Military exchanging the 20 year retirement benefit for a 401(k)?

This could be the future benefit package if Pentagon advisors succeed in replacing a long-standing tradition of drawing retirement after 20 years of active duty – regardless of age – with an employer-matched savings program much like the rest of Corporate America. In response to the defense spending budget cuts necessary to raise the debt ceiling, the Defense Business Board recommended ditching the outdated compensation package that has lured millions to serve their country because it is “unfair, unaffordable, and inflexible.” Detailing the problems and recommendations in their July 21, 2011 report Modernizing the Military Retirement System, the 401(k) program will allow all service members to earn retirement savings as they contribute into their own accounts that rollover to their civilian careers should they decide to leave the military. Under the current retirement system, only those who serve 20 years or more are eligible for benefits and the board suggests this is not competitive with the civilian workplace. In addition to 401(k) matching for all active duty service members, the board also recommends placing a premium on specific job fields such as combat duty and offering extra contributions for length of service. This type of flexibility in contributions will “reward longer service” and “high risk assignments” which could be more of an incentive as separation from families and hazardous duty often lead to attrition, especially for younger members.1 Although improving the retirement system to compete with civilian employment benefits by providing 401(k)s for all employees is worth considering, is this really the best alternative to offer our men and women who surrender their own personal freedoms to keep our country secure? In response to CBS Investigative Report, Radical overhaul of military retirement eyed, blogger “1969Vet” presents the following argument: “My retirement is not a benefit, it is something I have earned over the past 24 years, through sacrifices and unquestionable commitment to my country and what it stands for. Were the sacrifices I made for my country and countrymen over the past 24 years a benefit?”2 The “Vet” makes a good point – unlike Corporate America, we ask our service men and women to voluntarily obligate themselves for a contracted period of time to do whatever is necessary; wherever that may be; without regard for their own preferences; little to no consideration for family responsibilities; often in deplorable, unsanitary, and extremely dangerous conditions for about the same benefits and compensation that Best Buy offers the Geek Squad.3 We should now expect them to sacrifice so much for the benefit of making withdrawals from a 401(k) at the age of 60? What is the motivation to serve your country for 20 years or more if you can receive similar compensation from civilian employers? I asked my own son who is currently serving in Afghanistan how he feels about the proposal and he brought up a concern that many soldiers approaching the ten year mark face: under the current free retirement system, the longer you stay on active duty and climb in rank, the higher your retirement pay will be when you reach your twentieth year of service and it doesn’t require a monthly payroll deduction. That is a huge motivating factor when weighing reenlistment options against leaving the Armed Forces. Take away that motivation and the most experienced, highly skilled leaders that we have spent time and money training to use mission-specific equipment might just choose a comfortable civilian life. Wouldn’t our country be less secure with a less experienced military? Matching contributions at some percentage in a privately-managed 401(k) levels the playing field for all service members but let’s not take the 20 year retirement system completely off the table either. Considering that most people with 401(k)s have seen a drastic decline in their accounts since 2008, ending the 20 year retirement system might not be the best recruiting tool to attract the 17 – 24 year old high school grads, especially when the economy improves. It has only been in the last few years that recruiting goals for all branches of the military have been made – a first in over 30 years – due in part to the high levels of unemployment. Once the recession is over, there is a very real possibility that the numbers of quality men and women enlisting will drop and once again recruiters will have to entice eligible young Americans to choose the military over alternative industries that might offer better benefits. While the majority of businesses in the United States have stopped offering full retirement programs, 30% will contribute to a type of 401(k); 50% provide nothing at all; yet there is still about “20% of workers ... enrolled in traditional pensions ... according to Labor Department statistics and estimates by Boston College's Center for Retirement Research.”4 Shouldn’t the United States military rank in the top 20% for employment benefits? Clearly across the board budget cuts are necessary during our current economic downturn and defense spending should be tightened in some areas but why retirement and why now? Former Defense Secretary Robert Gates and current Defense Secretary Leon Panetta are both advocating for changing military retirement benefits to be delayed until after age 60 to save upward of $250 billion over the next 20 years.5,6 It doesn’t take a Wall Street financial analyst to quickly look at the annual spending on the wars in Iraq and Afghanistan to deduce that the costs just for one year alone exceed $250 billion: Iraq’s 2008 costs were $140 billion;7 Afghanistan’s 2011 tab to date is $119 billion.8 Maybe we should take a harder look at our priorities and decide if the price tag for the War on Terror is worth sacrificing a time-honored custom dating back over 100 years. Notes: 1. http://dbb.defense.gov/pdf/DBB_Military_Retirement_Final_%20%20%20%20Presentationpdf.pdf 2. Attkisson, Sharyl. Radical overhaul of military retirement eyed. August 15, 2011 6:38 PM http://www.cbsnews.com/stories/2011/08/15/eveningnews/ main20092652.shtml. blog by 1969Vet. August 22, 2011 2:56 PM EDT 3. Best Buy Geek Squad employee with a few years experience could have a 401(k) with employer contributions and typically earn $15.00 per hour which would be comparable to an E5 based on a 40 hour work week 4. http://archive.truthout.org/article/corporate-america-pulling-back-pension-safety-net 5. http://hamptonroads.com/2011/06/gates-seeks-big-changes-military-pay-pensions 6. http://www.usatoday.com/news/military/story/2011-09-07/Proposed-changes-in-military- benefits-have-troops-worried/50305324/1 7. http://www.foxnews.com/politics/2010/08/30/cbo-years-iraq-war-cost-stimulus-act/ 8. http://abcnews.go.com/Politics/afghanistan-war-costs-soar-obama-troops- announcement/story?id=13902853