Recent News on Military Retirement Benefits

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Proposed changes to the military retirement system by the Pentagon were sent to Capitol Hill last Friday. These proposed changes – what some are calling a “blended system” – after months of silence by the Department of Defense. The changes to the military retirement system would cut guaranteed benefits for those who serve 20 years while boosting retention pay and adding a retirement savings plan to ensure most troops can leave with a benefit. One Pentagon spokesman said these military retirement changes would create a savings of $8.1 billion over 10 years for the Defense Department.

Military Times reported that “the Defense Department’s recommendations, approved by the top officers from each service, are likely to influence Congress as it works toward a final, single compromise version to send to President Obama.”

Not all in Favor of Military Retirement Changes

The discussion over changing military retirement benefits has been a long one. And as Hero Giveaways reported previously, not everyone – including veterans organizations, lawmakers and military veterans – is ready to make a change in military benefits.

Support for the changes to military retirement is mixed among military veterans and veterans organizations. Lawmakers in Washington, including veterans of the wars in Iraq and Afghanistan, are not all on board with changing the decades-old military retirement system.

The Pentagon says changes are desperately needed. Military officials say if military personnel costs – including pay, health care and retirement – are not brought under control, they will consume the entire defense budget by 2039.

Recommendations for Military Retirement Changes

The military’s recommendations (as reported by Military Times) include:

– Shrinking the size of the current pension by 20 percent

– Automatically creating TSP accounts for all troops and beginning government contributions equal to 1 percent of basic pay.

– Automatically setting troops’ voluntary personal contributions to the TSP at 3 percent of basic pay.

– Allowing troops to opt out of that 3 percent voluntary contribution of basic pay only after completing financial literacy training at their first duty station.

– Allowing the TSP to “vest” and be legally transferred to individual service members after two years of service.

– Beginning the government’s dollar-for-dollar match of individual troops’ out-of-pocket TSP contributions, up to 5 percent of basic pay, after individual troops complete four years of service.​

– Allowing the individual military services to offer “continuation pay” to boost retention in specific career fields for troops with between eight and 16 years of service.

– Allowing government contributions to TPS accounts to continue for the duration of service. (Initial proposals called for stopping those payments after 20 years of service.)

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