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Silent Majority

September 26, 2011

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.

  1. September 26, 2011 10:28 am

    This is spot on. As a veteran of military service who left after my original four year commitment, it is impossible to financially reconcile paying people to do nothing – which is what giving someone a check for 50% of their salary for the rest of their lives is after they retire. Private sector companies like GM were mocked for doing this and the practice went the way of the dodo. Yet the government still provides these gold plated pensions to military retirees. Furthermore, military service is no longer the salaried “sacrifice” that it used to be even 15 years ago. Officers and enlisted are paid more than their private sector counterparts w/ less stress that their jobs might be cut. The American people love their military members, but the amount of funds to pay their benefits is egregiously high. It’s time to look at these entitlements and think of common sense ways to pare them back, and a 401(k)-style plan seems as fair as any. Let’s stop burdening future tax revenues w/ current expenses and let the miracle of compound interest work for us.

    • jimmysky77 permalink
      September 26, 2011 6:24 pm

      I appreciate you reading the piece and I’m glad you enjoyed it.

      However, phrases like “paying people to do nothing” and “gold-plated pensions” are emotionally loaded phrases and will probably not help foster a rational discussion on this issue.

  2. TJM permalink
    September 26, 2011 11:28 am

    Yes, the hypothetical LTC has an easy life and a generous pay package. The SSG gets paid substantially less and has a challenging lifestyle. But let’s also remember that the LTC has a much higher cost of living, due to his less frequent deployments, and he is in a higher tax bracket. The SSG incurs fewer living expenses due to his deployments. While deployed, he does not need to pay for his food, pay income taxes, or numerous other expenses that he incurs while living in garrison. He also receives tax-free bonuses. He is also spending less money when on training exercises.

    How does their disposable income compare?

    I was an intermediate between the two hypothetical characters. I was a junior officer who deployed four times in 8 years, for a total of 36 months. Most of those deployments were in patrol bases with no running water, no electricity, no days off, running continuous operations in areas where we were often poorly supplied and always undermanned. At home station, I was in the field for about half of the remaining time (6 CTC rotations, and more 2- or 3-week FTXs/gunnery densities than I can count). Of the other half of that home station period, I was usually pulling all-nighters at work and coming in to work on weekends – not because I was ordered to, but simply because there was so much work to do. You know who I never saw around the company CP when I was pulling those all-nighters or coming in weekends? NCOs and field grade officers.

    My pay was between that of the SSG and LTC. My time deployed was between theirs, with the intensity of those deployments more similar to the SSG than the LTC (air conditioning?). My home station work load was likely much higher than both. Amidst my time estimates above, you will not see any mention of a wife, children, or social activities. There were not enough hours in the day. I could ensure that my unit was prepared for its next gunnery density, FTX, CTC rotation, or deployment – or I could have a social life. Thus, I spent no money on such frivolities as dates, furniture, new clothes, dinner with friends, or hobbies.

    But here’s the other angle. My disposable income was likely higher than both the SSG and LTC. When I was discharged from the Army, I had $100K sitting in the bank and no debt of any kind. Why? Tax-free deployments, lower cost of living, and less time for leisure activities. The SSG may not have quite that much, but if he doesn’t have a fat bank account then it is not because of the Army not paying him enough. As for the LTC, he gets his fat pension. Good for him. I don’t envy him at all. When he was sitting in an air conditioned office, I was conducting raids, getting ambushed, and fighting in urban terrain. That’s why I – and most other 18-year-olds – joined the Infantry. We wanted to see the elephant. That’s what we got.

    Many of us could have pursued more lucrative civilian jobs, back when the economy was halfway decent. We didn’t. What you get out of your profession is more than just a paycheck, benefits, and pension. There is also satisfaction, fulfillment, and a sense of purpose. I got that. I bet the SSG gets it, too. The LTC probably doesn’t. I bet he’d trade his pile of cash for it.

    • jimmysky77 permalink
      September 26, 2011 5:48 pm

      I confess that I’m having a hard time following your argument. You start out by implying that the SSG gets enough in his active-duty paycheck that the Army shouldn’t have to worry about his retirement “When I was discharged, I had $100K sitting in the bank and no debt of any kind” This is because the Army has kindly removed any opportunity for the SSG to spend his active-duty pay (?) You close with the idea that the LTC would trade his retirement (almost $2 Million dollars) in order to have been able to go on raids with you.

      I don’t want you to take this as disparaging your career, deployments or dedication to saving, but I don’t think your experience is typical of the young enlisted personnel. I think that the military should demonstrate a longer term commitment to these people (even if they don’t serve for 20 years). Its also not *just* about what people want when they join the military (aka ‘see the elephant’), its also about what will benefit them long term (even if they don’t know it yet).

