Army "Right Sizing"

[Renegade One]

Well it looks like the COLA reduction to military retirement pay might not survive long. ...Cutting for existing retirees isn't the brightest thing to do, even if it is only a reduction in the COLA.

All that said I think this is just the beginning of what will likely be big changes to military retirement as we know it...Some sort of reform of our current military pension system is likely to happen in the next few years and while I think the COLA reduction to current miltiary pensions was a poor start I think we should take a long, hard and smart look at what should be done to change it instead of having a knee-jerk reaction to opposing any changes whatsoever that seems to be the SOP for MOAA and other like organizations as well as some of my friends and colleagues who seem think that anyone who suggests such things is a traitor and should be burned at the stake.

Pretty much agree with all you've said. Change is inevitable, especially during "right sizing" times. My view is that the time to start is with "new hires"…not with those who've already committed at some depth. What's "depth"? I dunno…10+ years would work for me, but I'm not the Crew Chief on that jet.

To give MOAA (and the NRA and others, I guess…) their due, it's kind of like "their job" to lobby for their constituents and the status quo. I'm not a member of the first, but I appreciate their voice in the matter. It's the old "If you give them an inch…" sort of reasoning. I get that.

 

[wink]

Some sort of reform of our current military pension system is likely to happen in the next few years and while I think the COLA reduction to current miltiary pensions was a poor start I think we should take a long, hard and smart look at what should be done to change it instead of having a knee-jerk reaction to opposing any changes whatsoever that seems to be the SOP for MOAA and other like organizations as well as some of my friends and colleagues who seem think that anyone who suggests such things is a traitor and should be burned at the stake.

Amen. How about the military do what it does best and LEAD! There are lots of affiliate organizations, retiree and otherwise, along with the official offices of DOD that can get ahead of this. I am sure there are some high level retired congressmen, senators, academics and economists that would volunteer their time to be a part of a panel that would make recommendations to congress. We can bitch all we want about the minuscule reduction in debt or deficit changes to military retirement make, but the little cuts add up. Big cuts hurt too much and are likely not something any politician could support. So, everyone must get hurt a little. The military should show the way before larger cuts and bigger changes affect other entitlement programs. How can we expect an 86 year old retired widow to take a hit (of any size) before able bodied military retirees half her age?

I am highly sympathetic to changes made to current retirees and even those still serving who might have expected a certain level of benefit. I happen to be one myself. But an actively serving individual can still make adjustments to his retirement plans. A retired E-6 may not be able to. So can we not take care of our own? If there is to be no grandfathering then it is more fair to have younger active serving members take the cut at a point in their careers they can make an adjustment or change careers. The biggest should certainly be made for those not yet sworn in. "But we had a deal" some say, "They violated a contract they made with us." Let me ask, did the terms of the contract any of us signed guarantee pay raises beyond what was in the pay chart your recruiter showed you? In the last 30 years or so there have been a few rather large pay increases for the military beyond COLA. None of them were part of the "contract". The POST 9/11 GI Bill is the sort of gold plated benefit that everyone on active duty jumped at with no concern for the fact it wasn't part of the original deal they had with Uncle. So it is OK to violate this "trust" if it enriches us, but it isn't OK to make cuts to our programs all the while screaming about other entitlement spending. That doesn't sound like any contract my lawyer wife has seen. Changes have been made to military entitlements many times in the past, often with little regard for grandfathering. It is coming like it our not. This proposal is just a shot across the bow. It is time the military got ahead of it and proposed changes across the board, pension, medical, educational, everything. Our nation is going broke. Everyone is going to have to take the medicine. If we can get ahead of this maybe we will get a spoon full of sugar to go with our dose.

 

[Jim123]

...All that said I think this is just the beginning of what will likely be big changes to military retirement as we know it...

The all-or-none 20 year "cliff" is obviously outdated.

