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.

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