The military pension plan, the envy of nearly every retiree in the nation, may well be going the way of the Dodo bird. Under the existing system, anyone who serves 20 years in the military is eligible to retire at half their salary for the rest of their life. This means a person who joined up at 18 years of age could draw retirement pay at the age of 38 and pursue a second profession with additional pension benefits, plus social security after reaching the age of 65. However, this may come to an end as a panel of military advisors (Defense Business Board) are recommending the existing retirement system be replaced with a 401k style plan which would require the existing 1.4 million service members to wait until normal retirement age (65) amounting to a budgetary savings of $250 billion over the next 20 years.
As long as Military Pensions are coming under fire, it is only fair to evaluate Congressional & Federal employee pensions as well. You ask a Congressman about his retirement and he will hasten to point out he pays into Social Security, but he will not mention the Federal Employee Retirement System (FERS) as amended under Federal Employees' Retirement Act of 1986. Both the military and Federal pension plans utilize the same formula: top three year salary average times number of years served times 2.5%. The military employer (The American Taxpayer) pays 100% of pension costs for the military, but the retiree must serve full 20 years to qualify. The Federal employee, on the other hand, pays 1.3 percent of his salary and can qualify for the pension after 5 years but cannot draw the retirement until 62; however, if he serves 20 years he can retire at 50, and 25 years of service allows retirement at any age. Congressman Ron Paul has always refused to participate in this pension plan labeling it "immoral" and North Carolina Congressman Howard Coble campaigned against it in 1984.
A military retiree who puts in 40 years of service can receive 100% of his top wage; however Congress and federal employees are limited to 80%. Even so, any Congressman (current salary of $174,000), with a minimum 5 years of service would be eligible ($174,000 x 5years x .025) for an annual pension of $21,750 at age 62, and if he sticks it out for 20 years, his retirement is a whopping $87,000 plus Social Security plus income from the "Thrift Savings Plan". For perspective, the average American retiree on Social Security considers himself lucky if he can get $1,000 per month at age 65 after contributing 6.2% of wages for a lifetime.
Possibly, one might wonder why the President and Congress agreed to reduce employee contributions by 2% to a financially troubled Social Security system. Obviously, their own retirement plan involves smaller payments and a larger return upon retirement. Social Security, therefore, is a bad investment.
Military and federal employees (Congressmen included) are able to draw from more than one pension plan and many are able to "double-dip" as the saying goes. Neither the Military nor FERS has a "Trust" fund. They are strictly hand to mouth and 80% of these pensions are funded by the employer which, of course, is the U.S. taxpayer. Obviously these costs are an increasing part of the soaring national debt.
On a local level, California's pension systems: CalPERS and CalSTRS, which also use retirement formulas very similar to FERS, are projected to be $-billions in the red which will require additional funding presumably by increased taxes.
It is obvious that most, if not all, pension plans are in jeopardy because of serious abuses, double dipping and just plain greed. Never-the-less, immediately following food on the table and a roof over our head, a realistic form of retirement income is mandatory. As long as Congress is looking into solving soaring retirement costs, there is little doubt that all of the many different retirement schemes should be eliminated in favor of one "National Pension Plan" which does not favor special interest groups. All American citizens, including elected officials and military veterans, are entitled to equal treatment with respect to retirement. We are in this together!