How to kill retention in one easy step
The Marine Corps Times reports that another of those idiot DoD panels has arrived at some radical changes for the military retirement system;
In a massive change that could affect today’s troops, the plan calls for a corporate-style benefits program that would contribute money to troops’ retirement savings account rather than the promise of a future monthly pension, according to a new proposal from an influential Pentagon advisory board.
All troops would receive the yearly retirement contributions, regardless of whether they stay for 20 years. Those contributions might amount to about 16.5 percent of a member’s annual pay and would be deposited into a mandatory version of the Thrift Savings Plan, the military’s existing 401(k)-style account that now does not include government matching contributions.
OK, sounds pretty good so far, except that the TSP has no investment option for cash investments, which means that 100% of their contributions are subject to market conditions in either bond or stock markets. I like that my pension is a guaranteed amount that I can count on despite the ups and downs of Wall Street. Don’t get me wrong, I’m going to be a very rich man when I retire and finally access my investments, but I’ll have a pension that I can always count on to be there.
But here comes the “sucks” part;
It’s unclear whether troops would have immediate access to all the retirement money or whether it would be partially or completely withheld until a traditional retirement age, such as 65. Under the current TSP, troops cannot withdraw money until age 59½ without incurring a significant penalty, except in certain specified circumstances.
Unlike other proposals to overhaul military retirement that would grandfather current troops, the board suggests that DoD could make an “immediate” transition to the new system, which would affect current troops quite differently depending on their years of service:
So it’s another example of the government forcing the troops to change horses in mid-stream. those troops who’ve been in for years won’t have to advantage of using the market to grow their pensions like a new trooper with twenty years to make up for losses and capitalize on gains.
Who in the military has the education to invest smartly? How much will it cost the military to educate Joe on how to not lose all of his money on a crap shoot? And the lure of a five-figure amount sitting in an investment account that they can access will probably tempt a lot of Joes out of the military. Yeah, it’s possible.
Thanks to StrikrFO and Posdorf for the links.
Category: Military issues
Funny, but when something along these lines was proposed for only a small portion of Social Security payroll taxes, why, that was the worst thing ever.
But hey, it’s OK to just dump this load of shit on the military.
And why this constant effort to make military retirees wait until they are in their 60s to collect anything? Do they not get it that the pensions we get at age 42 or 45 or 48 make up the difference between what we likely will earn in our new jobs-and what we would be earning in that field if we had spent twenty years building up seniority rather than deploying?
My understanding of ObamaCare is the provision permitting the government to raid retirement accounts, such as 401K and TSP. Soooo… we’re opening up another piggy bank, in this case SM’s retirement accounts, to raiding by cash-hungry Congresses?
Agree with QMC: back when the economy was growing and folks had jobs and a Republican was in office, this proposal was the most racist, ageist, sexist proposal ever. And now?
I liked the idea of having responsiblity AND control of my retirement funding back then, and like it today – but don’t want my future raided to pay for Congressman Wu’s Stupid Pet[ting] Tricks.
I’m not opposed to the overall concept of this, because I think defined benefit pensions are a thing of the past that we simply can’t afford anymore. But the contributions need to be vested, so that if you get out before 20 years you get less.
And they should give immediate access to your account when you hit your 20-that is the only way a military retiree could look at transitioning to the second career that they have to find.
Glad ya ran with this Jonn. The first thought I had wasn’t financial… I simply don’t know enough to comment on that aspect.
What I thought of first was the potential loss of the training cadre. Will we have a military made up of economists or warriors?
Dave Thul # 3: Please explain I think defined benefit pensions are a thing of the past that we simply can’t afford anymore.
Seems to me there are other (read non-military) areas aplenty to cut first?
I agree with Dave, pensions are a thing of the past. I’ve been downsized and had I had a pension would have not had anything. Instead I had a 401K I could take with me. See a pesion is just something a politician can fuck you out of at some later date….and they will, it’s not a matter of if, it’s a matter of when. You can’t count on ’em from private companies or the government. Look what the car czar did to GM white collar pensions….they were absolutely gutted to make sure the UAW got theirs… Some GM employees lost 70%+ of their pensions after the “bailout” courtesy of a political appointee that didn’t have to go through a confirmation, oh yah, and he got in big trouble for securities fraud too….go figure!!!
OT #5: I can’t agree. The military is a quite different case from other situations, I think. The distinction is age old.
Then there is equating a public sector/private sector dichotomy. The USPS, among others, has similar package in terms of retirement, but THEY have a union!
Finally – Don’t we risk turning our military in to mercenaries?
It looks like we are rapidly getting back to the days of stuffing cash into the mattress.
*sigh*
It makes me so angry. Is it not enough that our work environment is ALWAYS dangerous? Is it not enough to be broken physically after years of maintaining the highest physical standards? How long till the Bonus Army comes back?
This is frustrating.
It’s also stupid in that the *real* cost drivers for retirees are the medical services they are entitled to. The savings from this plan would be so marginal as to be invisible.
The Defense Business Board? Do they meet in the same room as the Diversity Commission?
Who thinks that letting pencil pushers determine how active duty military, and the retirees, are paid is even a moderately good idea?
“How much will it cost the military to educate Joe on how to not lose all of his money on a crap shoot?”. Well, they’ll have plenty of time, there won’t be any money for training in what they’re supposed to be doing, or deployments, ammo, food, uniforms and the like.
However, there will be food stamps for everyone, probably except the military.
Up North, that’s a good question. What “influential” board is this. Sounds like political appointees. I can’t imagine there is ANY officer, of ANY branch stupid enough to actually propose this.
I know people have told me if I do ten then why not twenty, but if I do twenty years and the retirement is not there I am ten years behind one’s peers.
Doc, if he wasn’t taking his dirt nap, I’d swear that this(Defense Business Board) is the wet dream of one Robert McNamara.
It’s gotta be a political wet dream from the head wet dream, finding ways to siphon more money from the military to give to those who aren’t paying their way, anyway.
Zero-
defined benefit pensions are based on expanding or at least steady workforce rates. It’s not quite a Ponzi scheme, but similar in concept, because if you don’t have tons of new people coming in to pay for those currently retired, the system collapses.
Plus they don’t give you an incentive to save. If you put in your 20 and retire an E-7, you could have been Captain America or the biggest shitbag blue falcon in history-you still get the same (or very similar) retirement pay.
The system above would reward those who get promoted faster (faster promotion means more pay earlier, and more contributed to retirement). And the TSP is now almost idiot proof in terms of deciding how to invest because of lifecycle funds.
I understand John’s frustration with retirement and healthcare bennies that we were promised and have fallen short. But if the country goes belly up with debt, you wont get a damn thing in benefits.
Yeah, make the service a B.S. corporate job with a vacation/sick day “time bank” like in Dilbert, too… that’ll inspire people to risk their lives for our nation!
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