Military still looking at switching to 401K for retirement

[CosmicCowboy]

http://www.cbsnews.com/stories/2011/...20092652.shtml

(CBS News) WASHINGTON - The military retirement system has long been considered untouchable - along with Social Security and Medicare. But in these days of soaring deficits, it seems everything is a potential target for budget cutters. A Pentagon-sponsored study says military pensions are no longer untouchable - they're unaffordable.
CBS News investigative correspondent Sharyl Attkisson reports high-level, closely-held meetings are taking place at the Pentagon regarding a radical proposal to overhaul retirement for the nation's 1.4 million service members - a bedrock guarantee of military service.

The proposal comes from an influential panel of military advisors called the Defense Business Board. Their plan, laid out in a 24-page presentation "Modernizing the Military Retirement System," would eliminate the familiar system under which anyone who serves 20 years is eligible for retirement at half their salary. Instead, they'd get a 401k-style plan with government contributions.

They'd have to wait until normal retirement age. It would save $250 billion dollars over 20 years.

Douglas Holtz-Eakin, former director of the Congressional Budget Office says it's very important that the military attack its retirement issues. "We're talking about an underfunding that starts to look like hundreds of billions of dollars in the next 20 years. And if you want to maintain the core mission which is to defend the nation and have the strategic capabilities we need, we can't have all their money tied up in retirement programs."

Advocates say the new system would not only save money -- but would also be fairer. It would give benefits to those who serve less than 20 years. Right now, they walk away with nothing. And it would give more money to those in combat or high risk situations.

The proposal leaves a lot of blanks to be filled in, including whether to exempt current service members so their plans won't change.

CBS News spoke to some active duty troops who agreed costs must be cut - but worry the number of experienced soldiers will dwindle with no incentive to stay enlisted for 20 years.

The proposal is in early stages and would require Congressional approval. But it's clear that military retirement is no longer untouchable. A Pentagon spokesman said the military retirement system "is a fair subject of review" but no changes will be made "without careful consideration."

[JoeChalupa]

That 20 in and out with full benefits is a real lure to many who join. I knew many who put in 20 then got govt jobs and are now pulling in a comfortable living. I guess nothing is off the table these days.

[coyotes_geek]

Like pretty much every other defined benefit pension program in America, we're learning the hard way that a lifetime of paychecks for only 20 years of work simply isn't a model that can be sustained.

[Wild Cobra]

What a joke.

Can someone tell me any significant differences between the TSP that the military can contribute to already vs. a 401k?

That aside, I think it's time for all employer pension plans to go away and be grandfathered. I agree, they are too expensive. Maybe they can get a sweetheart deal like a 100% match for the first 10%.

[ElNono]

There's not going to be support for this. This is not a desk job (for the most part), and I dispute this wasn't sustainable when it was enacted. Perhaps it just needs to be scaled back.