      This is what I believe and expanded retirement program would help reconcile.

  3. wjrue permalink
    September 26, 2011 12:17 pm

    Sky is right on here with his overall conclusion that the retirement system needs to be reformed. A one-size-fits-all approach, while easy and simple, is just not appropriate.

    The only thing I’d say is that the poster child for reform might be the O-5 going to work for Lockheed Martin or one of the other Beltway Bandits, but, as Sky notes, that’s not every retiree. It’s very easy to forget-especially living in DC-that there’s plenty of E-7s who go back to small town USA, teach PE, and coach high school football. Plenty of those E-7s might have led an active duty existence similar to the acquisition O-5 depicted in the post too.

    I think it’s important to consider the diversity of retirees because it means that regardless of the recommendations, a more tailored approach is necessary. Possibly two systems-one for officers and one for enlisted? Means based upon retirement, like social security ought to be?

    TJM’s sentiments above echo my own experience. I was in half as long and deployed a third of the time, but I got fulfillment out of leading Marines and working long hours. Retirement pay was nowhere on my really, really long list of reasons for joining and leaving the USMC.

    Great post and a worthy topic for discussion.

    • jimmysky77 permalink
      September 26, 2011 5:58 pm

      We kind of had this discussion the other day, but I agree. Clearly the LTC and SSG from the story are the far ends of the spectrum. The vast majority of folks, both officer and enlisted will fall in between these ends.

      Also to link back to Tim’s comment, there are lots of intangible benefits, ones that I received as well. I didn’t join the military for retirement benefits, nor was the lure of them enough to keep me in. That was a personal decision that I don’t have any ill will about. I should also be clear that I don’t begrudge those benefits to retirees or those on the cusp of retirement.

      The difference is when I look at the 10-year vets, the guys that came in around 9/11 and have clearly shouldered a huge load. I think that if they should receive a measure of long-term benefits, even if they decide that they cannot continue to serve.

  4. Andrea permalink
    September 26, 2011 3:11 pm

    This is an excellent post that is well overdue. It is apparent, with the economic crisis that we are experiencing domestically, that there are many social programs that will need to be changed because their costs are unsustainable in the face of growing debts. But I am not entirely sure that DBB proposal is necessarily the best or only option.

    Truth is, members of the military are provided compensation above their civilian counterparts because they are often asked to make sacrifices, face challenges, and endure hardships above and beyond their non-military counterparts. Military members and veterans cope with a whole set of issues that their civilians contemporaries will not ever have to confront (PTSD, TBI, amputations, family stress caused by multiple deployments, early-onset arthritis, etc) simply as a result of their military service. Therefore, I am not opposed to providing additional compensation for the challenges associated with their service careers. And although I say this as a veteran and a military spouse, I don’t think I am alone in this assertion. Civilians are grateful for the military and respect the fact that an all volunteer force is willing to bear the burden of serving locally and abroad to protect and defend national security.

    When considering the military retirement question, specifically, the DBB does not clearly reflect on the fact that a retirement plan, in the form of the TSP, is already currently offered to all active duty and reserve military members who wish to participate. The military retirement system that provides pension to those that separate after 20 or more years of service predates the TSP and was offered as a benefit to those who chose to engage in a career in the military regardless of whether or not they put money away for their future on their own. In other words, the system that the DBB is proposing now already exists and is augmented by a pension for those that choose to make the sacrifices associated with military service for 20 or more years. What the DBB wants to do is to take away the option to receive a pension after 20 years and make the TSP mandatory for all military members. My concern with this model is that they are supplanting a guaranteed compensation model with only a market based model that, in the current economic climate, is a really poor tradeoff.

    As for the newer system being more fair in that it attempts to quantify and compensate for differing degrees of sacrifice – this is a noble goal which I fully endorse. I agree with the need for greater equity in the system. I am concerned with how this will be implemented, however. For example, family separation pay is not always an automatic change in a service members pay. If the finance office does not have your record correct, these are things that a service member would have to rectify on their own. I am not sure how that would work with TSP. Regardless, there will still be inequities in the system. There will be people who do little work and get paid the same as those who work their tail off. I know my spouse gets paid the same as any other service member at his rank and he often works 10+ hours a day in a challenging and hazardous career field. But I know my husband also believes deeply in his service to our nation and the job he is tasked to do, fair or not. He has chosen to make the military a life long career and is deeply disappointed in the possibility that the option of retiring with a military pension, as many other service members who served 20+ years before him, may be going away because there are those who believe it is too costly for this nation to bear.

