Research for Retirement Reform

The current military retirement system dates back to 1947, when Congress implemented a common 20-year system for all services and for officers and enlisted personnel alike. Over the years, critics have charged that the system is (1) excessively costly and unfair to taxpayers, (2) inefficient, (3) unfair to the vast majority of entrants who do not serve long enough to receive any benefits, and (4) inflexible and hampers force management. The purpose of this paper is to provide these groups and other interested readers with a discussion of the issues relating to the military retirement system. To set the stage for the discussion that follows, the first main section outlines what a personnel system should do. Here, the purposes of compensation and personnel policy are reviewed and certain institutional constraints that influence the structure of the military compensation system are identified. The next section highlights the structure of the current compensation system and the outcomes that result from this structure. The third main section evaluates the past criticisms of the retirement system. The fourth section discusses the retirement reform recommendations of several past commissions and identifies the broad features of a revised system.