WBEN NewsRadio 930>Audio & Video on Demand>>SPECIAL REPORT: Pentagon Considers 401K for Military

SPECIAL REPORT: Pentagon Considers 401K for Military

Aug 16, 2011|

The plan would scrap traditional retirement plans enjoyed by soliders and service members after 20 years in the military

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Automatically Generated Transcript (may not be 100% accurate)

CBS news has learned high level closely held meetings are taking place at the Pentagon regarding a radical proposal to overhaul retirement of the nation's one point four million service members. A bedrock guarantee of military service. The proposal comes from an influential panel of military advisors called the defense business board. They're plans laid out in a 24 page presentation modernizing the military retirement system. Would eliminate the familiar system under which anyone who serves twenty years if eligible for retirement -- half their salary. Instead they get a 401K style plan with government contributions. They'd have to wait until normal retirement age to collect. It would face 250 billion dollars over twenty years Douglas Holtz Aiken is former director of the Congressional Budget Office. How important is that the military attack its retirement issues. But it's very important what we're talking about and underfunding that serves to look like hundreds of billions of dollars. In in the next twenty years and if you want to maintain the core mission which is to defend the nation and have strategic capabilities we need He can't have all the money tied up. Retirement programs advocates say the new system would not only save money but would also be fairer. It would give benefits to those who served less than twenty years right now they walk away with nothing. And it would give more money to those in combat -- high risk situations. The proposal leaves a lot of blanks to be filled in. Including what -- -- -- current service members of their plans won't change we spoke to some active duty troops who agreed cost must be cut but were even numbered if -- -- film does look. -- with no incident to -- lifted for twenty years. The proposal is that it's early stages and nor would require congressional approval but it's clear military retirement is no longer untouchable. A pentagon spokesman said the military retirement system is quote a fair subject to review the -- no changes will be made without careful consideration. On the WB a lifeline CBS news military consultant Mike Lyons retired army major who served in the first gulf war morning Mike Moran couldn't -- I guess the reason they're looking at this is because the current system is simply unaffordable. It -- -- unaffordable also inflexible and on some level unfair. And the fact of the matter is if you serve for eight years in the military today. You if you decide to leave service at that point to let's say two enlistment contracts. He -- you get nothing. If you worked for eight years and other corporate company is still in world. A unit that had the opportunity for 41 K unit had to retirement built up you can move that with the so. That's one of the reasons why -- sixteen -- but clearly. On affordability in the fact that they'll be many more soldiers. That will be paying pension benefits to in the coming years they're on active duty I think to people find that an unsatisfactory situation. Hey -- do soldiers who really. Do not make a lot of money do they contribute to the plan right now a -- government foot the bill that's why is there losing all the money. Not -- -- -- the -- does not contribute one dime to bear. To their retirement right now it's that the pension system. It's you know an all or nothing when you get that point you that the 2%. It is the number of you to twenty earmarks so but there's no contributions made whatsoever night and you're right -- -- at the lowest levels. The military -- somewhat low but but if you think if you look at it closely you'll see. Based on education levels that that in most cases the military -- has kept up with macedonians and that was the problem was that the ninetieth under actually the Clinton administration so. They've fixed that disparity that was once and very wide gap between civilian -- military pact. So do you think the average soldier in service member is likely to. Be happy about this. I think the channel that the challenge is going to be you're no longer the retired twenty years being your mid forties and and collect a pension for the rest your life for you go on to something else I think that's gonna provide. Some thanks for some individuals who have thought that they would be able to you know collect money you're you're gonna have to continue to work at that point in time now. I don't think -- -- wrong with that -- I hear a little while longer these days. This system was designed back in the fifties and sixties when. A life expectancy was the same as it is right now people. Or living Islam you know we we can't be allowing these these people to kind of take advantage of the system. We see what happened what's happened over and over in Europe because of it were paying to entitlement for people that are in spirit He retired but they actually can continue to work. They might I'm -- -- you can answer this question and it's understandable that the camp but. Give any idea who got to invest this money will be the big banks for the investment firms -- give the government the best deal. We added that there there are much pushing for this that's exactly what it's going to be it's going to be the big banks into the big banks suggest. In invest in terms of just -- themselves over a million new client potentially the -- that they have some of them in some cases but. This'll have to be run by the private sector itself the government won't be able to run. As some kind of for a 101 K pension plan so this'll be great opportunity for the civilian financial institution that apple will likely take responsibility for the past. Could this hurt. Realist than though and recruitment could lead to a shortage of troops. You is the question is the you know they're they're gonna pay more for the combat troops they're gonna contribute more than 41 K I think the the recruiting. Angle has got to be look if you decide to com and you know one career after eight to ten years. You'll be able to move 506070000. Dollars with -- to a new company that'll provide. You have said that you could borrow money against you if you wanna buy -- you can. Do a lot of things against that you wouldn't have had before Cuba the military at that point in time you have nothing so. I think that it's -- bit and I think it's a positive -- is say is that you're actually gonna gain assets. By being produced in this program. Mike thanks so much for joining us appreciate the information critical premise. Retired army major and CBS news military consultant Mike Lyons.