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Military Retirement Case Study

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1. The United States military retirement is very costly for tax payers in our current financial crisis and should be altered to reduce the cost on the American tax payer. Three solutions to reduce the cost of the military retirement are as follows; increase the required time in service to 25 years at 50% of the highest 5 years earnings, eliminate the pension and contribute only to the Thrift Savings Plan (TSP), and maintain the existing retirement plan and change the age to start collecting benefits to age 50.

2. The current military system is very costly to American tax payers. In fiscal year 2015 $56 billion was paid to approximately 2.3 million military retirees and survivors.1 The average active duty non-disability enlisted retiree is …show more content…
A possible solution to reduce the cost of the military retirement system is to increase the required time in service to 25 years at 50% of the highest 5 years earnings. Under the current retirement system a service member with 25 years would be entitled to 62.5% of their highest 36 months earnings.4 This will reduce the time and enlisted member is paid in the pension system by an average of 3 years and 1 year for officers. It will reduce the amount paid once benefits start by for both officers and enlisted. A second possible solution is to eliminate the military pension and only contribute to the TSP. Under the blended retirement going into effect in 2018 the military will contribute up 5% into a service members TSP.5 This would limit the governments contribution time. It would also be at a fraction of the cost to the American tax payer. A third option is to set age restrictions on when a retired service member can begin to collect benefits. Setting the age at 50 would reduce the amount of years the government has to pay a retired service member’s pension. For the enlisted force it would reduce the paid time by 8 years on average and for officers it would reduce the paid time by 5 years on …show more content…
Based on the options described above there is one option that is the best solution and should be implemented to reduce cost. Increasing the required service time to 25 years and transitioning the pension to 50% of the highest 5 years earnings should be the solution that is implemented. This solution would bring a healthy balance of reducing the financial impact on the government while still ensuring that service members are properly compensated for their dedication to the country. On average it would reduce an enlisted member’s pension by 5% and would reduce and officer’s pension by 10%. This would reduce the average officer’s pension by $906.27 per month which is $10,875.24 per year. An enlisted member’s pension would be reduced by $191.73 per month which is $2,300.76 per year. Increasing the pension from being based on 36 months highest earning to 5 years highest earnings will reduce the total amount owed to a service member. It would also keep the military’s senior leaders around for additional time giving more time to mentor and develop future leaders. This solution would help maintain a more experienced military and reduce the retirement cost for the American tax

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