Military retirement under attack

[GKinnear]

http://www.washingtonpost.com/blogs/post-politics/wp/2013/12/10/ryan-and-murray-to-unveil-budget-proposal-tuesday-night/

Senate Budget Committee chairman Patty Murray (D-Wash.) and House Budget Committee chairman Paul Ryan (R-Wis.) were finalizing details and hoping to schedule a press conference to unveil the deal, which would partially repeal sharp agency spending cuts known as the sequester in fiscal 2014 and 2015.

Those savings would be replaced by roughly $65 billion in other cuts and additional revenue, including fee increases for airline travelers, cuts to federal-worker and military pensions and higher payments for federal insurance of private pensions, according to people familiar with the talks.

Well, I guess they went and did it. I'll be standing by for the details for how the guv'ment is about to do us dirty.

Lets see: longer service commitments, less pay/retirements, centralized planning, increasingly chaotic situation in Afghanistan, which side won the Cold War again?

[Skitzo]

Lower COLA increases.

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[ThreeHoler]

http://www.washingtonpost.com/blogs/post-politics/wp/2013/12/10/ryan-and-murray-to-unveil-budget-proposal-tuesday-night/

 

Well, I guess they went and did it. I'll be standing by for the details for how the guv'ment is about to do us dirty.

 

Lets see: longer service commitments, less pay/retirements, centralized planning, increasingly chaotic situation in Afghanistan, which side won the Cold War again?

Still has to be voted and signed...

[hindsight2020]

For those currently in the service who would theoretically be "grandfathered," at a minimum I would expect a change in either how they calculate retirement pay like nixing high-three and making it a high-five with a kick in the nuts, or change WHEN you actually start collecting (age 50+). Either way, we're going to get less than what we expected. Count on it....

Nah. That's not grandfathering. That's straight up fucking you, and at least for me, it would incentivize me to pull an immediate curtailment out of the AGR program and into the airlines or an ART position, where I can continue to earn a full time-paycheck while I wait for the retirement annuity to kick in. For AD, it would mean a mass exodus which would absolutely require stop loss to avert. It would be a panic. It ain't gonna happen that way.

The way these things usually get rolled, if civil service is any indication (specifically the CSRS-to-FERS transition), is that they shaft the new hire into the new system. They won't have the political capital to change it for someone already in.

I'm not trying to be an aloof polyanna but I don't see them straight-fuckin the current batch into a Reserve retirement payout date system while mid-career. I'm personally not worried.

[GKinnear]

Still has to be voted and signed...

Yeah, but the fact its actually an option on the table speaks directly to the current mindset of the budget committee. So it gets removed in conference or a rider gets attached effectively negating it...what's to stop them from trying it again? Eventually the ramifications could lead to decreased upward mobility as the senior level are loath to retire, a la the Russkies. Granted, the post-military career was nothing compared to the US's, but it still begs the question: how will promotions/retention/force management be affected by reduced retirement pay?

My opinion: negatively...

[ThreeHoler]

how will promotions/retention/force management be affected by reduced retirement pay?

My opinion: negatively...

There is one good study on just this question (there are lots of good studies on retirement reform...again this is nothing new and has been going on since 1948). You would be surprised at the opinions of your fellow .mil members.

http://www.csbaonline.org/publications/2012/07/rebalancing-military-compensation-an-evidence-based-approach/

● Service members of all ranks place a high value on basic pay, especially those at the lower end of the pay scale. The study reveals that a dollar spent increasing basic pay for junior enlisted has more than six times the impact than a dollar spent increasing basic pay for senior officers.

● Service members at all stages of their career do not value free TRICARE for Life commensurate with what it costs DoD to provide.

● Service members of all ranks, ages, and years of service prefer maintaining the 20 years of service requirement to earn a retirement rather than lowering it to 15 years.

● More than 80 percent of service members in each age group would be willing to have the retirement collection age raised to 50 in exchange for a 1 percent increase in basic pay.

