An interesting but almost entirely flawed debate over military retirement reform has played out over the last few months since the Defense Business Board (DBB) published their initial recommendations [.pdf link] on 21 July 2011. While the final DBB recommendations have not yet been published, one key aspects of their proposal is that instead of retirement being a purely binary system, military members would be vested in a 401k style program very early in their career (3-5 years). This would create an individual account for each service member that they would grow for the duration of their service time and then take with them upon departure regardless of whether that occurs at 10, 15 or 25 years. This system would also make contribution adjustments based on a variety of factors such as “combat zones, high risk positions, and hardship tours.”
For those less familiar with the subject, military retirement works like this: After 20 years of service, you can retire and receive 50% of your base pay for the rest of your life. Keep in mind most military members retire around 40 years old and receive benefits for the next ~40 years, roughly twice the length of their service.
This retirement ‘cliff” has very predictable effects on the retention curve. There is substantial turnover in the junior enlisted and junior officer ranks as people join the military, fulfill one, two and occasionally three terms of varying lengths, and then move on to ventures outside the military. Once members cross the 10-year ‘halfway’ mark separations drop off substantially. The salient fact here is that 83% of veterans do not receive any retirement benefits and this percentage is almost entirely drawn from the junior ranks – the demographic that has done the vast majority of the fighting and dying over the last decade.
Nevertheless, prominent critiques of DBB’s proposed changes have come from Robert Goldich (posted by Tom Ricks over at Best Defense), who implies that reducing military retirement benefits amounts to class warfare against enlisted personnel:
…[reason to be against retirement reform] that has not been talked about much is the way in which social class, which tends to be verboten in these here egalitarian, straight-talkin’, straight-shootin’ United States, is rearing its ugly head in all of this talk about retirement “reform.” It’s simply this: these retirement cuts are designed by study groups that are officer-centric, for audiences and relevant players who are primarily officers, and who speak almost always to officer retention.
…and Andrew Bacevich, whose thesis seems to be that any change to the military retirement system instantly reduces soldiers to Safeway employees:
Whether out of malice or ignorance, the DBB would junk all that. By focusing on economy and flexibility, its proposed overhaul would commodify military service. The effect would be to transform profession into trade, reducing long-serving officers and noncommissioned officers to the status of employees, valued as long as they are needed, expendable when they are not, forgotten the day they leave — just like the workers at any GM plant or your local Safeway.
I would highly encourage you to read these pieces, but do so with a critical eye and be sure to tally the number of “scare quotes” in each one. [SPOILER: There are many. Also, keep in mind Andrew Bacevich gets a check every month for the rest of his life under the current system.]
What Bacevich and Goldich both gloss over, and what the DBB attempts to address, is the unfairness of the current military retirement system. While it is perfectly reasonable that a person’s retirement benefits will increase along with their length of service, what is unforgiveable is that this is the only discriminator the military currently uses. This means that unless you complete 20 years of service you receive absolutely nothing. Items like the number of times you deploy and your military occupational specialty (MOS) are completely irrelevant. It is also important to note that disability benefits are paid to a member as compensation for injuries received over the course of their military career and are separate from the retirement system discussed here.
On that note, here is a fictional, but completely plausible comparison between two military members:
There is USAF Lieutenant Colonel who specializes in acquisition. Throughout his career, he has worked 40 hours a week in air conditioned offices in places like Boston, Los Angeles, and Washington DC. He has deployed twice in his career – Kuwait (‘97) and Qatar (’03) – for a total of 12 months. While deployed, he continued to work 40 hours a week in an air conditioned office. During his 20 years of military service he has completed his Masters Degree and is almost done with his PhD. He is happily married and has 2 daughters.
This LtCol is 42 years old and gets paid $97,000 a year [base pay]. Next year he is accepting a job with Lockheed Martin for $130,000 a year. He will also receive retirement pay from the military in the amount of $48,000 a year for the rest of his life.
He will live to be 82 years old. In total, this Lieutenant Colonel will receive over $1,920,000.00 in retirement.
There is an Army Staff Sergeant who has spent his entire 10-year career in the infantry. When not deployed, his schedule is also around 40 hours a week, but it is spent largely in the field training his soldiers for their next deployment. He has been stationed at Ft. Riley KS, Ft. Hood TX and Ft. Benning GA. He has deployed 5 times in the last ten years, Afghanistan (2001, 2010) and Iraq (2003, 2005, 2007). In total he has been overseas for 66 months (5.5 years). During these deployments he worked a hellish schedule (80+ hrs/week) and witnessed firsthand the death of several members of his unit; he considers himself lucky to have never been injured himself. While the Sergeant has completed all of his required military training, he has not been able to make any progress towards completing college. He is divorced from his first wife and due to his deployment schedule, she has primary custody so he rarely sees his oldest son. His second wife is pregnant and is struggling to deal with an impending 6th deployment. She has repeatedly stated that she can’t deal with the thought of him dying and having to raise their daughter alone. The Sergeant is at the ten year mark and decides that his personal relationships cannot survive another decade of military service.
The Sergeant is 30 years old and gets paid $38,304 a year [base pay]. Next year, he will be working as a low-level manager at a department store making $40,000. This Sergeant will receive absolutely no retirement benefits from the military.
This individual has simply not sacrificed enough to receive any retirement benefits.
Under the plan proposed by the DBB, the benefits you receive at the end of your military career would correspond much more closely to the level of sacrifice exhibited during your military career. Both the LtCol and the Sergeant would leave the military with a 401k that they could take as a lump sum, annuity, or traditional payout upon reaching retirement age. Additionally, in the event of their death, that account could be transferred to their survivors.
Both Goldich and Bacevich focus almost entirely on the way benefits for future retirees would be reduced (current retirees are not affected) and how these changes would lead to some military members being released from service prior to serving 20 years. Since support for military personnel and loss aversion are both powerful forces, these essays resonate emotionally, but the underlying assumption in both pieces is that the current system we have is ideal, utterly failing to account for the injustices built into the present system. While there are clearly several issues that need to be considered prior to substantially altering the military retirement system, it is apparent that the current system of retirement payout does not sufficiently account for the huge disparity in military service. The DBB proposal would go a long way towards reconciling that.