AFFECT OF NEW BUDGET ON RETIRED PAY!

CDR Richard Tucker — Fri, 13 Dec 2013 14:29:41 -0500

I have already been deluged by veterans groups about the new budget and the affect it will have on retired pay. All are saying it will be detrimental to the all volunteer force. I am retired and know it will be detrimental to me, but what do you active guys and girls have to say about it? Most of the Veterans groups are led by just that, Veterans.

Response by SFC James Baber made Dec 13 at 2013 9:31 PM

SFC James Baber — Fri, 13 Dec 2013 21:31:41 -0500

We all know it is going to be detrimental to everyone AD, vets and retirees, no one is safe from the ripple effect this is going to have across all lines.

Response by LTC Jason Bartlett made Dec 13 at 2013 10:09 PM

LTC Jason Bartlett — Fri, 13 Dec 2013 22:09:42 -0500

As active duty I am fully aware of what this means and have spent my day writing my reps voicing my concern and displeasure. Not sure this is a fight we will win and I personally think this is just the start of what is yet to come.

Response by 1LT Private RallyPoint Member made Dec 14 at 2013 5:16 PM

1LT Private RallyPoint Member — Sat, 14 Dec 2013 17:16:30 -0500

To be honest: I think it's a step in the right direction. We have a legacy pension system with ridiculous benefits that the grand majority of service members will never tap due to the prohibitive 20 year requirement.
I'm not getting out or lessening my effort because my retirement pay got smaller. In the same way, I severely doubt we're going to have an issue retaining the best and the brightest any more than we do right now; even if the retirement system gets a employer-matched 401K that starts paying at social security retirement age do-over. Moreover, we're still going to be able to recruit quality individuals for the immediate benefits we offer.

Response by LTC Mark Overberg made Dec 20 at 2017 10:03 AM

LTC Mark Overberg — Wed, 20 Dec 2017 10:03:34 -0500

Strictly speaking, the budget doesn't have a direct impact on current retired pay. The budget does impact Service members current pay and their future retired pay. Retired pay is determined at the time of retirement, and then it is adjusted each January based on the COLA, which is the Consumer Price Index for Urban Wage Earners for the past year. The CPI-W grew from 1 OCT 2016 to 30 SEP 2017, so DOD announced the retired pay COLA for January 2018 will be 2.0%.

Response by Lt Col Jim Coe made Dec 20 at 2017 11:40 AM

Lt Col Jim Coe — Wed, 20 Dec 2017 11:40:08 -0500

I agree with LTC Mark Overberg. Retirement pay is determined at the time you retire. Changes to the military retirement system made while or before the Service Member is on active duty don't necessarily mean the Service Member is losing something. Their retirement pay was never calculated, so they are equally impacted with their peers and prospective recruits. (I understand the argument about enlistment being a "contract", but the Government has all the power in that contract and can do most anything it deems in the interest of National Security, including changing, terminating, or involuntarily extending the contract.)

Meanwhile in the private sector, more businesses are moving away from "heavy industry" type retirement plans that projected a long period of employment followed by a comparatively short period of retirement. These plans, often union driven, were based on some of the same assumptions as current Social Security. Mostly, that people wouldn't live for a long time after retirement. This assumptions proved to be increasingly incorrect as we moved into the 21st Century. Private sector companies are moving to 401k type plans. The amount (percent) of company matching and the vesting period are the competitive factors among employers in the same industry.

Civil Service moved away from classic industrial retirement over a decade ago. Civil Servants have a "blended" plan including retirement calculated based on total years of service and high-three years of pay plus TSP, the government version of a 401k. I think the new military retirement plan aims to parallel the civil service plan. Adding some flexibility to take the retirement portion of the plan without serving 20 years could be a plus. I understand some retirement pay would accrue as early as 12 years of service.

Overall I think the military will remain competitive with both public and private industry. The retirement benefit is generous compared to many private firms. The additional retirement benefits, such as TRICARE for Life, are better than those offered to most private sector employees. To be honest, most young people entering the Service aren't thinking about a long-term career. They are looking at a steady paycheck, good employment benefits, and a chance to serve their Country. We tend to think about retirement when it gets closer. I think a thriving private sector economy will impact recruiting more than the retirement program.