Congress Approves Military Retirement Overhaul; Changes Coming in Two Years

Congress on Tuesday approved a broad defense bill that includes an overhaul of the military retirement system.

So how – and when – will military members be affected?

From the Military Times:

Troops will not see any of the retirement changes for two years.

New recruits who sign up beginning in October 2017 will automatically have 3 percent of their pay diverted into a Thrift Savings Plan account, which the Defense Department will match with an amount equal to 1 percent of their pay. After two years of service, the Pentagon match could be increased by another 5 percent of pay.

“Anybody who comes in after that date will automatically be in the system, they won’t have a choice,” said Steve Strobridge, director of government relations at the MOAA.

Those future service members will be able to adjust their contribution amounts or opt out of the system, but only after completing financial literacy training at their first permanent duty station.

The 20-year pensions will remain for all but they will not be as lucrative for future service members. To support the new retirement accounts, future pensions will only be worth 80 percent of their current value.

Troops who are already in the military and have less than 12 years of service can choose the assured pensions or opt into the new blended program, which will look very similar to the 401(k) accounts that are the norm in the civilian world.

Pension360 has been covering the possibility of a military retirement overhaul for over a year. For previous coverage, click here.

Photo by Brian Schlumbohm/Fort Wainwright PAO