Military pension reform means an 85% cut for career veterans

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Military pension reform means an 85% cut for career veterans

Source: MOAA analysis of 10th Quadrennial Review of Military Compensation

The red shaded area shows the current retired pay projection over time for a newly retiring E-7 at age 40 with 20 years of service. His/her retired pay of about $24,000 a year would grow using a 3% COLA factor. This chart carries the projection for the expected lifetime (age 85) of a current 40-year-old retiree.

The QRMC plan (blue shaded area on the chart) would reduce retired pay 5% for each year before age 57 (17 years x 5% = 85% reduction), yielding only $3,600 at age 40.

At age 60, the retiree would begin drawing money from a 401(K)-type plan. Using QRMC assumptions and projecting a 7% rate of return, the retiree would draw an additional $13,600 per year until age 85. To be able to draw money beyond age 85, the annual withdrawal amount would have to be reduced.

The Defense Business Board, a bureau of corporate executives and management consultants established by Donald Rumsfeld has caused a furor in the military community by proposing to turn the traditional military pension system into a 401(k) plan. TPM noted that Defense Secretary Leon Panetta is considering the proposal. CBS reported what the changes mean for our vets:

Their plan, laid out in a 24-page presentation "Modernizing the Military Retirement System," would eliminate the familiar system under which anyone who serves 20 years is eligible for retirement at half their salary. Instead, they'd get a 401k-style plan with government contributions.

They'd have to wait until normal retirement age.

The Military Officers Association of America illustrates in stark terms how this proposal would cut hundreds of thousands of dollars out of Military pay. Leaders from the MOAA met with White House officials about the problem, but the answers they received were not exactly encouraging:

White House officials couldn’t offer specifics about what pay and benefits might be sheltered from the worst-case situation of a federal default, but Ryan said, “They assured attendees they care about our communities and are aware of the challenges. They want to keep an open dialogue with us about the progress of raising the debt ceiling and the impact of any such legislation on our communities.”

Not exactly a rousing endorsement of good military pensions.

In 1986 military pensions were reformed far less dramatically than this.That pension cut had such a dramatic effect on retention, the Joint Chiefs pushed to repeal it. It was repealed.

No matter where you stand on the issue of cutting the Defense budget, it should be clear to everyone that career veterans should be the last ones to take it on the chin. There are plenty of places where there is a great deal of money to cut, especially in procurement, weapons systems, and the excess number of bases we have around the world. If there is worry about coming up with the extra 12.5 billion to take care of our vets, I suggest a War Tax on the wealthy. I'm sure these patriotic Americans will be more than happy to see to it our vets are taken care of for their service.

Turning the military pension system over to Wall Street probably isn't the best message to send to troops deployed in hostile regions.

If you can attend a town hall with your local Representative of Senator, go there and let them know what you think about cutting military pensions. You might even recommend they reform the Congressional pensions first:

The pension amount is determined by a formula that takes into account the years served and the average pay for the top three years in terms of payment. In 2002, the average pension payment ranged from $41,000 to $55,000. For example, a member of Congress who worked for 22 years and had a top three-year average salary of $153,900 would be eligible for a pension payment of $84,645 per year.

Let them take their own 85% cut in benefits.

[slim 1,530]

I doubt this will go through. It's horrible!

[Ban Hammer 13,492]

This chart carries the projection for the expected lifetime (age 85) of a current 40-year-old retiree.

well that's just stupid.

[Mr. Big Dog 10,747]

When are we going to get to talk about cutting Congressional pensions? And when do members of Congress start contributing to their pensions?

[mawilson 2,133]

Let me get this straight. You retire at age 40, after 20 years of service, and then collect retirement paychecks for another 45 years?

And they are wondering why the system is insolvent?

[Ban Hammer 13,492]

Let me get this straight. You retire at age 40, after 20 years of service, and then collect retirement paychecks for another 45 years?

And they are wondering why the system is insolvent?

i doubt the average retiree lives to 85

[slim 1,530]

Let me get this straight. You retire at age 40, after 20 years of service, and then collect retirement paychecks for another 45 years?

And they are wondering why the system is insolvent?

Kind of. It's based on how many years of service you did and what your pay was when you got out. Then you get a nice raise for cost of living every year.

Military retirement was never meant to be "retirement." It was more like a "since you've sacrificed this many years of your life, you can now take it a little easier than everyone else" kind of thing. It would be tough to live on military retirement alone, especially at the "retirement age" of 40 when most folks have a family with kids, are transitioning to a new life, house, etc.

i doubt the average retiree lives to 85

Especially not military retirees. Too much alcohol and bad decisions when they were younger!

[Ban Hammer 13,492]

it's also not retirement. it's retainer. they can call back retirees to active duty .

[slim 1,530]

it's also not retirement. it's retainer. they can call back retirees to active duty .

85-year-old E-6s whould be awesome!