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Reduction in Military Retirement Pay
Old 11-18-2010, 10:05 AM   #1
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Reduction in Military Retirement Pay

I saw this article today on Army Times website:

Second task force seeks to cut retired pay - Army News | News from Afghanistan & Iraq - Army Times

This is the second commission in the last several weeks that has proposed pretty drastic changes to the current military retirement system (first being the Simpson/Bowles preliminary report). My question is this--if the current military retirement system were not in place, would you stay/have stayed on active duty in the military for a career?

For me, I'd have to say the answer would be no. I could make a lot more money as a defense contractor, and would not have to be gone from home for years at a time in various awful parts of the world. And, I could still stay in the National Guard/Reserves to get the retirement benefits at 60 and deploy less frequently (once every five years or so). To be honest, I don't see much difference between the proposed system for active duty and the current system for the National Guard/Reserves. Why would anybody stay on active duty and do the year deployed, year at home, year deployed cycle that we are currently living with? I can't see a scenario where this would end well for the all volunteer force...am I missing something?
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Old 11-18-2010, 12:18 PM   #2
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The retirement benefit was the major factor in my deciding to make it a career. Otherwise, I would have done my few years, then gotten out and looked for a civilian job where I would most definitely have made a lot more money.

Three things conspired to keep me in.
The retirement carrot, which I was aware of, and two others which took me by surprise.
One was the camaraderie (I really liked most of the people I worked with).
The other was the way they kept finding really interesting assignments for me. It was always "Would you be interested in ...?" and my reply was "When do I leave?"

Needless to say, my military career was anything but typical.
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Old 11-18-2010, 01:24 PM   #3
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My wife was in the reserves when we met. She joined because she felt a sense of duty but also to provide for her children she was raising as a single mother, and for some variety of job experiences in her life. Most of the time she was involved in port security having to be fully armed and trained to check for contriband and enforce if necessary.
After we married she decided to stay for at least 20+ years because of the health benefits at retirement which would be worth more than any small pension she would get .
If they would have changed the agreement/contract to something less than what was promised she probably would not have stayed. Neither one of us will stand for anyone or any organization who breaks their word on a promise.

Cheers!
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Old 11-18-2010, 01:52 PM   #4
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One of the reasons why retirement benefits cuts are likely for the military is that retirement benefits play a pretty insignificant factor in a new recruits decision to enlist. Once you are in, for enlisted personnel, retention bonuses etc are used to make sure the services have the numbers they need to fill positions. Probably a bonus system will be used as a carrot for officers to stay as well. Future service members will still have a retirement system that is far more generous than most.
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Old 11-18-2010, 09:52 PM   #5
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Originally Posted by r23748 View Post
My question is this--if the current military retirement system were not in place, would you stay/have stayed on active duty in the military for a career?
Why would anybody stay on active duty and do the year deployed, year at home, year deployed cycle that we are currently living with? I can't see a scenario where this would end well for the all volunteer force...am I missing something?
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Originally Posted by jimnjana View Post
One of the reasons why retirement benefits cuts are likely for the military is that retirement benefits play a pretty insignificant factor in a new recruits decision to enlist. Once you are in, for enlisted personnel, retention bonuses etc are used to make sure the services have the numbers they need to fill positions. Probably a bonus system will be used as a carrot for officers to stay as well. Future service members will still have a retirement system that is far more generous than most.
I hear that, but we played this tune 25 years ago with the original version of REDUX-- the one that didn't include the High-3 option. Retention tanked appropriately and was even worse when the Internet gold rush began.

One of my career regrets is that I didn't learn enough about the Reserves to have the informed courage to leave active duty. It was always "easier" to stay in my rut, not analyze the issues, stick around for co-location, no matter how miserable the tour, than it was to figure out how to put together my Reserve career.

As for bonus money, let's go to the pay tables:
http://www.dfas.mil/militarypay/mili...PayTable34.pdf

A submarine lieutenant with more than six years of service is already earning $5117/month base pay. He/she(!) also gets ~$600/month sub pay. Add in roughly $225/month for food allowance, another ~$1000/month for a housing allowance, both tax-free. That's $68,600/year plus another ~$14,700 tax-free. Add to that the incentive of a three-year, four-year, or five-year bonus contract for an additional (taxable) $25K/year and they're north of $100K at the age of 27-28.

