The current military pension system, in which you get a generous pension after 20 years of service but have no retirement plan if you serve 19 years, could use an overhaul. That doesn't mean that dumping the military into the kind of privatized, vulnerable to stock market crashes, 401(k) system that has so many Americans headed for poverty-stricken retirement is a good idea, but it's what the House Armed Services Committee
is considering. Defense Secretary Ashton Carter has also praised the idea.
Last month, Military Times reported that:
The plan would create 401(k)-style investment accounts for all troops and the government would offer up to 6 percent of basic pay for troops who contribute their own out-of-pocket money. Troops would own that investment account regardless of when they leave the military.
The commission's proposal would also give troops who reach 12 years of service a lump-sum retention bonus in exchange for a new four-year service commitment. The amount would likely vary by service and career field.
Carter did not mention another central — and more controversial — component of the proposal, which would shrink the size of the current pension by 20 percent.
Finding a way to get some retirement benefits to the
83 percent of enlisted personnel who do not stay in the military for 20 years is a good idea. But we know from experience that low-paid workers have trouble putting money in 401(k) accounts, and in this plan that would be required to get matching funds. And having your retirement at the mercy of the stock market is a risky prospect, as many Americans found out in 2008. Let's also be clear that, while this is being sold as a benefit to people in the military, there's a big upside for the government, which would
save up to $4.7 billion per year. Wouldn't it be nice if the powers that be were talking about expanding retirement benefits to more people in a way that didn't also involve cuts?
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