What have you always wondered about the economy? Tell us

Proposal would cut military pension and add a 401(k)

Tim Fitzsimons Apr 27, 2015

As it stands today, servicemembers who advance through the Department of Defense are entitled to a pension of 50 percent of their income at retirement after 20 years of service. But a new proposal making its way through Congress would lower that to 40 percent and add a 401(k) savings account. 

Some veterans’ groups, like the Military Officers Association of America, oppose the change and say the 20-year pension is an incentive for top officers to stay in the service.

“We’re concerned that the commission’s blended retirement benefit would fail to provide the necessary draw to retain those service members,” says Col. Mike Barron, deputy director of government relations for MOAA. 

But the report from the Military Compensation and Retirement Modernization Commission suggested this plan as a way to both save costs and increase incentives for servicemembers who don’t make it to 20 years. Other, more controversial proposals—like overhauling the TriCare health system used by servicemembers—are stalled.

Todd Harrison, Senior Fellow for Defense Budget Studies at the Center for Strategic and Budgetary Assessments, says it’s clear that the 20-year pension isn’t a good incentive, because only 17 percent of servicemembers get to that point.

“They are pushing out some of their best people with this inflexible, industrial age career model,” Harrison says.

Harrison also notes that not all veterans’ groups oppose the change; others, like the Veterans of Foreign Wars, support it.

Marketplace is on a mission.

We believe Main Street matters as much as Wall Street, economic news is made relevant and real through human stories, and a touch of humor helps enliven topics you might typically find…well, dull.

Through the signature style that only Marketplace can deliver, we’re on a mission to raise the economic intelligence of the country—but we don’t do it alone. We count on listeners and readers like you to keep this public service free and accessible to all. Will you become a partner in our mission today?

Your donation is critical to the future of public service journalism. Support our work today – for as little as $5 – and help us keep making people smarter.