No more retirement after 20 Years? Proposed new US Military retirement program.


Lab Animal
Aug 25, 2007
Apparently this is coming straight from the Pentagon. After reading through the article I wondered what the good members of this board thought of the proposal and whether they agree or disagree that the current system is unfair. That kind of struck me as odd, but I could at least see the point that was trying to be made by that statement.

Does the current TSP not work strictly like a 401k, if you leave before 20 years time in service are there any penalties regarding that account?

Links to the two articles: (quoted below) (this article is a lot more in-depth)

July 26, 2011
Stars and Stripes

A sweeping new plan to overhaul the Pentagon’s retirement system would give some benefits to all troops and phase out the 20-year cliff vesting system that has defined military careers for generations, the Military Times newspapers reported.
The plan calls for a corporate-style benefits program that would contribute money to troops’ retirement savings account rather than the promise of a future monthly pension, according to a new proposal from an influential Pentagon advisory board.
The move would save the Pentagon money -- at a time when it's being asked to cut at least $400 billion -- and benefit troops who leave with less than 20 years of service.


The yearly contributions might amount to about 16.5 percent of a member’s annual pay and would be deposited into a mandatory version of the Thrift Savings Plan, the military’s existing 401(k)-style account that now does not include government matching contributions, according to the Times.
Proponents said the plan would allow more flexibility for servicemembers, who could decide how they want to invest their retirement savings, and for the military, which would be allowed to offer higher contributions to troops who deploy frequently or take hardship assignments.
The Military Times has more on the proposed overhaul, including a summary of how servicemembers would be affected, depending on their length of service.
I would say the current system is plenty fair. However a revised plan would help those who do not do 20. What happens though when they start cutting? It makes it a lot easier to cut in the future.
I think anyone who serves 20+ years in the US Military is owed some form of retirement. However, I do think that some of the people who serve 10-15 years and then leave for personal, family or financial reasons should be compensated as well. Why is it that a congressman can serve one term and receive retirement for life, where service members have to serve 20 years to get the tinny retirement they do?
Might not be a bad idea.
Easier to cut Officer Promotions as folks would still get a retirement.
One bad side effect; really great guys will have fewer incentives for staying in. You'll see a lot of guys/gals get pissed off and drop papers.
This will be interesting to watch.
NZ had a similar programme IIRC. Mac would know alot more about it than I.
NZ had a similar programme IIRC. Mac would know alot more about it than I.

We used to have a 20 year contract system with superannuation (you paid a set percentage every fortnight and the army matched it dollar for dollar) but that was done away with in 1999. We then went to a 6 year contract where you received a 50% payout at 6 years. Now you will receive 100% payout after 3 years service with a number of different scheme options.

Our super was/is a bit of a joke, the providers used it as a training ground for their newb investors who used to lose money damn near each year on it. Also there was a massive slush fund sitting there from people who left without doing their 20.

The other thing was education on it, as a young lad joining you were told "you will pay money into this, its compulsory" without really knowing how the hell it worked.
We changed from a pension to a super scheme in the early 90's, the blokes who stayed on the DFRTB pension are doing a lot better than the rest of us. At this stage I won't see my super until I reach retirement age (65), a bloke on DFRTB who completes his 20 years (minimum) is on a pension (I think it's about half of what he retired at, indexed).
I retired as a civillian from the Government under the old retirement system and had a TSP account. There are basically five levels of risk. The G fund is a Gov bond and pays almost nothing but is safe. The other funds have different degrees of risk and have paid upward of 15% over the years. You have a great deal of control over the investing and under certain circumstances you can borrow against your account. This would allow people to move about the job market without losing all their retirement contributions. I had an old guy talk me into the TSP when I was younger and it now makes a good retirement great with the monthly additional income I draw over and above my retirement. There is no reason a person starting out in the military and working for 30 years could easily end up a millionaire if they used their TSP properly and put in the maximum allowed by law. Slightly better than an E-7 with 30 years. These statistics are based on the next 30 years are similar to the last 30 and I am beginning to think that is a real stretch.