OT. Military retirement

[Dean Hoffman]

In the off chance you haven't heard, the retirement system is changing.

or

[Peter]

For the military member, the loss in retirement pension is actually greater than the 10% cut from 50% to 40% after 20 years of service. Military pensions benefit from cost of living adjustments similar to those applied to social security benefits. The average annual rate of inflation in the U.S. from 1929 - 2016, based on consumer price index calculations, was 13.9%. However, according to Vanguard, the average annual return from a balanced portfolio of 50% stocks and 50% bonds (generally regarded as a safe and prudent choice for long term investment) for the same time frame was only 8.3%. Therefore, over decades, an inflation corrected pension is almost certain to provide more income than a well configured investment portfolio.

Any argument that the newly retired member will make up the lost 10% increment in pension with their investment in a retirement savings plan is almost certainly not valid. Any attempt to configure an investment portfolio to yield an annual rate of almost 14% would require investment in extremely high risk issues that almost certainly would yield less than the safer, more traditional investment portfolio. Even if the member could predict the future and invest in a portfolio that was guaranteed to annually, consistently gain in value by the same dollar value as what was lost with the reduced pension, there are likely to be either (or both) purchase and sales commissions to pay, reducing the net value of that investment and widening the discrepancy between what the private investment portfolio yields and what the member would have received under the "old" retirement calculation.

In short, this is a loss both for the services and for military members who plan to serve 20+ years. By financially discouraging long term military careers, the services will endure a retention problem for their mid-grade enlisted and officer personnel. They will have to compensate for that loss by accelerating the promotion of members with less time and experience in service to fill the senior billets.

[Frank]

Corporations doing similar things except for pensions which they are dropping. My former company gives no pension or health care for new hires after they leave for any reason, change jobs or retire at any age. Money goes up front into 401k where you have to save for yourself. Changes started 15-20 years ago when there were insufficient funds in retirement plans. Similar to Social Security companies were raiding these funds to support the business and a big drop in the stock market was devastating to the company. Recall GM going bankrupt and would have if not for Uncle Sugar.

[Ed Pawlowski]

What is the turnover and long term retirement? How does it compare with the census of the past? I'm going back to the days of the draft when you had fresh bodies coming and they leaving after two years. They have been replaced, I thin, by more career oriented recruits that become more costly after a number of years and it strains the budget.

[Retirednoguilt]

I don't have any figures available for turnover and/or retirement rates or how they compare at present to any time in the past. Those rates have always been affected by complex factors including (a) the true rate of unemployment (not the phony baloney number that refuses to account for both the drastically underemployed and those who finally quit looking for work after years of fruitless searching for new jobs), (b) whether we are at peace or at war, (c) the benefit package, both while on active duty and after retirement, and (d) situational fluctuations in staffing levels, e.g., did Congress recently expand or contract the authorized number on active duty and is there a current excess or a deficit of personnel, or are new classes of weapons coming on-line that either require greater staffing or allow fewer personnel to do the work previously requiring more personnel.

I was on active duty while there still was a draft. In fact, at that time, I was a draftee. Morale stank. By the time we completed initial orientation and training, adjusted to the military culture and learned our assignment, it was time to begin processing out and our minds were preoccupied with civilian job search, etc. We were not well respected by the lifers and with good cause. Most of us had count-down calendars that started with the number 730 (days until we could get out). I saw no effort to recruit us to extend service much less consider making it a full career. Out of the 24 months we were paid, we provided only about

15 months of effective service; not a very efficient return on the government's expenditure. For very personal reasons, I later returned voluntarily to active duty service and made a full career of it, and receive a pension calculated on 30 years of active service. As a lifer, I had many assignments, but most were in the same geographic area and I usually was trained for a subsequent position by spending part time there, as a collateral duty. Although I retired as an 0-6, I believe the taxpayers got their money's worth for what I cost.

My personal observation does not support your implication that the additional pay received for longevity and rank by more senior personnel is not a good value for the government. My observation is that because it is an up or out system (get promoted or get kicked out), most senior people have the corporate knowledge, experience and capabilities needed to meet the responsibilities that are part and parcel of those senior billets. When someone is dumped by accelerated promotion into an assignment that is beyond them, they usually create at least extra work, possibly wasted resources, and at worst, risk the loss of personnel and equipment. The system isn't perfect. However, it's a lot better without the constant chaos and churning caused by a perpetual influx and outflow of 2 year recruits. Just my $0.02.

[Ed Pawlowski]

What implication? I never mentioned anything about value. I did question if the service has a higher percentage of long term people eligible for pension as compared to the draft years era. If it was 20% and is now 50% more money would be paid in pensions.

Quite the contrary to your conclusion, an experienced soldier is better than a bunch of new draftees just putting in time. A better value.

OTOH, I think a draft would be a great opportunity to straighten out some of the young kids lost in life and hanging on the corner. The army is not a social experiment though.

[Retirednoguilt]

You conveniently snipped out part of your previous statement, "I'm going back to the days of the draft when you had fresh bodies coming and they leaving after two years. They have been replaced, I thin, by more career oriented recruits that become more costly after a number of years and it strains the budget" that suggests to me that you believe that personnel who become more senior by virtue of retention and/or promotion strain the budget. I don't believe they strain the budget if their continued service reduces the likelihood of senior personnel making bad decisions and taking the wrong actions due to inadequate experience and training.

The issue of using the military as a social experiment is a non sequitur in the context of our discussion. However, as far as using the military to instill discipline and job training in "young kids lost in life and hanging on the corner", it sounds good but in today's military, not likely to be nearly as successful as it was prior to Viet Nam. As we saw from the Viet Nam experience, life in the military can be so overwhelming that we produce lots of veterans with PTSD and drug addiction. Today, even low rated enlisted personnel must rapidly master rather complicated technology to function effectively and not be a danger to their comrades. The requirement for a high school diploma just to join the service at entry level enlisted rate is justified. Even then, I saw many people who had the necessary intelligence but not sufficient self-discipline dismissed from the service. Speaking of straining the budget, we just can't afford to recruit personnel with highly dysfunctional personalities.

I suspect we aren't going to agree on much if anything. In any case, Happy Thanksgiving.

[Ed Pawlowski]

Straining budgets has nothing to do with the value of the personnel. I'd increase the budget to allow the services to keep valued people. Congress, not me, is setting budgets and pensions strain them. I don't see how you interpret that negatively on my part.

My nephew was a recruiter for a couple of years. He said it was difficult to find people that can handle the technical requirements of today's Marine Corp.. It is no longer marching and shooting a rifle. As an aside, he retired as a bird colonel and is getting a nice pension.

Actually, we did. Enjoy the holiday.