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Changing the Military Retirement System

Andrew Tilghman, writing in the Military Times newspapers, did a tremendous job of succinctly outlining the proposed new military retirement system. This proposal, which is certainly not a new concept, would provide military members with contributions to their eventual retirement without requiring them to serve a 20 year career. This system, which is called “cliff vesting” provides for a benefit of between 40 and 50% of their base pay, plus cost of living adustments, beginning immediately after retiring. For those who enlisted right after high school, they could begin collecting this retirement at age 38, and collect for the next 40 years.

As Mr. Tilghman points out, 83% of veterans leave military service without serving the minimum 20 years required to draw a retirement benefit. For this overwhelming majority, the ability to receive a proposed 16% raise deposited directly into the Thrift Savings Plan would represent a significant increase in pay and recognition that military veterans contributions to National Defense should be financially rewarded regardless of the length of tenure.

This option would have a huge impact on military members who entered service in the hope of retiring at the 20 year point, as their benefit would be cut by 78%! (Mr. Tilghman notes that the amount of TSP contributions needed to duplicate the current military benefit is 75% of base pay. It should also be noted that TSP contributions cannot be withdrawn easily prior to age 59 1/2.)

It is unlikely that this retirement proposal will be adopted without a battle with veterans groups and lobbyists. They will argue that educational scholarships and the Post 9/11 GI bill has provided benefits that far outweigh any financial contributions to the TSP accounts for one-term officers and enlistees. These groups will fight to retain the 20-year retirement system.

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