● The military exchanges are valued as much or more than they cost to provide by a majority of service members at all ranks.

● Of all the additional services and in-kind benefits examined in the study, service members of all ranks place the highest value on being able to choose their duty station and length of tour. Moreover, officers and senior enlisted with dependents tend to value this benefit more than their peers without dependents.

[Fuzz]

There is one good study on just this question (there are lots of good studies on retirement reform...again this is nothing new and has been going on since 1948). You would be surprised at the opinions of your fellow .mil members.

http://www.csbaonline.org/publications/2012/07/rebalancing-military-compensation-an-evidence-based-approach/

Nothing surprising given our current fiscal climate (as a government and population). The average joe has demonstrated that the "here and now" is more important than the future by the way most people spend money or vote others to spend money (especially money neither they nor the government has); in addition fail to save or prepare for the future/retirement. Unfortunately the military is not immune from this line of thinking either. Also most members of the military don't have the benefit of seeing what those long term programs actually mean further down the road, growing up with Tricare from my parents was a huge financial benefit for them especially with kids, as well as them pulling in a pension while working full time. Unfortunately most young people's only concern (military or civilian) when it comes to finances deals with balancing partying with bills so they can eat for all 31 days of the month.

[Ram]

Surely there are many moving parts here, but I think we can all agree on two things:

1. If Congress wants to change military retirement, they need to lead from the FRONT and make SWEEPING changes to their OWN pay/retirement system first.

2. Number 1 will never happen.

[Fifty-six & Two]

Lower COLA increases.

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Yup. This is the only thing I could find in summaries about military retirement being targeted.

Annual adjustment of retired pay and retainer pay amounts for retired members of theArmed Forces under age 62

This provision modifies the annual cost-of-living adjustment for working-age military retirees by making the adjustments equal to inflation minus one percent. This change would be gradually phased in, with no change for the current year, a 0.25 percent decrease in December 2014, and a 0.5 percent decrease in December 2015. This would not affect service members who retired because of disability or injury. Service members would never see a reduction in benefits from one year to the next

Edited December 11, 2013 by Fifty-six & Two

[ThreeHoler]

Not a stats or math major, so I may have done this wrong.

This chart shows O-5 retirement under the current system as compared to REDUX (which no one should ever take) and the proposed COLA changes. I pushed retirement out to 2016 to show the overall effect of COLA = CPI - 1. Total retired pay (assuming living to 79 years) is reduced by roughly $128,000.

Edit: corrected chart based on updated information. CPI - 1% from retirement to 61. Adjusted to full "original" retirement at 62 and CPI from there.

Edited December 12, 2013 by ThreeHoler

[Champ Kind]

They will do as much tinkering as they can without actually "changing" retirement.

To all the new guys reading: if you are just planning on using your mil pension as your retirement, you're wrong. Start maxing out a Roth IRA and/or your TSP *yesterday*!

[mcbush]

To all the new guys reading: if you are just planning on using your mil pension as your retirement, you're wrong. Start maxing out a Roth IRA and/or your TSP *yesterday*!

Already done, but guys aren't stopping there. I have nine years left on my UPT ADSC as of this week. Know what the all the new copilots are talking about around the office? The ATP written exam.

[Pajaro]

ThreeHoler, your chart is pretty close, but it the new plan calls for the COLA to be reduced for retirees only until age 62. After that the COLA goes back to the full rate. My math shows that a Lt Col who retires in 2018 with 20 years service (me, for example) will lose $372000 in lifetime pension payments by age 85 with the new system. I've already written my congressman to urge voting this down because it is a huge amount of money to wring out of retirees.

[ThreeHoler]

Yes, COLA goes back to full rate. My numbers also assume a 1% pay raise per year on AD for the next three years (as opposed to the mandated ~1.8%) and a 3% CPI (based on the average CPI for the last 100 years).

