When soldiers can move flexibly in and out of active duty roles, they are able to gain priceless skills in the private sector and also bridge the civilian-military gap, which is effectively impossible given the current pension structure. By delinking retirement benefits from laying off and hiring , force shaping by the Army, Navy, Air Force and Marines is suddenly much more flexible.
There will be no more agonizing about forcing troops into early retirement, which is an anachronistic concept. Instead, the services can start thinking about their human capital in terms of skills and talents instead of year group cohorts.
When policymakers consider compensation reform, they must analyze options that break free from the defined benefit retirement structure entirely. It is a recommendation that is half a century overdue. It has been recommended by a dozen expert commissions. He is the author of Bleeding Talent. This research is made possible by a grant from the Smith Richardson Foundation. He is a former officer in the U. Air Force. Military Retirement: Too Sweet a Deal?
Tim Kane. Blogs - Charlie Mike. Government Accountability Office GAO was calling for an end to the year cliff in a clearly titled report, Retirement Security: The Year Military Retirement System Needs Reform : Twenty-year retirement, in conjunction with present personnel management policies, is an inefficient means of attracting new members, causes the services to retain more members than are needed up to the year point, provides too strong an incentive for experienced personnel to leave after serving 20 years, and makes it impossible for the vast majority of members to serve full careers.
Consider these three charts. Uncertain future. The Alexanders' most pressing issue is that they don't know where their future lies, either geographically or professionally. As a master sergeant, Jason can be promoted only once more, so his pay won't rise much if he stays in the Army to get to 30 years. To keep his options open, Jason earned an MBA online last year and is completing a master's in finance.
If he works in finance, Jason thinks he would make more over a ten-year period than he would in the Army. But salary isn't everything. He needs to factor in his military benefits and tax breaks against what he'd qualify for in the private sector. For example, Jason pays no state income taxes on his Army pay. In the military, you can claim residence in a state where you served, such as income-tax-free Texas, even after you move to a state with income taxes.
Then there's the pension. So the pension side of the decision hinges on how big a pot of money Jason can build as a civilian using his MBA. That could be a tall order. Some of it could come from an employer match to a k. But with two children, that might be pushing things. Then again, finance does offer a shot at higher pay and more promotions than being a master sergeant.
The decision may ultimately boil down to how much risk Jason and his wife feel comfortable taking. When you exit the military, your cost of living may change with it — all while seeing a reduction in wages too. A cash buffer will help substantially, especially if you take your time to find a new job, Sheldon said. Finances aside, you should also ask yourself what you plan to do in retirement.
You would be retiring at a pretty early age if you left the workforce at Taking on another job would not only help you pay down some education expenses, but if you weigh your options and choose a new job you really love, you might be happier than if you entered retirement with no concrete plans of how to spend that time. Now, you get to design your life exactly as you wish, and choose where your money will come from and where it will go. As retirement gets closer, juggling all of these questions and choices may become very overwhelming.
Have a question about your own retirement savings? Email us at HelpMeRetire marketwatch. Alessandra Malito is a retirement reporter based in New York. Home Retirement Help Me Retire. Help Me Retire The military is giving me retirement and disability pay — but will it be enough to retire at 48? Published: Aug. ET By Alessandra Malito. Thanks for your help.
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