1. Change the full retirement "cliff" to 25 years of service. Or maybe 30. Slowly walk it forward/phase in the change by first changing it from 20 to 21 years. Then in a couple years to 22... a couple years later to 23, etc.

2. Duh.

 

[Flash]

The all-or-none 20 year "cliff" is obviously outdated.

1. Change the full retirement "cliff" to 25 years of service. Or maybe 30. Slowly walk it forward/phase in the change by first changing it from 20 to 21 years. Then in a couple years to 22... a couple years later to 23, etc.

2. Duh.

I don't think there even needs to be a 'cliff'. I recently read a pretty good article from a LT or LCDR (I think in Proceedings but can't find it) about changing the military retirement using the 'rule of 80' model, adding your age and time in service to come up with when you get your pension. I think his proposal also included a lower 'vesting' time to 10 years instead of 20.

Another idea would be to move closer to the military reserve retirement or federal civil service models, getting your pension at a fixed age (60 or 57) getting more the longer you serve while vesting at just 5 years in the civil service. Make the pension a higher rate like federal law enforcement/'public safety' but without the employee constribution (0.8-4.4% for civil servants), combine it with TSP matching and that might be reasonable proposal.

 

[Flash]

Amen. How about the military do what it does best and LEAD! There are lots of affiliate organizations, retiree and otherwise, along with the official offices of DOD that can get ahead of this. I am sure there are some high level retired congressmen, senators, academics and economists that would volunteer their time to be a part of a panel that would make recommendations to congress.......

There was already one proposal by the Defense Business Board back in 2011 that looked at this very subject and they are apparently looking at it again along with some Congressmen too.

.....To give MOAA (and the NRA and others, I guess…) their due, it's kind of like "their job" to lobby for their constituents and the status quo. I'm not a member of the first, but I appreciate their voice in the matter. It's the old "If you give them an inch…" sort of reasoning. I get that.

I think there is a much smarter way to go about debating this issue than the the tactics MOAA and its allies in the 'Military Coalition' often use which seem to border on the apocalyptic sometimes.

 

[bert]

[I'm too lazy to pull out all the quotes related to the comments I want to make, but hopefully this will all make sense anyways.]

- On the subject of earnings after leaving the service. The best way to figure out what you make now is to take a paycheck calculator (here is one, but there are many out there) and work backwards to find the annual salary that matches your take home from the service. Easier, faster, and more accurate than rules of thumb, plus you can tailor it to where you plan to live once out of the service if you know where that is. Don't forget medical costs. I think some of you are going to find out that your equivalent salary is higher than you thought it was.

- Out of about 2 dozen guys who retired around the same time I did that I can speak about, only a couple of us make more post-retirement (not counting our retirement paycheck - if you plan to count that then the number goes up considerably). Pags and R1 already covered this, but obviously it is a combination of your actual useful skills plus the career that you are interested in that will determine what you make. For the case of officers, our past salary history doesn't hurt us at all, but you may have to make a special effort to translate your military earnings for a civilian HR office.

- I haven't bothered to re-run the numbers with the COLA change (which I am expecting to be temporary anyways), but when I did the math on staying in vs getting out, and retiring at 20 vs retiring later, one of the big drivers is 401k match. If you make a decent salary (match is usually based on a percentage of that at most places), then the 401k match can likely drive the case that retiring at 20 is a better choice than staying later, unless you make it all the way to 30 years as an O-6 (depending on your assumptions O-5 at 27 years can be equal). COLA for retirement pay was one of the smaller drivers in that equation and I doubt this would have changed my conclusion.

- For the people who tried to calculate the NPV of a military retirement, you get 1 above for your math and 2 below for headwork for your assumptions. Earnings growth of that retirement lump-sum, in our scenario, is completely risk free. That means a far lower rate of return and thus a far higher lump sum needed. Let alone the fact that there is no risk to outliving your life expectancy.