    • jimmysky77 permalink
      September 26, 2011 6:18 pm

      I’m going to start at the bottom, since that is the place where you agreed with me 🙂

      Supporting my position that it is possible to improve the fairness of the retirement system is going to require an additional tracking mechanism. Any new system is going to have challenges to implement and I will fully admit that going from a single-variable retirement system (Time in Service) to a multi-variable will probably be…uhm…challenging for the DoD to accomplish.

      HOWEVER, as you point out there is an existing TSP system which could serve as a basic framework and starting point for a new retirement system. I also think that if this system was adopted the information should be incorporated into LES’s and should be as transparent as possible to members and their supervisors, and their spouses.

      This is where we part ways. While I will fully admit that it can be difficult to emotionally separate the retirement system from the disability system, especially with the number of injuries seen over the last decade, that was my goal in this piece. I don’t want to gloss over or minimize the very, very real impact of this issues, but I think it is important to note, repeatedly, that these don’t actually impact retirement. They are dealt with by the disability system that is administered by the VA. Anytime disability and retirement are lumped together it makes it very difficult to have a rational discussion about retirement benefits.

      • Andrea permalink
        September 27, 2011 11:30 am

        Thanks so much for your reply. I respect your opinion and understand how much you truly care about this and other military and veterans issues. I agree with your assertion that it is challenging to separate of retirement from the real and relevant challenges that meet retired vets (emotional, physical and otherwise). So, stepping back from that aspect of the argument, and approaching this logically – I realize that the system will change. But the question is, how to make that change fairly and wisely. TSP already exists as an option for all service members so people need not go into military service and exit with nothing set aside for their future. But what to do with the military retirement system, which is unsustainable? Can it be shifted to incrementally reward differing terms of service? Can we quantify the nature of someone’s service to retain this benefit for those whose service careers are more demanding? Perhaps we can shift the age of retirement? Can we scale back the level of benefit we offer retirees? Is removing the system entirely the only option?

        The reason I ask these questions is that the military retirement is a unique benefit that this nation has heretofore offered in gratitude for 20 or more years years of service. It is no small achievement for an individual and their family to invest 20 or more years of one’s life in military service. There are some serving today who joined with the understanding that they would be met at the end of the careers with the option to retire. These people are now considering getting out and pursuing other options. Would it be possible to offer those people the option to be grandfathered in or maybe still provide some level of benefit to keep them within the ranks?

        Also, if and when we change the system we will almost surely guarantee that retirees will most likely need to find employment to fill the gaps until they reach retirement age. How will this affect the already tight job market? How will our government benefit when military members leave to work for contractors, which cost our government more overall to get the same job done ( These are questions we should answer before we decide that the proposal offered by DBB is the best option, otherwise we risk shifting one problem to another in the name of progress.

  5. September 26, 2011 6:49 pm

    When peope compare examples of military retirees getting lifetime pensions starting at age 40 to civil servants or other employees, they never seem to mention that had the servicemember stayed on active duty until age 50 they’d be forced out at 30 years of service. Not really the best time to try and start a new career, especially in economic times such as these.

    Any new retirement system that is looking at fairness needs to address how to fairly handle the situation of those forced out by an arbitrary retirement date yet being unable to immediately draw a pension.

    • jimmysky77 permalink
      September 26, 2011 6:59 pm

      Fair point, but in my experience, the vast majority of people that retire from the military very quickly move on to other careers, most of them equitable to what they were making in the military.

      I do agree that in instances where this doesn’t happen there would probably be a benefit to a safety-net of some kind. However, it is important to note that the current TSP system does allow for members to take loans against that amount or pay-out and amount to assist with expenses.

  6. FDChief permalink
    September 27, 2011 2:09 am

    Just a couple of thoughts.

    1. The current system was not designed for an imperial/expeditionary/constabulary force. Which is what we have now. Unless we decide to go full Roman, we will not have what we have now for much longer (gee, and such a shame when it’s worked out so WELL…). Redesigning the current pension system based on a decade of expeditionary war unlike any we have seen in the nation’s history, in the middle of a depression unlike any we’ve seen since 1941 seems…somewhat rash.

    2. I would agree that some form of additional retirement credit is warranted for combat time. But how do you calculate that? Does the FOBbit whose deployments are spent within the wire get the same overseas credit as the line dog? Who decides?

    3. Any change in a pension system that includes the phrase “we’re going to offer you this terrific 401K opportunity” needs to be immediately taken down to the basement dayroom and administered some high-level wall-to-wall counseling. There is no such thing as a stocks-and-bonds lottery system that is preferable to a defined-benefit pension unless you are work as a trader for Goldman-Sachs. Period.

