BOSTON (TheStreet) -- On the surface, it might seem that crafting a retirement plan for military personnel would be fairly straightforward.
Under current guidelines, enlisted personnel can collect 50% of their pay after 20 years of service (additional years of active duty add another 2.5%, up to 75%). Because many military members enlist right out of high school, they can complete their uniformed career before turning 40, with plenty of time to start a new career and supplement those monthly checks.
While serving, they can tuck extra money into the federal government's Thrift Savings Plan, its variation on the standard 401(k) offered by private companies.
Unfortunately, these options are far from that simple or straightforward.
To start with, financial planners traditionally suggest an average person will need to generate upward of 80% of the income from their working years to maintain a comparable lifestyle. Because the overwhelming majority of enlisted men and women retire in their 21st year of service, this means a military pension needs to be supplemented by more than 30% when accounting for loss of housing and other military subsidies, as well as the potential for added health care costs.
As for the TSP, while it may be an effective way to benefit from compound interest, there is a crucial drawback for the enlisted: Unlike many other government workers, as well as private-sector employees with a direct contribution plan, military personnel get no matching contributions.
The number of military personnel that eventually collect a pension is also relatively low. According to a recent report by the Defense Business Board, convened by Defense Secretary Robert Gates to evaluate budget reductions, 47% of new officers will collect on a nondisability retirement; only 15% of all other enlistees will hit the 20-year mark.
There are also concerns that the military pension system is taxed to its limits. The amount paid out each year has grown from nearly $22 billion in 1990 to an estimated $47 billion this year. Projections call for an increase to $59 billion by 2020. An increase in the number of years needed to collect a full pension is among the ideas that have long been considered.