- With TSP authorized for the military for >10 years now (and IRAs have always been), nobody should be leaving with "nothing" in retirement. Speaking for the officer side, even if you only contributed your flight pay (and nothing else) to either or both for your minimum commitment, that would absolutely be worth something when you hit 59.5.

- A couple people mentioned the post-9/11 GI Bill - that thing is fantastic. Take advantage of it, and make sure you transfer at least one month to any dependent you might want to share it with prior to getting out.

- I've said it before on this site, but one of the real keys is to keep your personal finances under control. If you put yourself in a position where you can't afford to miss a single paycheck or take the risk of a new career, then you will take whatever crap your current employer cares to give you and you will like it.

- From my "already got mine" perspective: compensation in the military is currently very good on the officer side. Given the current civilian employment sector and the military's desire to get smaller, I don't see potential changes causing an uncontrollable/undesired flood of departures. Having said that, generally speaking I still believe the lifestyle should make the choice. If I hadn't been able to stay flying for 18/20 years my 20 would have been a lot more painful, I think. If you still love the military then staying in will treat you fine. If the thought of completing one more mandatory anti-terrorism lecture is going to make you strap a vest on yourself, then a penny-a-day pay cut would probably send you to the door.

TL/DNR: Don't be a passenger in your own life: do your own math and make your own decisions, and make those decisions based on reality, not on how you wish the world were.

 

[Spekkio]

Doesn't case 1 also have the GI Bill, which will not only pay for that college degree, but also give him BAH while he does it? Or which he can pass on to his kids if he deems that a better bet?

As for the kiddos, that's a personal decision and should have nothing to do with what compensation is fair. Having kids means he needs more money, but it doesn't somehow make the work he does worth more compensation. I'm pretty sure there's a system where people are compensated "to each according to need", and ours ain't it.

Case 1 does have the gi bill. Hopefully he has a wife who can support a family and an employer willing to hire a 50 year old with the credentials of a 22 year old.

Kids come into the equation because the military doesn't aim to just keep single men for 20-30 years. As I said above, unless they raise the retiremenent thresholds to allow people to serve into their 50s, it is financial suicide to stay in the military to 38-48 while acquiring no useful skills for civilian employment in some ratings or MOS.

 

[e6bflyer]

I hope common sense has caught up with congress on this issue, but I am not holding my breath.

This deal was very short sighted and, as usual, doesn't get to the root of the issue. A 401K style retirement with a healthy govt contribution would be very beneficial to the budget and also would potentially benefit servicemen more than the standard retirement based on economic performance and years of service. Also allowing them to roll it over into a civilian fund after their service is over or cash it out with no penalty would give them more options. Health care is a whole other issue, but that third rail hasn't been touched yet.

The big thing here is:
1. Don't TOUCH existing retirements. Allow the option of active servicemembers to convert or stay standard pension, but otherwise leave it alone.
2. Come up with a plan and stick to your guns, congress. If they repeat the past, they will make a huge change and then a war will happen and they will change it back.

 

[HooverPilot]

So, I am wondering, would you be satisfied if on re-enlistment (literally a new contract) a sailor came under a new retirement system? After all, his previous mutually agreed upon compensation assurance was for the duration of an expired contract. While officers serve indefinitely, how about at augmentation (if they still do that), or when incurring another obligation due to grad school, TPS, etc. "We will send you to TPS but your payback will include cola - 1% on your retirement until age 60. Deal?" I am aware of the varying retention issues this may cause. Would something like this satisfies you morally? Looking for clarification.

Wink, I don't think I would have a problem with such a construct. I agree we should not change the game on retired folks or those who are obviously on a career track. But, if change has to be made for financial reasons, I think this is a much better way to effect the change than what has been done to date.

 

[BusyBee604]

Amen. How about the military do what it does best and LEAD! There are lots of affiliate organizations, retiree and otherwise, along with the official offices of DOD that can get ahead of this. I am sure there are some high level retired congressmen, senators, academics and economists that would volunteer their time to be a part of a panel that would make recommendations to congress. .

