They would probably have to have it vest over a long period, with full vesting at 20 years or something.

[jimnjana]

Quote:

Originally Posted by Bimmerbill Well, the 401k system could support retention if they had a huge matching %. They would probably have to have it vest over a long period, with full vesting at 20 years or something.

I think they could have it vest over two or three years. I think a more generous match plus deferred compensation bonus money vs pension would keep many in the service. If given the flexibility to adjust financial incentives, the services could make it work.

[DoraM]

I think they should have special government backed bonds that can only be purchased through a 401K. These bonds would be inflation adjusted and offer a real return of around 4%. If you did this, then nobody would have pension envy.

Right now the best you can do for a semi-guaranteed retirement using a 401K is to go 100% TIPS which have a less than 2% real return. This doesn't even come close to matching the guaranteed return in most public pension systems.

The other solution is for everyone to just work for the government.

Note as I write this, my 401K is starting to go negative for the year, so there may be some bitterness. 2012 is not looking to be much better...

[HawkeyeNFO]

Reading the Navy Times article, it says that ADM Greenert (the next CNO) wants to bring back early retirement for officers. It would be accomplished just as they did it in the 90's, whereby officers became retirment eligible at 15 years of service. They simply want people off the books, and I think it is short-sighted over the long-term, but if this comes to fruition, I might accept it. Hafta see the details first.

Not sure what their payment is based on, but if we figure 2.5% per year as a differential from the 50% of base pay at 20 years, that means 37.5% of (hi-3) base pay after just 15 years of service.

Obviously this is just in discussions, but I might just retire with a pension next year if the stars align properly!

[donheff]

Quote:

Originally Posted by BLS53 Which brings up the question, who would serve in the Guard and Reserve if they already have a pension from serving on active duty for 5+ years?

How do the proposals affect Reserve retirement policies? It has always been my impression that the retirement benefits are the biggest draw for the reserves. Am I correct in that?

[HawkeyeNFO]

Quote:

Originally Posted by donheff How do the proposals affect Reserve retirement policies? It has always been my impression that the retirement benefits are the biggest draw for the reserves. Am I correct in that?

In my experience, no it's not the biggest draw. Reserve aircrew in my squadron seem to stick around for two big reasons: it's fun, and it provides a source of income.

[BLS53]

Quote:

Originally Posted by donheff How do the proposals affect Reserve retirement policies? It has always been my impression that the retirement benefits are the biggest draw for the reserves. Am I correct in that?

I'm not intimately familiar with the reserve retirement program, as far as the exact formula, for figuring the monthly dollar amounts for pensions. I do know it's figured on a point system derived from monthly drills, combined with active duty periods. Also, 15 years of active duty, is going to be worth more than 15 years of reserve duty, as for the amount of a monthly pension.

Other than the monetary amounts, the main difference has been that the active duty retiree gets their pension immediately upon the completion of 20 years, while the reservist must wait until age 60.

Two prominent factors in some of the reform proposals, has been the elimination of the ability to draw active duty retirement immediately, and delaying the date to age 57-60. Similar to what the reserves have now. The other proposal involves vesting beginning at 10 years of service. The reserves have always had a considerable number of members who don't want to serve 20 years on active duty, but still would like to get a pension. They do time in the reserves to complete 20 years. I question whether someone vested from 10-15 years active duty, would find it worthwhile to spend an additional 5+ years in the reserve, just for a small increase in their pension at roughly the same age.

I see the 10 year vesting proposal as vastly affecting the relationship between the active duty and reserve retirement programs. The key being the elimination of the ability of active duty retirees to receive their pension immediately.

In response to the 401K proposals, and comparing them to the current retirement system, it's difficult to analyze them because military pensions are not the same as private or other government pensions. There is no cash balance. In fact, technically, the military refers to them as "retired pay". They are paid through the DFAS the same as other forms of military pay. As far as I know, there is no "pension manager", nor any kind of investments involved with military retiree benefits. Therefore, it's difficult to compare a proposed 401K plan, with the current system.

Military pay in general is hard to correlate with civilian occupations. Always has been. Any self-funded retirement plans that replace the current retirement system, will require a total overhaul of the current pay and benefits program.

[martyb]

Speaking as a reservist who stayed in until I was told by the Air Force I was too old...I can say that the eventual pension I will receive had a whole lot to do with it. Also...a very good additional income for one weekend a month, the ability to go "on orders" for 2 -4 times a year & draw full military pay & added $$ for per diem, subsistence & housing allowances, plus the ability to continue to serve....all figured in to the formula. ALSO pertinent was the fact that for most of my military career I was working in a civlian/military technician civil service job that required me to remain a member of the reserves as a condition of employment. Had I decided to leave that job, I don't know that I'd have stayed in the reserves so long. Now that I'm retired from the reserves, it's great to have all my weekends back, but I do miss the pay each month. Gotta wait another 6 1/3 yrs to get the paycheck.

[BLS53]

Quote:

Originally Posted by martyb Speaking as a reservist who stayed in until I was told by the Air Force I was too old...I can say that the eventual pension I will receive had a whole lot to do with it. Also...a very good additional income for one weekend a month, the ability to go "on orders" for 2 -4 times a year & draw full military pay & added $$ for per diem, subsistence & housing allowances, plus the ability to continue to serve....all figured in to the formula. ALSO pertinent was the fact that for most of my military career I was working in a civlian/military technician civil service job that required me to remain a member of the reserves as a condition of employment. Had I decided to leave that job, I don't know that I'd have stayed in the reserves so long. Now that I'm retired from the reserves, it's great to have all my weekends back, but I do miss the pay each month. Gotta wait another 6 1/3 yrs to get the paycheck.

