Arming the military with retirement savings plans

It's not easy recruiting 18- and 19-year-olds to serve in the military, what with the low pay, the obvious risks and the frequent relocation.

The military's retirement plan hasn't made things easier. Service members with 20 years under their belts are eligible for relatively generous pensions, but if they leave before then, they are out of luck. (There is a thrift savings plan, but it is voluntary and contributions are not matched.)

According to a January report by the Military Compensation and Retirement Modernization Commission, which recommended changes to military retirement plans and more, under current rules, "83 percent of all enlisted personnel and 51 percent of officers receive no retirement savings for their service." (Tweet this)

The White House and the Defense Department intend to change that as part of a broad plan to make the military a more appealing employer. In letters to Congress sent Monday, President Barack Obama said he would back changes to military work life along the lines of the commission's recommendations.

The commission recommended that pension benefits be reduced, but that military service members receive a lump sum payment at 12 years if they commit to serve four more years. In addition, all soldiers would be enrolled in a defined contribution plan similar to a 401(k), in which the military would match up to 6 percent of contributions.

"I believe the recommendations are an important step forward in protecting the long-term viability of the All-Volunteer Force, improving quality of life for service members and their families, and ensuring the fiscal sustainability of the military compensation and retirement systems," wrote Obama.

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Defense Secretary Ashton Carter and President Barack Obama.
Andrew Harrer | Bloomberg | Getty Images

In a speech Monday to students at his former high school, Defense Secretary Ashton Carter said the military is closely studying what members of that generation want from their careers in a bid to attract more of them to military service.

"In the coming years, as the so-called 9/11 generation begins to leave our ranks, the Defense Department must continue" to attract talented recruits, he said. "We have to bring in about 250,000 people each year just to keep up."

The Defense Department is the nation's largest employer with more than 1.4 million men and women on active duty and 718,000 civilian personnel. (Another 1.1 million serve in the National Guard and Reserve forces.) More than 2 million military retirees and their family members currently receive benefits.

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Carter, who took office last month, was applauded at his alma mater after his speech on the military and millennials. But career service members are taking a wait-and-see approach to any possible changes to military retirement benefits.

A survey by First Command Financial found that 61 percent of middle-class military families approved of the retirement commission's retirement benefit proposals, and just 11 percent were opposed. But they don't want their own benefits changed: 67 percent of the respondents who expect to serve for 20 years said they would rather keep their pensions.