Posted on Mar 7, 2014
What do you think of a military retirement system closer to a 401K?
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The Military is considering a new system similar to a 401k. What are your thoughts?
Posted in these groups: 
Retirement
Military Career
Retirement Military Career
Posted >1 y ago
Responses: 11
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I have not seen the actual proposal (links?) but there are advantages, especially if there was a good match from Uncle Sam. Â Right now, if you serve less than 20 years and get out, you get absolutely nothing. Â With this, you would have something to show for any amount of time you served. Â
Additionally, (but dangerously) you can borrow from a 401k. Â This is especially beneficial to RC Soldiers who cannot collect anything from their retirement until age 60 (give or take a few years for deployments) no matter how long they serve.
Another thing to think about is that you can put more money into a 401k to end up with a higher benefit. Â In the current system, your only option to increase your benefit is to stay more years.
...and I see the "stay more years" thing as a negative. Â There are a lot of people who are not really interested in progressing in their military careers but are still on duty waiting for retirement (tying up promotions for people below them) or trying to beef up their retirement checks. Â This does not serve the military.
If it came out where the money would be essentially the same between what you would get per month under the current system vs the new system, I would be all for it. Â I get that there would be some people who would screw it all up. Â They will contribute the minimum and constantly borrow against it. Â Safe guards could be put in place or you can just insist that people take some personal responsibility - or a little of both.
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CPT (Join to see)
I feel differently about Social Security.
We, as the military, have a closed system. Â We have the ability to counsel, and failing that, direct the actions of the members of our system.
Additionally, as the members of what I like to call the real 1%, how our current pension funds are invested are directed by federal law (10 U.S. Code Section 1467). Â Having those funds hit the open stock market will pose a lot of ethical questions. Â Will we be invested in foreign countries? Â Don't we know a lot about what technologies are emerging and which companies they belong to? Â
I feel that these concerns could be overcome, but for the other 99% - meaning moving social security into the stock market - wow, what a quagmire! Â It would be tantamount in my mind to government control of private industry. Â Any moves made with pension funds would be closely mimicked and could have unintentional and extreme market effects. Â Not only that, who would manage the funds? Â Would they be compensated with fees for service as currently happens with 401k plans? Â What a windfall it would be for banks and brokerage houses which is why these groups are usually the biggest backers of social security privatization. Â They win whether the market is up or down. Â If not, are we going to create another government bureaucracy to handle the management role. Â To get a concept of the size of this new agency, you would have to combine Fidelity and JP Morgan's asset management operations to get the same amount of funds under management. Â Forget converting over the Social Security staff. Â This is why the fund manager sharks are circling. Â Outsourcing, contracts, and big bucks! Â Oh, my!Â
It is really an entirely different problem. Â Not everything that can work well in a microcosm can be extrapolated to a larger population. Â
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CPT (Join to see)
SSG G,
I'm glad to hear this. Â Back in 2011, in anticipation that there would be draw downs, I remember being told to be more aggressive in using the "bar to re-enlistment" tool to weed out Soldiers we really didn't want. Â In the past, when an MOS became over strength, HRC would just say if you are rank x, and have TIS Y, then reclass or you're out. Â That completely ignored the quality of the Soldier and took the say away from leadership. Â People might not like this approach, but it's better.
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Wait, we get something after we retire?Â
Guess I can stop playing the lotto now...
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SSG Gerhard S.
If we're allowed to get that far. As this Article from TREA (The Retired Enlisted Association) newsletter tells us, this is far from a Certainty when our futures are left to the whims of politicians and their base-line budgeting.
"The Army has cut 22,000 soldiers from its ranks this year with plans to trim 20,000 more next year.
Cuts had largely come through attrition and reductions in recruiting, which mostly affected low-ranking enlisted soldiers. But this summer, the cuts began to affect officers as well, including 1,188 captains and 550 majors. Some of those officers found out they would have to leave the service while they were deployed to Afghanistan, even if they were intending on making a career of the military. All must be out by April.
