How Generous Are Military Benefits?


Tuesday November 18th, 2014   •   Posted by Craig Eyermann at 7:02am PDT   •  

militaryspendingTom Slear retired from the U.S. Army in 2001 after reaching the rank of lieutenant colonel in a career spanning 28 years, 23 as a reservist, where he specialized in logistics and never faced combat. He recently wrote an opinion piece in the Washington Post, in which he described veterans benefits as “too generous.” Here are excerpts:

Once I joined the Reserves, I started out receiving what today would be $11,000 annually for two days of drill per month and 13 days of active duty per year. That increased to $17,600 when I retired in 2001.

Even though I spent 80 percent of my time in uniform as a reservist, I received an annual pension in 2013 of $24,990, to which I contributed no money while serving. (Reserve retirement pay does not start until you turn 60. For those who remain on active duty for at least 20 years, payments start the month they leave service. Those who enlist at 18, right out of high school, can retire at 38 and receive $26,000 a year for the rest of their lives.)

My family and I have access to U.S. military bases worldwide, where we can use the fitness facilities at no charge and take advantage of the tax-free prices at the commissaries and post exchanges. The most generous benefit of all is Tricare. This year I paid just $550 for family medical insurance. In the civilian sector, the average family contribution for health care in 2013 was $4,565, according to the Kaiser Family Foundation.

Simply put, I’m getting more than I gave. Tricare for military retirees and their families is so underpriced that it’s more of a gift than a benefit.

Now, compare that with the benefits that California State police officers collect when they retire, which we discussed in a previous article:

It’s said that government workers now make, on average, 30% more than private-sector workers. Put that fantasy aside. It far underestimates the real figures. By my calculations government workers make more than twice as much. They are America’s fastest-growing group of millionaires.

Doubt it? Then ask yourself: What is the net present value of an $80,000 annual pension payout with additional full health benefits? Working backward the total NPV would depend on expected returns of a basket of safe investments–blue-chip stocks, dividends and U.S. Treasury bonds.

Investment pros such as my friend Barry Glassman of Glassman Wealth Services say 4% is a good, safe return today. But that’s a pitiful yield, isn’t it? It’s sure to disappoint the millions of baby boomers who will soon enter retirement with nothing more than their desiccated 401(k)s–down 30% on average from 30 months ago–and a bit of Social Security.

Based on this small but unfortunately realistic 4% return, an $80,000 annual pension payout implies a rather large pot of money behind it–$2 million, to be precise. That’s a lot. One might guess that a $2 million stash would be in the 95th percentile for the 77 million baby boomers who will soon face retirement.

That $2 million also happens to be the implied booty of your average California policeman who retires at age 55.

By comparison, we find that military benefits are far less generous than those enjoyed by “civilian” government employees.

In the grander scheme of things, it’s the overly generous pensions of civilian government employees that present a greater threat to the fiscal stability of the communities they serve. Such benefit plans have forced a number of local governments across the United States into bankruptcy proceedings.

To deal with that bigger picture, we propose that state and local governments bring their benefits to be in line with what military reservists receive after similar periods of public service.

Although Lieutenant Colonel Slear describes reservists’ benefits as excessively generous, a reduction of the benefits of state and local government employees to the level enjoyed by reservists would least lower the risk that the federal government would bail out state and local governments, and thus would save money at the federal level as well.




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