By DARRELL DRIVER, JIN PAK and KYLE JETTE
New York Times
December 27, 2011
AS the nation’s budget pressures prompt officials to scour the Defense Department for cuts, one tantalizing target is the military retirement system. The Pentagon has reportedly been considering replacing the guaranteed pension that, for more than a century, has been a fundamental compact between the United States and its soldiers, in favor of a market-based 401(k) approach. But this would be a grave mistake, a disincentive to future volunteers and a threat to national security.
Needless to say, there are critical differences between the civilian and military work forces. Soldiers who have risked their lives for our nation should not also have to risk their retirement savings in stocks. But there are many more mundane sacrifices required of career service members that also make it hard for them to build up the kind of wealth — whether in their houses, their careers or the careers of their spouses — that cushions civilian retirees from the whims of the market.
Service members are often required to move, for example, which hinders their ability to build home equity. Many have to put off purchasing homes, and those who do buy do not have the option of choosing not to move if their mortgages become underwater. For this reason, the housing crash of recent years has hit service families especially hard.
Frequent moves also make it hard for service members’ spouses to find work and progress in their own careers. This is most likely a primary reason that median household incomes for military families are lower than those of their civilian counterparts.
Most important, the unique skills people learn on the battlefield do not easily translate into private sector employment, and many military retirees struggle to find new work. While the officer who managed a military transportation hub might anticipate an equivalent job from a civilian firm, and while a young private who served one deployment could relatively easily return to school or an entry-level job, an infantry sergeant first class who has spent a decade or more on multiple deployments to the world’s most dangerous places would not find the same ready options.
For these individuals, there can be a significant financial cost to agreeing to remain in military service beyond the years when it would be easiest to make the transition to more marketable civilian jobs. But these are the people the military needs, and needs to retain.
The military pension helps compensate for their sacrifices. Soldiers and their families are more willing to put off other careers, and to accept frequent displacement, lower earnings and even the risk of being ordered back to active duty after beginning new careers, because of the promise of future compensation. The guaranteed pension is one of the biggest incentives keeping talented people in the military.
No one knows for sure how a shift to a 401(k) model would affect these families and their decisions to remain in military service. But we do know that there is a spike in retirements once soldiers complete the 20-year minimum to qualify for full pensions, and we can only assume that these people would retire far sooner without them. And it’s likely that many would not join up at all.
As policy makers continue their deliberations on military spending cuts — which are scheduled to begin again next month — they must keep the unique nature of military service in mind when they look to the costs and benefits of the retirement plan. And they should remember that no one imagined, back in the 1970s, that our all-volunteer force would last this long. Most believed that conscription would again be needed if the nation ever engaged in a significant conflict. The United States military has proved them wrong so far, but we should not underestimate the role the guaranteed pension has played in its resilience.
Darrell Driver, Jin Pak and Kyle Jette are lieutenant colonels in the United States Army.