NEW YORK (MainStreet) -- The retirement savings crisis began when corporate America began trimming – and then eliminating – pension plans for workers. The burden of financially preparing for life after work shifted from the employer to the employee. And so did the cost. Now, U.S. service members face a similar transition as the government looks to shrink pension benefits while expanding its “401(k) like” savings plan.
The Pentagon proposes a “blended” military retirement system. The 20-year service pension would be cut 20% -- as the Thrift Savings Plan, similar to a 401(k), would institute automatic enrollment at a 3% participant deferral. The government would offer a dollar-for-dollar match of 1%, increasing to 5%, depending on a service member’s length of service.
Members could opt out of the default enrollment after completing “financial literacy” training. In many ways, the changes reflect the retirement benefits currently offered to federal civilian employees.
Service members “would have the opportunity to achieve nearly equivalent or better retirement benefits when they reach retirement age,” said Defense Department spokesman Navy Lt. Cmdr. Nate Christensen in a statement.
In a white paper delivered to Congress, the DOD admits the significance of the proposal.