But that eager beaver just finished getting their MBA on shore duty and is seeking a career in a field commensurate with all of their technical, managerial, leadership, and pressure-cooker experience. How much would you pay them to punch out for the Reserves, where they'd "only" earn about $11K/year on top of their civilian salary/benefits?

I remember at the height of the 1990s drawdown a submarine admiral came to talk to a roomful of San Diego junior officers contemplating leaving active duty. He ran through a PowerPoint slide with the same math and concluded "If you guys go back to sea then you'll be hot-running department heads earning $100K/year. There's no way you'll ever be able to do that at your age as civilians!" One of those irreverent JOs raised his hand and said "Sir, my wife makes that much now, and she's three years younger than me. I'd rather stay home and take care of our kids."

The generation gap stopped the flag in his tracks. A working spouse had never even occurred to him. It was the end of that flag-officer retention seminar, except for the poor JO's bonus round with his commanding officer...

In all the whining complaining I've seen from SECDEF and SECNAV press releases about the defense budget, they're not unhappy with the pay. They're unhappy with retiree healthcare. Thwacking the retirees will save a lot more money and it won't affect retention a bit.
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Old 11-18-2010, 11:14 PM   #6
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Originally Posted by jimnjana View Post
One of the reasons why retirement benefits cuts are likely for the military is that retirement benefits play a pretty insignificant factor in a new recruits decision to enlist. Once you are in, for enlisted personnel, retention bonuses etc are used to make sure the services have the numbers they need to fill positions. Probably a bonus system will be used as a carrot for officers to stay as well. Future service members will still have a retirement system that is far more generous than most.
Even we EM's ain't stupid. We know the deal when we sign on. We live the life. But, at some point, we start thinking about the future. I saw many generous (for the time) retention bonuses turned down.
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Old 11-19-2010, 07:19 AM   #7
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Even we EM's ain't stupid. We know the deal when we sign on. We live the life. But, at some point, we start thinking about the future. I saw many generous (for the time) retention bonuses turned down.

Exactly!!! But enough service members stay or the bonus gets raised in the future to meet the requirements. Unfortunately for the service, while the numbers may be met the best and brightest may take the opportunity to bolt the services...
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Old 11-19-2010, 08:46 AM   #8
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Actually, If you look at the numbers, military retirees are not as much of a burden as one is led to believe. I was shocked when I read Nord's book as to how many actually got to retirement. A lot less than I thought. In addition, most Reservists don't make as much as an active duty retirement, hence the need for streams of income.

I stayed in the Reserves for the different opportunities - I wouldn't have traveled as much nor had the leadership and other educational opportunities otherwise. It's been a great blend for me and I'm glad I have stayed in.
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Old 11-20-2010, 09:27 AM   #9
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I stayed in the Reserves for the different opportunities - I wouldn't have traveled as much nor had the leadership and other educational opportunities otherwise. It's been a great blend for me and I'm glad I have stayed in.
Now on recall orders to AD, I plan on sticking it out for the immediate pension from active duty. (already have 22+ years for reserve pension - but that is down the road) They also can't market the fun and camraderie that comes with the deal! Oh, and some of the little perks are nice to! (no baggage fees with most airlines that charge civilians)
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Old 11-20-2010, 09:58 AM   #10
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Now on recall orders to AD, I plan on sticking it out for the immediate pension from active duty. (already have 22+ years for reserve pension - but that is down the road) They also can't market the fun and camraderie that comes with the deal! Oh, and some of the little perks are nice to! (no baggage fees with most airlines that charge civilians)

I only have to wait 7 more years before I can start collecting my reserves pension...hope I make it!
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Old 11-20-2010, 11:25 AM   #11
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Actually, If you look at the numbers, military retirees are not as much of a burden as one is led to believe. I was shocked when I read Nord's book as to how many actually got to retirement. A lot less than I thought. In addition, most Reservists don't make as much as an active duty retirement, hence the need for streams of income.

I stayed in the Reserves for the different opportunities - I wouldn't have traveled as much nor had the leadership and other educational opportunities otherwise. It's been a great blend for me and I'm glad I have stayed in.
From a 2008 Article... Still a pretty big chunk of money.

The Defense Department spends about $13 billion a year on military retirement, more than 7 percent of current active-duty personnel costs. Because retirement benefits do not vest until a member has completed 20 years of service, less than 47 percent of officers and 15 percent of enlisted members overall receive anything, and rates are even lower for Army and Marine Corps personnel. Reservists are in a separate retirement system that forces them to wait even longer to collect benefits, even as they are spending more time on active duty than in the past.
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Reduction in Military Benefits proposed
Old 11-20-2010, 02:30 PM   #12
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Reduction in Military Benefits proposed

Received this as part of an email from MOAA. Interesting proposal to reduce government expenses by shorting those who risk it all.