Initially, before they took place, the Army announced that the officer cuts would target officers with evidence of poor performance or misconduct.
But an internal Army briefing disclosed by a military website in September obtained by The New York Times showed the majority of captains being forced out had no blemishes on their records. Instead, it found that officers who had joined the Army as enlisted soldiers were three times as likely as captains who graduated from West Point to be forced to retire.
It is believed that officers who were prior enlisted are being pushed out because they are entitled to more pay and are eligible for retirement earlier, since they have more time in service than other commissioned officers."
"The Army has cut 22,000 soldiers from its ranks this year with plans to trim 20,000 more next year.
Cuts had largely come through attrition and reductions in recruiting, which mostly affected low-ranking enlisted soldiers. But this summer, the cuts began to affect officers as well, including 1,188 captains and 550 majors. Some of those officers found out they would have to leave the service while they were deployed to Afghanistan, even if they were intending on making a career of the military. All must be out by April.
Initially, before they took place, the Army announced that the officer cuts would target officers with evidence of poor performance or misconduct.
But an internal Army briefing disclosed by a military website in September obtained by The New York Times showed the majority of captains being forced out had no blemishes on their records. Instead, it found that officers who had joined the Army as enlisted soldiers were three times as likely as captains who graduated from West Point to be forced to retire.
It is believed that officers who were prior enlisted are being pushed out because they are entitled to more pay and are eligible for retirement earlier, since they have more time in service than other commissioned officers."
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Just another way for the Federal Government to steal your money.Â
They have been stealing Social Security funds for decades now. The IOUs are starting to come due, and there is not anything to pay those IOUs with, and they CONTINUE to plunder the fund.
The new MyRA that the president is pushing is a Ponzi scheme as well. They take your money and buy our own Federal debt with it. Seeing as how badly Federal T-Bills are performing, the expected rate of return on these is pessimistic at best. Good luck trying to live on whatever (if anything) you can get back when you want to retire.
Better to just buy precious metals than have your "money" (1s and 0s) in a bank that is accessible to the government. Don't believe the government will take your money? Talk to those in Cyprus and the EU...
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CPT (Join to see)
I cant say you are wrong but it does offer a possibility for service members to walk away with something even if they dont serve 20 years.
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CPT (Join to see)
And, SGT Dean, I know there are lots of people not saving anything toward retirement planning on their military pension. Â I doubt they have ever checked out a retirement pay calculator to see where they would end up (http://militarypay.defense.gov/mpcalcs/Calculators/redux.aspx). Â You are right that most people have post retirement jobs, and that may sound fine today, but what happens when you are too old to work that post retirement job (or just want to...you know...retire)? Â Unless that job is also going to give you a pension, that income will disappear. Â I hope people realize this and are socking away everything they can...
The first step in determining your retirement pay flow is to establish your retirement expectations. Please consider your planned retirement year and grade and answer the following questions.
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SSG Gerhard S.
CPT (Join to see), Well Said Ma'am. A 50% military retirement "benefit" is far from a solution to the retirement equation. Even more unfortunate is the fact that Military retirements are even more ludicrous in their funding model than is Social Security. At least Social security withholds funds for the purpose, though our politicians feel all too free to take, and utilize those funds on fish farms and studies with shrimp on treadmills. Military retirements, on the other hand require NO input in the "earning" phase, and are solely based on the HOPE that there will be enough Federal dollars to fund them, and the REALITY, that if there aren't enough of those dollars the Federal government will do what it can to make sure they either print enough of them (causing inflation) or make sure fewer service members make it to retirement as this article from the newest TREA (The Retired Enlisted Association) suggests.
"The Army has cut 22,000 soldiers from its ranks this year with plans to trim 20,000 more next year.
Cuts had largely come through attrition and reductions in recruiting, which mostly affected low-ranking enlisted soldiers. But this summer, the cuts began to affect officers as well, including 1,188 captains and 550 majors. Some of those officers found out they would have to leave the service while they were deployed to Afghanistan, even if they were intending on making a career of the military. All must be out by April.