Edit: corrected chart based on better description of the cut. ~$128K reduction from retirement to age 62.

Edited December 12, 2013 by ThreeHoler

[Karl Hungus]

Already done, but guys aren't stopping there. I have nine years left on my UPT ADSC as of this week. Know what the all the new copilots are talking about around the office? The ATP written exam.

Careful, Liquid will be around any minute now to give you a no-notice ground eval.

[ThreeHoler]

Great news, everyone!

If you stay in to 24 years as an O-5, you could retire under the new changes with the same (well, $108K better) total retirement income that an O-5 with 20 years can retire under the existing rules.

[Champ Kind]

LOL

[Pajaro]

If you like your military retirement plan, you can keep your military retirement plan. Oh, wait....

[Champ Kind]

If you like your military retirement plan, you can keep your military retirement plan. Oh, wait....

"...you just have to serve longer..."

[Fuzz]

If you like your military retirement plan, you can keep your military retirement plan. Oh, wait....

The duffel blog does it again:

http://www.duffelblog.com/2013/12/obama-military-cuts-like-job-can-keep/

[matmacwc]

Surely there are many moving parts here, but I think we can all agree on two things:

1. If Congress wants to change military retirement, they need to lead from the FRONT and make SWEEPING changes to their OWN pay/retirement system first.

2. Number 1 will never happen.

You had the stupid beer tonight. Obamacare doesn't really effect congress, why do you think retirement will be any different?

Disclaimer: I know they might fall under O-Care, but they have a 70% something discount......F them.

[Pajaro]

Yes, COLA goes back to full rate. However, since each new year's pay is last year's pay adjusted by the COLA, the years from 62 to death will track at CPI but never catch up to the current plan as there is no one-time adjustment at 62 like the REDUX plan. My numbers also assume a 1% pay raise per year on AD for the next three years (as opposed to the mandated ~1.8%) and a 3% CPI (based on the average CPI for the last 100 years).

It looks like there is a catch up at age 62, so although a kick in the balls, it´s not as bad as it could be. Anyway, this plan simply makes my blood boil. Here´s the text from the bill:

“(D) REVISED ADJUSTMENT UPON REACHING AGE 62.—When a member or former member whose retired pay has been subject to adjustment under this paragraph becomes 62 years of age, the Secretary of Defense shall recompute the retired pay of the member or former member, to be effective on the date of the next adjustment of retired pay under this subsection, so as to be the amount equal to the amount of retired pay to which the member or former member would be entitled on that date if increases in the retired pay of the member or former member had been computed as provided in paragraph (2) or as specified in section 1410 of this title, as applicable, rather than this paragraph.

The entire bill is at: http://docs.house.gov/billsthisweek/20131209/AMNT-113-HJRes59sa-1R.xml#toc-H8C039B43CF3F48C0A8BF11CD9720FF81

For reference, here´s paragraph (2) from Title 10, section 1401 (this is the paragraph (2) referenced in the amendment in the proposed bill)

(2) Percentage increase.— Except as otherwise provided in this subsection, the Secretary shall increase the retired pay of each member and former member by the percent (adjusted to the nearest one-tenth of 1 percent) by which—

(A) the price index for the base quarter of that year, exceeds

(B) the base index. .

I also want to note that this has very little effect on 3 and 4 star generals who retire very close to age 62 and won´t receive many years of the reduced COLA penalty. It punishes only the cogs in the machine.

edited for clarity

Edited December 12, 2013 by Pajaro

[NotADude]

If I didn't have zero faith in AFPC's ability to make long-range decisions, I would almost think this was timed to hit the news right when they were announcing new FY14 Force Management programs. Raise your hand if you want out now!

[ThreeHoler]

Made some edits based on additional information stating that the COLA would return to "annual pay that the member would have if they were under the current plan at 62" and then track CPI until death. Roughly $128K reduction from retirement to 62 years.

[Homestar]

Can someone explain this to me like I'm 5 years old?