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Military Retirement Under Fire

Updated: August 17, 2014

In 1986, the Department of Defense implemented the REDUX retirement plan for all those who joined the military after 01 August of that year. REDUX retirement provides a 2% per year for the first 20 years of service (Final Pay and High Three retirements provide 2.5%) which means if you decide to retire at 20 years of active service, you get 40% of your base pay in a monthly check for the rest of your life with a yearly adjustment (based on the CPI, same indicator used for Social Security adjustments) for cost of living. But with the REDUX retirement system, you get an increase to 3.5% for each additional year passed 20 and can get to 100% for 40 years. When REDUX was first implemented, those under the program did not have the option of choosing the High Three program like they can today.

I was a recruiter in New Jersey in 1986 when the REDUX plan was being implemented. Most applicants were oblivious to the change, as a matter of fact, most applicants didn’t know there was a retirement program of any sort, let along the details of it, but some did and the change mattered to them.

Recruiting in the mid-1980’s was about as tough as it could be. The parents of the applicants we sought were draft eligible during the Vietnam War – the last thing most wanted was to see their child join the military, but when the REDUX change was announced, Veterans were dragging their kids into the recruiting station to make sure they didn’t miss an opportunity to be eligible for the High Three retirement and not be forced into what was proving to be the very unpopular, REDUX. Those that did join were very likely to join anyway, they just pushed their decision up a few months to join before the deadline – if I recall correctly, I alone contracted 8 people in July 1986, a few of which because of the pending retirement changes.

Fast-forward to today. The winds of change are blowing once again, hard enough to fill the sails and potentially move the ship.

The Defense Business Board put together a task group (7 white males, wait till the diversity folks get a hold of that) to review the Defense Department’s current retirement system and to “provide recommendations that will enable the system to be fiscally sustainable and recruit and retain the highest personnel required for our nation’s defense.” The actual report is due out sometime this month, but this advanced brief was released during their public meeting on July 21st.

When I joined the Navy, it was common knowledge that if one stayed in the service for 20 years, you would get a retirement benefit of 50% of the base pay you were making during the last full month of active duty for the duration of your life, and that it also included free medical and dental care. While I was a recruiter, I informed applicants of the military’s retirement system and informed them that they would be able to use the military’s health care system while in retirement, there was many more military clinics and hospitals back then, or where no clinic or hospital was available, the retiree and family could use CHAMPUS (Civilian Health and Medical Program Uniformed Services). CHAMPUS has since evolved into Tricare.

Now the “free” health care “promise” is gone. Space available at military treatment facilities seems to be a thing of the past, and there are calls to raise the current Tricare premiums as much as 8 times the current rate. This issue is and will continue to be a battle, and a topic for another discussion.

The current law dictates that the President propose a minimum adjustment to military pay at the rate of the private sector Employment Cost Index, for 2012 it is a 1.6% raise. Military pay has seen additional increases over the first decade of the new millennium of a half percent beyond that of the current mandatory pay adjustments in order to close the pay gap between the military and the private sector pay. The gap was considered closed before the 2011 pay amount was legislated, and for the first time, at least in congress, they believe the military enjoys pay parity with civilians. The report that will be delivered by the Defense Business Board will cite a report by the RAND National Defense Research Institute that the military’s pay has actually propelled past that of civilians, ignoring a report by the Government Accounting Office that implies pay parity, and also states that establishing a system of evaluating and comparing military and civilian pay is near impossible because of transfers and salary vs overtime pay potential. I guess you pick the report that best fits your desired outcome…

According to the Congressional Research Service, “Estimated future retirement costs are arrived at by making projections based on the past rates at which active duty military personnel stayed in the service until retirement, and on assumptions regarding the overall U.S. economy, including interest rates, inflation rates, and military pay levels. Approximately 30% of military basic pay costs must be added to the DOD personnel budget each fiscal year to cover the future retirement costs of those personnel who ultimately retire from the military.” —It is the main reason any increase of base pay comes under strict scrutiny by DOD officials, and just as influential in the establishment of other pay and allowances; bonuses and allowances used to increase a members compensation without increasing the pay that will have a longer term affect on the budget of the department.

I do think the military retirement system has got to change in order for those entering the service today to receive the compensation they will richly earn, but with that said, lets get back to the report and what is fair; for the first time, a proposal is being made to change the retirement system for servicemembers while they are under contract.

-Preserve accrued benefit from “old plan” but no further accrual
-For those with less that 20 years –proportional benefit under “old plan” if they stay for 20+ years (example: 10 years of service would result in 10/20 of the old plan benefit at old vesting date or 25% of pay at retirement)
-All active duty personnel start to accrue new benefit for the balance of their service payable under new terms (age 65 nominal)

All servicemembers currently serving were told by me, and every other service recruiter in this great nation and reenforced by leadership, that they too could serve a minimum 20 year participate in DOD’s retirement system as it exists today – hell, it’s currently the law!

As I said, I think we all understand that a change in the system ultimately has to happen, we are on an unsustainable course, but if the new plan must include those currently serving, provide them with the option of selecting the new program or staying with the program they were promised. Keep the full faith and credit of the U.S. government in tact, it is a promise made and those serving this great country deserve it.



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A Navy recruiting blog that delves into the military enlistment process and benefits of service. This is NOT an official United States Navy or government web site. The opinions expressed are my own, and may not be in-line with any branches of the government or military.

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