World Economics - Insight , Analysis and Data

World Economics - Insight , Analysis and Data
It’s Time to Retire the US Military’s Retirement System
Chris Springer
World Economics, December 2010
The author outlines a retirement system for the most expensive government organisation in the world – the US military. The plan incorporates positive aspects of both defined benefit and defined contribution plans that cost less and are more valuable to service members than the current system, which was put into place in 1947. The paper uses previous studies that reflect service members’ ‘value’ of retirement pensions and US Department of Defense net present value assumptions to prove his case and demonstrate how the DoD can save tens of billions of US dollars, while increasing the value of the plan in the eyes of those who serve.

This paper builds on previous work done in 2006, when the author wrote a paper titled ‘Is It Time to Update the Army’s Retirement System?’. However, this paper focuses more broadly on the overall military retirement system and takes into account the changes that have occurred since 2006 regarding the general debate on retirement pensions, the macroeconomic conditions that have changed drastically in four years, the political reality of future government budget cuts (such as with the military retirement system), and the fact that anything related to military compensation being a target because US military benefits (primarily health care, pay, and bonuses) have increased steadily over the years since 2001.
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