Research for Retirement

Military personnel who entered service after 31 July 1986 and who are eligible and intend to serve for 20 years must choose between two retirement plans at their 15th year of service.2 Once the final selection is made, the choice is irrevocable.

Congressional mandate requires DoD to review its forces, resources, and programs every 4 years. As part of this Quadrennial Defense Review (QDR), the Office of the Under Secretary of Defense, Personnel & Readiness requested an overview paper on how DoD can improve military manpower management. Given increasing personnel costs and budgetary pressures to control spending, cost-effective manpower management has taken on additional importance. We conclude that the military compensation package could be better aligned with what Servicemembers value. In particular, the value of the military retirement package to personnel is not commensurate with its significant cost to DoD. Furthermore, current rotation policies can significantly detract from military service; programs that allow personnel choice in their assignments would lower cost and improve the value of the overall compensation package. On the demand side, we conclude that current processes increase requirements. Rotation policies increase turnover and directly reduce performance. Furthermore, units and commands do not have visibility into the compensation or full cost of military personnel. Finally, DoD faces several constraints that result in decisions unrelated to the military mission. More discretion in using military personnel funds and relaxing the endstrength constraint would improve the cost-effectiveness of military manpower management.

The Old Age and Survivor's Insurance (OASI) programs of Social Security and the military retirement system are two of the largest and fastest growing income replacement programs in the United States. The size of these programs, in terms of both coverage and cost, make them of continuing interest to policymakers. Although both OASI and the military retirement system provide substantial amounts of income for retirees, they are fundamentally different. In addition to providing retirement annuities, OASI attempts to improve the social welfare by redistributing income toward the old and the retired poor (i.e., those with low earnings histories). The military retirement system helps manage military manpower. This system provides incentives for some personnel to remain in military service, and incentives for others to retire. Through this system the military is able to maintain an experienced force with sufficient youth and vigor to cope with the rigors and stresses of military life.