August 2nd is the deadline for Congress to get their act together and figure out a way to pay the bills. That’s when, according to the Treasury Department, the cash reserves to pay government debts will run out and the ramifications of not extending the debt ceiling beyond 14.3 trillion will start to come to fruition. Among the many things being considered for the chopping block are cornerstone practices regarding federal employee and military retirement. Congress is currently contemplating whether or not altering both the way cost-of-living-adjustments (COLAS) are referenced for military retirees, and the way age, disability, and time served affect the immediacy of your benefits if you were a member of the military.
Instead of using a wage-earning consumer index to measure how much military retirees receive each month, the government is considering changing it to an all-consumer index. The move is projected to save $24 billion over 10 years according to the non-partisan Congressional Budget Office. It will likely matter little to most, whether it affects those already retired or just future retirees, but everyone, military or civilian, needs to consider what congress is wanting to do here, for the sake of their own retirement plans. These are moves that private providers could be considering as well.
The other big idea is to only provide immediate benefits to those who are disabled, with everyone else waiting until they are 60 before they can see any of their military benefits. Defense Secretary Robert Gates connected the dots by saying that the overwhelming majority of military personnel don’t enlist long enough to receive any retirement benefits for their service whatsoever, which he said “doesn’t make any sense.” By restricting access to early benefits, the government hopes to re-disperse the funds to more people who served shorter periods of time, at reduced levels of course. Officials at the Pentagon believe this will encourage more people to stay who otherwise find the 20-year enlistment required for retirement benefits too long a commitment to make.
Gates said the private sector is “way ahead” of the military in terms of how they manage to provide benefits to those who do not stay employed for two consecutive decades. Take that to heart; count your blessings. But also never forget that retirement plans rest on an ever changing base. Congress wants to raise the retirement age in general, and while such plans might skate past our generations concern, we should always think about the future. After all isn’t that the philosophy behind a retirement fund in the first place?