Quote:
Among a broad range of other proposals, the Rivlin-Domenici plan would dramatically alter the military retirement system by:
  • Shifting it to a 401(k)-style system involving member contributions and variable government matching (depending on skill, retention needs, etc., each year),
  • Basing retired pay on the highest five years' average basic pay (vs. the current three years),
  • Delaying eligibility for immediate retired pay until age 57 for those with 20 or more years' service, and
  • Vesting retirement benefits for members with 10 or more years of service
They estimate this would reduce long-term military retirement costs by 50%.
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Old 11-20-2010, 02:53 PM   #13
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Received this as part of an email from MOAA. Interesting proposal to reduce government expenses by shorting those who risk it all.
As a retired military officer and long-time MOAA member, I think this particular proposal goes too far. On the other hand, if massive federal budget cuts are in the works, I don't think that some additional shared sacrifice as part of a deficit reduction package is unreasonable for all federal retirees, includng military retirees. Frankly, sometimes the MOAA lobbying makes me wonder if they have forgotten what "sacrifice" is all about. The only part of military retirement that should be entirely off limits is disability retirement.
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Old 11-20-2010, 03:16 PM   #14
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I merged these two threads on the same topic.
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Old 11-20-2010, 03:16 PM   #15
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This looks very much like the FERS civilian retirement plan.

I vote "Thumbs down" for migrating these type of rules to our military.
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Old 11-20-2010, 08:00 PM   #16
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Three things conspired to keep me in.
The retirement carrot, which I was aware of, and two others which took me by surprise.
One was the camaraderie (I really liked most of the people I worked with).
The other was the way they kept finding really interesting assignments for me. It was always "Would you be interested in ...?" and my reply was "When do I leave?"
This mirrors my experience and decisions about staying in. I had planned to stay in for 20 and retire but interesting jobs and the lure of "one more" promotion kept me in until 28.

My career was not as arduous as, for example, Nords' but I still put up with a number of inconveniences.

If I had to go to a 401K type of retirement plan as a military person (and, if I still wanted to do important work for our country), I would wonder why I couldn't work as a government civilian and put up with less BS and probably better pay.

But going back to the OP's points, I REALLY liked the people I worked with in the military better than I liked the folks I worked for during my brief second career in private industry. I occasionally have dreams about being back in the Navy; I NEVER have dreams about working as a Defense contractor. (Freud would have a ball with that.)
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Old 11-20-2010, 10:58 PM   #17
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But going back to the OP's points, I REALLY liked the people I worked with in the military better than I liked the folks I worked for during my brief second career in private industry.
A shipmate has been struggling for over 10 years to find the same sort of peers he worked with on his submarines. He's so desperate for a return to his fondly-remembered level of discourse that he's considering joining the submarine veteran's organizations.

I think that same urge is what leads me to discussion boards.
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Old 11-21-2010, 01:03 AM   #18
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I'm not sure if I would have stayed in, if not for the 20 year retirement and immediate pension. Getting a pension in your early 40's, does make you somewhat of an outcast in the civilian community. I experienced that resentment somewhat early on, but it has lessened now that I'm 57.

I see the basic pay and allowances nowadays, and I think the average enlisted person could save the amount necessary to bridge the gap between ages 40 and 60, after a 20 year career.

First 10 years of my career there were no 401K'S, IRA's etc. And the post-Vietnam payscales were low, up until the Reagan Administration. The military inclusion in the Thrift Savings Plan, came years after my retirement.
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Old 11-21-2010, 02:05 PM   #19
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This looks very much like the FERS civilian retirement plan.

I vote "Thumbs down" for migrating these type of rules to our military.

Payouts not starting until 57 is just too far away for retention purposes.

The farthest or "worst" I can see military retirement going to is
the FERS safety/ATC plan. Not as good as current military plan,
but not too shabby either. 25 and out, or 20yrs/age 50.

A lot of military "active guardsmen" (sorry, I don't know if this is
actually the correct term) currently are under this this plan anyway.

I can see DOD jumping to something like this, I can't see them
adding 20 years instantly to the retirement eligibility age like that.
(37 to 57)

Either way, as mentioned before, the health insurance eligibility
is the big kicker.
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