Keep in mind that this story focuses on only one aspect of the entire retirement reform language. In total, the reforms will provide more benefit to the National Guard than what was currently being made available.
Financial experts are telling the Pentagon that the reformed military retirement plan would shortchange career service members, especially those in the enlisted ranks, according to a report this week from Military Times. While National Guard members continue to wait for details on how the reforms will affect them, the plan is getting close scrutiny before it goes into effect in 2018.
The American Academy of Actuaries is taking a look at the plan’s lump-sum payout and how the amount will be determined. The complexity of determining how much an individual service member would receive increases the chances that choosing a lump-sum payment would cost the individual a great deal of money compared to accepting monthly retirement checks.
The problem is what’s called the discount rate, which considers money to have more value today than tomorrow and would be set by the Pentagon. The Pentagon has an incentive to choose a discount rate that would pay less, saving money for the Defense Department.
In a letter, William Hallmark, an official with the academy, told the Pentagon, “We encourage the department to carefully consider the extent to which the discount rate should reflect a service member’s financial sophistication and immediate financial need, or whether the discount rate should be independent of these considerations.”
He warned that troops would not understand what they could lose by taking the lump-sum payout rather than accepting monthly checks.
EANGUS supported the retirement reforms because they extended benefits to more troops, specifically National Guard members. EANGUS also supports providing information to military members so they can make a decision that is best for them.