By Debbie Gregory.
Current service members are well aware that the military has been taking measures to cut its spending, in light of our nation’s current economic state. Every branch has seen noticeable reductions in force size, with tens of thousands of service members encouraged to enter early retirement or into involuntary separation. Now those who fought to remain in the military may see their retirement benefits reduced as proposals to overhaul the military retirement system mill about our nation’s capital. How will the changes affect those who serve twenty years in the military?
Traditionally, only service members who remain in the military for a full twenty years or more get retirement pensions, medical benefits for themselves and their dependents, as well as other benefits. Exceptions to this policy are those who have a service-related disability, those who received a medical retirement, and those who took the offered early, pro-rated retirement to help force reduction efforts. More than eighty percent of service members don’t meet the requirements for military retirement, and therefore, don’t receive pensions or benefits after they complete their tours of duty.
One of the proposed changes could benefit those who serve and don’t qualify for military retirement, as a proposed new model would offer service members a personal retirement savings account benefit, wherein the government would make annual contributions of up to six percent of their basic pay.
However, this proposed system complicates matters for service members who plan to make a career out of the military and retire with twenty years in. The new system calls for cutting the size of the current pension by twenty percent, an average of over $4,000 per year. To make up for that, the Department of Defense would open 401(k)-style retirement accounts. Funds placed into these accounts will not be available for withdrawal without a tax penalty before the service member reaches age sixty.
The proposed changes to military retirement also effect on when the service member can begin receiving their retirement pension. Under current policy, an individual who enlists at eighteen years old and retires after twenty years can begin collecting their retirement checks as soon as they retire at age thirty-eight. Under the new system, military retirees would have to wait until they are sixty to start receiving retirement pay.
The proposed changes to the retirement system are included in the 2016 defense authorization bill that is moving through Congress. Under that legislation, today’s troops would have about 18 months to make a decision, by 2017, on whether to stick with the old benefit or sign up for the new plan. Let us hope that our elected leaders do what is right when making decisions for our service members. Be sure to contact your representative and senators to make sure that they know how you want them to represent you.
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Military Connection: Proposed Changes to Military Retirement: By Debbie Gregory