Great post, agree with the exception outlined above. Rather have veteran 'Joe the Plumber' & his Buds! Retired professional politicians have done enough damage during their active careers... no mas. The terms "negotiate" and "compromise" appear to be an alien concept to most contemporary pols... puleeze, no mas!
BzB

 

[exNavyOffRec]

The all-or-none 20 year "cliff" is obviously outdated.

1. Change the full retirement "cliff" to 25 years of service. Or maybe 30. Slowly walk it forward/phase in the change by first changing it from 20 to 21 years. Then in a couple years to 22... a couple years later to 23, etc.

2. Duh.

Might work for officers, but HYT times for enlisted would need to be changed as only E-8 and E-9 can go past 24, and the way the enlisted structure works they need HYT limits to prevent stagnation.

 

[Jim123]

Might work for officers, but HYT times for enlisted would need to be changed as only E-8 and E-9 can go past 24, and the way the enlisted structure works they need HYT limits to prevent stagnation.

True- and current HYT for some O grades would have to change too. Of course, many "up or out" fans won't like such changes.

 

[wink]

There was already one proposal by the Defense Business Board back in 2011 that looked at this very subject and they are apparently looking at it again along with some Congressmen too.

Great post, agree with the exception outlined above. Rather have veteran 'Joe the Plumber' & his Buds! Retired professional politicians have done enough damage during their active careers... no mas. The terms "negotiate" and "compromise" appear to be an alien concept to most contemporary pols... puleeze, no mas!
BzB

I was unaware of that panel's recommendations, as were every other American and 95% of the policy makers in the country. My point is that these sort of panels, commissions, whatever, need to be high profile and actually lobby for a change. The military needs to embrace them and sell it. The Defense Business Board is made up of some very distinguished individuals. But I only recognize the names of John Hamre and Paul Kaminski, both ex officio members. These boards need to have heavy hitters that will be heard, and not just by policy wonks in the puzzle palace. Retired general officers would lend legitimacy and some acceptance by the military. Ex politicians have their place. They know how congress works. The very talent they used to get three post offices build within a single neighborhood are the sort of talents that will help effect change. It isn't hard to come up with alternative plans, they did in 2011. But who heard about it? Was anything done? No. First attempt was the hated cola reduction blind side. And even that may survive.

 

[BusyBee604]

I was unaware of that panel's recommendations, as were every other American and 95% of the policy makers in the country. My point is that these sort of panels, commissions, whatever, need to be high profile and actually lobby for a change.

What you say makes sense, I guess we have to snooze with the devil on occasion, to get anything accomplished. I have a 'woody' for all pols, especially CongressCritters... either party. It's hard to embrace any group of people who have a job approval rating of ~7%, most of whom have no military experience... to contribute much worthwhile to benefit the military, especially something they don't squeeze extra $$$ out for their own pockets. Bee, in over his head, and out.
BzB

 

[Recovering LSO]

So, I am wondering, would you be satisfied if on re-enlistment (literally a new contract) a sailor came under a new retirement system? After all, his previous mutually agreed upon compensation assurance was for the duration of an expired contract. While officers serve indefinitely, how about at augmentation (if they still do that), or when incurring another obligation due to grad school, TPS, etc. "We will send you to TPS but your payback will include cola - 1% on your retirement until age 60. Deal?" I am aware of the varying retention issues this may cause. Would something like this satisfies you morally? Looking for clarification.

It doesn't help the conversation to play out hypothetical ideas that don't have any basis in reality. Re-enlistments are not intended to operate as reset button. When a Chief reenlists, do we make him regress to an Airman?

The retirement system needs to be amended, I think we can all agree on that. Just don't alter what has, to this point, been a mutually agreed upon set of compensation and benefits. Start at the door of the recruiting office.