Initially, before they took place, the Army announced that the officer cuts would target officers with evidence of poor performance or misconduct.
But an internal Army briefing disclosed by a military website in September obtained by The New York Times showed the majority of captains being forced out had no blemishes on their records. Instead, it found that officers who had joined the Army as enlisted soldiers were three times as likely as captains who graduated from West Point to be forced to retire.
It is believed that officers who were prior enlisted are being pushed out because they are entitled to more pay and are eligible for retirement earlier, since they have more time in service than other commissioned officers."
"The Army has cut 22,000 soldiers from its ranks this year with plans to trim 20,000 more next year.
Cuts had largely come through attrition and reductions in recruiting, which mostly affected low-ranking enlisted soldiers. But this summer, the cuts began to affect officers as well, including 1,188 captains and 550 majors. Some of those officers found out they would have to leave the service while they were deployed to Afghanistan, even if they were intending on making a career of the military. All must be out by April.
Initially, before they took place, the Army announced that the officer cuts would target officers with evidence of poor performance or misconduct.
But an internal Army briefing disclosed by a military website in September obtained by The New York Times showed the majority of captains being forced out had no blemishes on their records. Instead, it found that officers who had joined the Army as enlisted soldiers were three times as likely as captains who graduated from West Point to be forced to retire.
It is believed that officers who were prior enlisted are being pushed out because they are entitled to more pay and are eligible for retirement earlier, since they have more time in service than other commissioned officers."
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I think moving away from the 20 year retirement system will be good for the military. Â The all or nothing system makes force management mor difficult.
 All Current Soldiers who do 20 should be grandfathered.
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SSG Gerhard S.
Or for those earlier in their careers an actuarially determined bonus-in could be established to facilitate a switch.
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This was being talked about 12 years ago when I retired. yes its a good idea but not as a replacement for the current retirement.
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Hell No, tho it's going there. You get out what you put in. Nothing in gets you nothing out. My life time Pension works Great for me plus TSP.
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I'd be all for a retirement system kind of like the 15 year early retirement. Probably make us eligible for a retirement at 10 years. Pension = 2.5% * tis - .5% * (20- tis). 10 years would get you 20%, 15 - 35%, and 20 would be a full 50%. This system would still incentivize you to work towards 20 but it would leave you with nothing if you didn't make it to 20. That'd ease the minds of plenty of staffs and captains.
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I think the system needs some revamping, but looking at these proposals worries me. I think they devalue the system and will do very little for retention.
I think if they considered a contribution to the service members TSP at each enlistment/reenlistment point then combine that with a reduction in the multiplier, say 2.0 per year served versus 2.5 would give the members something for their future even if they don't serve a full 20. Granted they can't touch that money until age 59 1/2, but it will be there growing for them over the years, not to mention if they leave the service they will be able to roll that money over to their own personal IRA, employer 401(k) and then have more control over it's growth.
They should also consider matching contributions to the TSP, just like GS civilians get. Congress authorized matching contributions already.Â
Just some thoughts. I'm no financial wizard but surely they could garner some savings and still maintain the 'retirement incentive' of continued service.
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SSG Gerhard S.
Well articulated MSG Koss. I agree that any plan to move away from "retirement" and toward a TSP/401K type system SHOULD include matching funds, and perhaps bonuses upon reaching benchmarks of time, or rank. There are plenty of ways to incentivize retention through such a system.
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LCpl James Robertson
Most civilian 401-k's alone without Military Retirement, you would have to stay active duty until 59 1/2 years old until you could draw out any money, plus I worked for a company that didn't do matching funds and made it mandatory to pay 2% percent of your income. And you have to worry about the stock market and losing what you have. Good if you are staying in the Military until you are 62 0r 65 years old.
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Here's a link
Better link;
After years of silence on the intensely controversial issue of military retirement reform, the Pentagon on Thursday unveiled a detailed proposal for fundamental, far-reaching changes to the current ...
In a revolutionary shift in how it would compensate retirees, the U.S. Defense Department is considering adopting a 401(k)-like retirement plan and other financial incentives for those who serve les...
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