Modernizing the Military Retirement System

By
Real Estate Agent with RE/MAX Honolulu

Where the Military is Today:

  • 83% of military personnel receive no retirement benefits
  • Retirement plans are an important component of both private and public sectors compensation systems
  • The military retirement system has not materially changes for over 100 years;
    • The current military retirement system was designed for an era when life spans were shorter
    • Pay was not competitive with civilian pay, and
    • Second careers were rare since military skills did not transition easily to the private sector
  • Military retirement funds are not able to be invested in higher yielding equities and bonds.

DoD pays retirees 40 years of retirement benefits for 20 years of service. Military skills are transferable to the private sector. Payout after 20 years makes retention difficult--76% leave between years 20 and 25. 20 years of service earns a lifetime of payments of 50%, ramping up to 87.5% for 35 years of service.  For those serving more than 20 years, the retirement contribution is 10 times greater than the private sector. "One size fits all" has structural disadvantages, Surveys consistently report that military retirement has little value in recruitment of retention for at least the first 10 years of service. The current plan is highly inflexible and especially poorly suited for periods of significant change (e.g., when 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. The current system does not compensate for those in high risk situations or extenuating circumstance (e.g., combat duty, hardship tour, and separation from family).

83% OF THOSE WHO SERVE WILL RECEIVE NO RETIREMENT BENEFIT

This is a final briefing slides as approved by the Defense Business Board.

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