January 1, 1981
The virtues and criticisms of the current military retirement system are described. Then an economic model is developed for analyzing the effects of different retirement systems on retention. The model also can be used to analyze other kinds of changes to the military compensation system. Here it is used to estimate the effects of three retirement plans on enlisted retention and force structure: (1) a two-tier plan that reduces annuities after 20 years of service, (2) a trust fund plan recommended by the President's Commission on Military Compensation that provides some benefits after 10 years but fewer after 20 years, and (3) a two-tier plan recommended by the Secretary of Defense that allows early withdrawal of prospective 20-year benefits after 10 years of service.
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