    • jimmysky77 permalink
      September 27, 2011 10:10 am

      1) Concur. System was not designed for the current utilization of the military.

      2) I would not necessarily frame it as “additional retirement credit” which implies in addition to the current system, but I think we agree on the basic goal of making the existing system more fair. Clearly this would mean creating a new system and that will be a challenge. The current system does have the advantage of being very simple (if not very fair).

      3) Lots of people I have discussed this with have addressed concerns with the uncertainty inherent in a 401k style plan (though none as creatively as you). I’m actually not sold one way or the other on this. While I understand the advantages of this with regards to portability and transition to civilian life and commercial banking systems, I think the volatility that is inherent in a stock plan is a potential weakness in the DBB proposal.

  7. K2isnothome permalink
    September 27, 2011 8:34 am

    It’s important to have this conversation. We, collectively, have become too expensive for the nation. We need to get over our infatuation with ourselves and look at the situation dispassionately. I’m a retired officer who works, mostly, with retired officers for defense contractors. Honestly, it’s the life of Reilly. Really cheap health care, benefits on base, two taxpayer funded salaries and aside from our kid’s college expenses not too many huge expenses. As I look at my peers in defense industries I notice that retired lieutenant colonels, colonels, and general form the backbone of these companies. These also serve on the boards of most military advocacy groups, agitating for even greater benefits. Admittedly it’s only my perspective, but we [retired field grade officers] lived pretty good lives while in service and didn’t suffer as many indignities as the soldiers we led. I believe it’s time to address the inequities of the retirement system including healthcare participation [completely outside VA disability issues].
    One thing I believe must be part of the reformed system is the elimination of the all or nothing pension motivation. It’s just not fair to separate soldiers short of twenty with nothing. Sometimes fate has it that a soldier decides late in his service that this isn’t what he wants to spend his life doing or priorities of his family dictate an early end to his career. Sadly there is also a significant number of people who are just hanging on the last 8-10 years just for the lucrative retirement, underperforming and holding a billet needed my a more motivated and productive member. Wouldn’t it be nice if there was an incentive for these people to move along early to their new careers in “civilia?”

    • jimmysky77 permalink
      September 27, 2011 10:02 am

      Thank you. First for your 20+ years of service and secondly for your desire to step back and dispassionately examine the issue.

    • September 27, 2011 10:59 am

      A little off topic, but relevant as far as holding out for the pension/etc. Shouldn’t the service involuntarily separate the guy/girl who is hanging on for 8-10 years? That’s 1/2 a military career! That’s an awfully long time to be a ROD (retired on duty) in any environment!

      I am not sure what the overall solution is. Maybe reeling in some of the medical benefits and such. Seeing as this system was designed when lifespans were much shorter, and medical science was much less advanced. People just didn’t live 30 or 40 years beyond the 20 year retirement mark.

      Correct me if I am wrong, but can’t service members contribute to a 401k type plan now?

      • jimmysky77 permalink
        September 27, 2011 12:03 pm

        Yes, there is a 401k style plan called the Thrift Savings Plan (TSP) that is available to Active Duty and DoD civilians. However, as I recall, this system does not do match employee contributions for Active-Duty military, only for civilian personnel.

        I have been off active duty for a few years, so my info could be outdated, or I could just be wrong, but that is how i remember it.

  8. September 27, 2011 9:26 am

    Excellent piece. Provides a good base to start a short discussion on how to properly compensate those who sacrificed more…MOS 1110 Bravo, Charlie, and Delta to name a few.May I reprint this? Thanks.
    Vietnam Vet 68-69

  9. SRY permalink
    September 29, 2011 11:24 am

    Excellent post. I think the way you illustrated your point with the SSgt and LTC was well done and provides a key justification for reforming the system. It is the type of argument that will resonate within the military for it is fair and focuses on actual service. Ironically, this morning USA Today has an article on the same topic and the best example they could find justifying military pensions was an Air Force nurse who had to move a number of times and make a couple short deployments.

    I think, however, the larger issue is the increasing divide between our military members and our civilian populace. The all-volunteer nature of the service and the structure of the retirement system exacerbate this problem. Rather than having large numbers of people serve only a few years (bringing their understanding of both the goods and the others of the military back into society), we have fewer people serving for longer. While the current system is good for shaping a small elite force, it doesn’t foster strong bonds between the military and the society that is supposed to oversee it. Too few members of congress have any military service, and most are unwilling to stand up to the Generals and Admirals in any meaningful way, other than trying to protect programs in their districts. The path we are on did not work well for Rome and perhaps reforming the retirement system can start to push the services in a better direction for the long term.


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