Re: Budget negotiators looking at military pensions
The point that is never made is that ALL uniform members already contribute. I think it is 6%, it is already taken off before the money is paid to members, so it is in reality "invisible" to the the service member. One point that is always brought up by the pointy headed bean counters is that 92% of those that pay in never receive a payback.
In reality it is hard to find a retirement system so well balanced (IMO). Monthly salary (avg of high three), x number of years (20 minimum) x 2.5%. Add to that the availability of TSP. Unfortunately we (retirees) are not dying off as quickly as our predecessors (avg age 56 back in the mid 80's)
From the Rand Corp (1997):
For many years, the Defense Department funded military retirement on a "pay-as-you-go" basis, estimating how much money was needed to write checks for current retirees and adding that amount to the budget. This system worked well as far as paying retirees went, but it did not hold policymakers fiscally responsible for today's decisions affecting the size of the future retirement bill, e.g., increasing the force size. To promote better management, in 1984, Congress directed a switch to an accrual method of funding retirement. Under this procedure, each year the services transfer into a fund the amount necessary to pay for future retirements. The amount transferred is a percentage of the service's basic pay. Thus, if a service implements policies that affect the future value of retirement benefits, it sees the budgetary consequences of that decision immediately in the form of an increase in the amount transferred to the retirement fund. Analysis by Arroyo Center researchers William Hix and William Taylor, reported in A Policymaker's Guide to Accrual Funding of Military Retirement, suggests that the current procedures do not fully capture the intent of the legislation and that changes could eventually save the Army as much as $5-6 billion annually.
Last edited by Chief_KO; 12-08-2013 at 08:49 PM.
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