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Defense Budget Would Delay Retirement Savings Match for Younger Troops

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The ink is barely dry on the new retirement system passed by Congress for the nation’s military servicemembers, and already the Department of Defense is looking to postpone matching retirement contributions for those members who will be part of the new system.

The Military Times reported that DoD’s proposed budget for fiscal year 2017 wants to delay the time when servicemembers can start to receive matching retirement contributions—stalling those contributions from their third year of service to their fifth year of service.

Lawmakers intended for newer servicemembers to be able to have a retirement incentive for joining the military, even if they didn’t make it their career; this move would circumvent that incentive.

And at the same time, DoD also wants to change another rule — the one that ends matching contributions after 26 years for those servicemembers who do remain in the military longer.

Instead, DoD proposes letting those career military members, both enlisted and officers, to continue to receive matching contributions until they retire.

That’s more like the system governing civilian government employees’ retirement.

The new “blended” retirement system, which adds a 401(k)-style Thrift Savings Plan to the existing defined benefit plan, takes from the DB plan to pay for the thrift part of the plan; most servicemembers retiring with 20 years of service would receive annual retirement pay that amounts to 50% of their average basic pay over their last three years of service.

The new plan, which takes effect on Jan. 1, 2018, cuts that amount to 40%.

The new blended plan doesn’t apply to currently serving military members, although servicemembers with fewer than 12 years of service under their belts at the end of 2017 can choose to opt in.

It already doesn’t appear to be a popular choice, given recent polls of active-duty career servicemembers.

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