Congress has rolled out the biggest changes in the Military Retirement System since World War II and it will affect more than 1 million service members. Beginning in 2018, those members affected will need to make a very important financial decision on how their retirement program will work for them.
Members of the US Army, Marines, Navy, Air Force and Coast Guard with fewer than 12 years of service will have to choose whether to stay on an all-or-nothing path toward a traditional pension after 20 years of service or to opt for a new “blended” retirement system that Congress approved as part of the 2016 National Defense Authorization Act.
The new system combines a 401(k)-style plan with a continuation bonus after 12 years of service and a traditional pension (albeit less generous than before) after 20 years. The upshot: Those who don’t reach the 20-year milestone required to qualify for a pension — which amounts to more than 80 percent of those who serve — will no longer leave with nothing saved for retirement.
AdvertisementUnder the new plan, those who do stay for 20 or more years will see a 20 percent cut in their pension payouts, though the difference should be offset in part by the contributions to the plan’s 401(k)-style component. The changes, which amount to a test case for entitlement reform in the civilian world, are expected to save taxpayers billions and also boost recruitment efforts for millennials, who tend to change jobs more often but are reluctant about putting off saving for retirement.
The only issue not discussed is whether or not Congress will be allowed to “borrow” money from the retirement accounts and then bleed the system dry much like they did to Social Security. (Okay that was sarcasm….but not really)
To read the entire article from CBS News, click here:
Photo courtesy DOD