The "technician" program sounds like a good deal. I first became aware of it when I served with some TANG guys at NAS Dallas. The Navy counterpart was the Training and Administration of Reserves Program (TAR). Now it's called the Full Time Support Program (FTS). The difference compared to the technician program, is that the Navy member doesn't get a civil service position, and is an active duty member, with active duty pay. The advantage was (at least in the Air Traffic Controller rating) is you were limited to shore duty in CONUS. The BRAC's of the 1990's closed the majority of inland NAS's, and that was the end of it for AC's in the program.

[Nords]

Quote:

Originally Posted by HawkeyeNFO It would be accomplished just as they did it in the 90's, whereby officers became retirment eligible at 15 years of service. They simply want people off the books, and I think it is short-sighted over the long-term, but if this comes to fruition, I might accept it. Hafta see the details first. Not sure what their payment is based on, but if we figure 2.5% per year as a differential from the 50% of base pay at 20 years, that means 37.5% of (hi-3) base pay after just 15 years of service. Obviously this is just in discussions, but I might just retire with a pension next year if the stars align properly!

I applied for the last TERA three times and got turned down every time because the submarine force realized it was cutting too deep. IIRC, DoD makes each service pay the pension difference between TERA & regular retirement so that the services aren't just passing the pension buck to DoD. "Seating will be limited."

If you hear even just a credible whiff of the program being offered, I'd pre-load an application and have it ready to snapshot on the day the program is announced. (For extra bonus points, e-mail it directly to the PERS code and tell them your CO's endorsement will be forwarded SEPCOR.) Even if you're not quite at 15 years yet, put in the application and make BUPERS say "Denied". Then you can at least re-apply the day before you reach 15 YOS.

I don't know how easy it is to search the ALNAV and NAVADMIN archives for 1996-97, but I'm pretty sure the acronym "TERA" was in the subject line. That's exactly what the poor PERS-4 action officer is going to do if TERA II is proposed.

Quote:

Originally Posted by donheff How do the proposals affect Reserve retirement policies? It has always been my impression that the retirement benefits are the biggest draw for the reserves. Am I correct in that?

No impact so far.

In addition to the camaraderie, it's easy to get sucked into drilling. Active-duty officers from service academies and ROTC are obligated to eight years' service, of which only the first five have to be active duty. (The last three years' Reserve service can be inactive, which is just an annual phone muster.) If they leave at five then they make the rest of their civilian transition, but eventually many upgrade their Reserve participation to see if it's worth their time. And of course if the civilian job search doesn't go well, Reserve duty is plentiful for those who are in the right town or willing to travel. It's not too hard to string together a living from a series of Reserve orders and part-time civilian employment. On Oahu you can practically leave active duty on Friday, join the Reserves on Monday, and start a set of active-duty orders on Tuesday. Within a few months you could even be mobilized. Unfortunately all of that would occur at PACOM HQ, which is not among the happiest places on earth.

I don't think retirement benefits are a priority until at least 12-14 years. There are many ways for veterans to make a clean break and to "sell back" military time in federal civil service, in many state/municipal civil services, and even some civilian jobs. But by 12-14 years most Reservists/Guard have integrated the routine with the rest of their lives (or at least tolerated it) and feel that they're in the home stretch.

Quote:

Originally Posted by BLS53 I'm not intimately familiar with the reserve retirement program, as far as the exact formula, for figuring the monthly dollar amounts for pensions. I do know it's figured on a point system derived from monthly drills, combined with active duty periods. Also, 15 years of active duty, is going to be worth more than 15 years of reserve duty, as for the amount of a monthly pension.

Retiring from the Reserves and National Guard | Military Retirement & Financial Independence , as well as the two posts on either side of that one.

(If anyone knows how to make a WordPress blog easier for readers to sort through a "table of contents", I'd love to use it. The "Top 10 posts" widget works well, but after 140 posts it's getting harder for new readers to sift through the archives or the search results.)

The rest of your comments are spot-on. I think the DoD proposal is fundamentally crippled and just intended to be a controversial conversation-starter. Which, according to my blog stats, is succeeding beyond my wildest dreams.

Quote:

Originally Posted by HawkeyeNFO ... it says that ADM Greenert (the next CNO)

When I was just an itty-bitty department head on a Pearl Harbor boat, Greenert was CO of the USS HONOLULU. That crew had absolutely stratospheric retention during his tenure. Good guy. I wish we could figure out how to train more COs like him, starting with the two I had on my boat during my tenure.

When I rotated to follow-on shore duty, I worked with a young quartermaster named Ricky West. He was an impressive guy (even if he only appeared to be about 14 years old) and made chief petty officer while he was there. He went back to sea and I lost track of him until he surfaced wearing MCPON insignia...

[packrat44]

Quote:

Originally Posted by Nords I don't think retirement benefits are a priority until at least 12-14 years. There are many ways for veterans to make a clean break and to "sell back" military time in federal civil service, in many state/municipal civil services, and even some civilian jobs. But by 12-14 years most Reservists/Guard have integrated the routine with the rest of their lives (or at least tolerated it) and feel that they're in the home stretch. ...

True. By 12/14 years you can see the light at the end of tunnel (hopefully it is not a train heading your way). I had to run the numbers for many prior cohorts to show them the benefits of "buying back" their military active duty in order to count it for longevity on their civilian fedral job. Many initially got hung up on the cost to them rather than the perpetual monthly increase to their pension. If I recall properly, the break even point was usually less than 2 years.