As the national deficit climbs its imaginary mountainside, Congress and the Oval Office are pulling out their machetes to find new budget areas to cut. Since they can’t clip coupons, the federal government is looking at two ways military retirement can change for future members. The goal is to reach a consensus by August 2. Possible changes will modify the system and maybe save some moolah.
The first possible change in military retirement is adjusting the calculation for the annual cost of living. An individual’s cost of living allowance (COLA) depends on inflation based on the previous years, when the service member entered service, and when they retire. Today, COLA inflation is linked to the Consumer Price Index for Urban Wage Earners (CPI-W). Changes would connect it to the Consumer Price Index for Urban Consumers (CPI-U). It is obviously more expensive to live in 2011 than 1971. COLA makes those adjustments. Changing the calculations impacts eligible military members, federal workers, disabled veterans, and surviving dependents.
Based on today’s CPI-U, the change would only be a quarter of a percentage below the current standard. Over the years, inflation increases COLA. An increase hasn’t happened in the past two years, but due to the current economy, supposedly COLA can decrease with new calculations. According to the congressional budget office, adjusting the annual cost of living could save $24 million over 10 years.
A second change is more drastic. This option would alter the format of military retirement. Currently, servicemen and women receive retirement benefits after 20 years of active duty. A new format would offer benefits as early as five years. A majority of service members don’t stay in service for 20 years, so they would receive helpful benefits through the reform. Age limits still apply. Retirement cash would not kick in until the military member turns 60 years old.
These changes are less severe than some of the other budget cutting proposals that could affect military retirement, Social Security, Medicare and Medicaid. Altering military retirement won’t have immediate paybacks. Hopefully Congress and President Obama will concur in due time and choose wisely.