Task Force Finds Military Retirement System “Unfair…Unaffordable”

A Defense Business Board task force chartered by the Secretary of Defense has concluded that the current military retirement system is unfair to many service members, unaffordable due to rapidly rising financial obligations, and inflexible at a time when change is needed. The task force of seven military experts recommended in a draft briefing dated July 21 that the retirement system be restructured to more closely resemble the retirement packages available to civilians in the private sector.

Under the current system, retirement benefits accrue continuously during the time military personnel serve, but 83 percent never reach the 20-year threshold required to qualify for the benefit. That includes the vast majority of personnel who serve in combat; only one in eight enlisted personnel ever receive retirement pay, because serving for five, ten or fifteen years results in no retirement benefit. On the other hand, those who do reach 20 years of service can look forward to decades of retirement pay — pay which makes no distinction between those who were in combat and those who weren’t.

Not surprisingly, the task force found that the current retirement system has little impact on recruitment, and only begins to influence retention after personnel have served at least a decade. The larger problem, though, is that the system has not changed significantly in a century — even though every other facet of military service and American society has been transformed. Today’s military retirement system, the task force argues, was created for an era when life-spans were shorter, active-duty pay was below that of most civilian occupations, and second careers were uncommon after military service. Today, lives are longer, military pay is more competitive with the private sector, and second careers are the norm.

The task force recommendations for changing the retirement system might not save much money in the near term, because they would leave the benefits of retirees already in the system untouched. However, over the longer term a restructuring could save the government hundreds of billions of dollars in forward financial liabilities. In the absence of changes, those liabilities would double over the next 25 years to about $2.7 trillion. The bottom line on the task force briefing is that, like the private sector, the public sector can’t afford to give each person who serves for 20 years an average of 40 years in generous retirement pay. Trying to stick with such a system will unbalance military budgets to a point where the force can’t be adequately equipped or trained for the challenges that lie ahead.