Arguments Against Changing Military Retirement

POSITION PAPER

ON

WHAT SHOULD THE FUTURE BENEFITS BE IN OUR FISCALLY-CONSTRAINED ENVIRONMENT

1. This paper address the changes in the military retirement system. Furthermore, it addresses the primary argument against changing military retirement. Finally, it will prove that the new retirement system positively benefits more military members than the current system does.

2. The current military retirement system is unsustainable and needs to be replaced due to surging costs. With two wars during the past 15 years, veteran’s benefits costs have surged to unprecedented levels. In 2015, the military retirement fund held $1.6 trillion in liabilities; 34 percent of that is covered by investments in U.S. Treasury securities.1 The costs of retirement
benefit payments are projected to be $118 billion by 2035.2 A new retirement system is scheduled to take effect in 2018. This system decreases the monthly pension payout by 20 percent but includes government contributions into the service member’s Thrift Savings Plan (TSP).3 The new system will save the Department of Defense (DOD) $13 billion in the first 10 years alone.4

3. The common theme among critics of the new system is they believe it does not take care of future generations of veterans. According to Richard L. Denoyer, national commander of the Veterans of Foreign Wars (VFW), the new military retirement system “focuses more on saving the government money than on providing a modest and immediate stipend to someone who first volunteers 20 or more years of their youth to the nation.” He believes these changes could break the faith of America’s veterans’ service organizations which serve as some of the greatest recruiting advocates.5 He further states that, as the economy continues to rebound, the Department of Defense (DOD) will no longer have record recruiting and retention rates.6 Senator Lindsey Graham decried the proposed changes to military retirement, stating it is “shortchanging” troops instead of rewarding them.7

4.
The new retirement system is better for service members than the current system. It will benefit all for their service, not just the 17 percent of service members who stay long enough to collect retirement.8 TSP accounts are portable and all government contributions are vested after two years of service. Joseph E. Davis, the Director of Public Affairs for the VFW, stated that “this recruiting initiative is needed to attract new generations of qualified enlistees who might otherwise not consider military service because it provides no employer match to portable 401k style plans that virtually all civilian plans offer.” Another benefit of the new retirement plan is any remaining balance in a retiree’s TSP can easily be passed to a spouse or heirs, whereas a defined pension essentially disappears.10 Analysis of the plan show that an E-7 could start taking withdrawals from TSP at 60 years old and still have $566,000 in the account at 85 years old.10

5. This paper addressed the changes in the military retirement system and it addresses the primary argument against changing military retirement. Finally, it proved that the new retirement system positively benefits more military members than the current system
does.