No More Military Retirement or Tricare Prime?!?

It’s that time of year again: Congress is debating the annual federal budget proposals. My e-mail and social media have exploded with outraged commentary on the proposals to overhaul the military retirement system and to get rid of Tricare Prime.

How does that affect your retirement? How does that affect your family’s healthcare?!?

Well, it doesn’t.

Changes to military retirement– or not

If you’re already retired, then the proposals have no effect on your pension or your COLA. A few months ago when a legislative compromise tried to reduce the military retiree COLA, Congress was swamped with over 200,000 protesting e-mails, phone calls, and old-fashioned letters. Congressional military committees were unhappy, too– their party leadership forced a compromise to avoid a government shutdown, and the amendment didn’t go through the normal debate process. Both Houses later stomped on the change, and now Congress is even more reluctant to mess with military compensation.

Image of servicemember holding a stack of dollars, courtesy of |

Is this enough for retirement?

If you’re in the military now then the proposals won’t affect you either. Your retirement system is protected from any changes, even for those who joined in 2013. Recruits who joined the military in 2014 are still subject to a smaller retirement COLA, but that’s at least 20 years away. Military support organizations have that lingering fix on their agenda too, and anyone who’s just joined the military has more important retention issues to consider (see the end of this post).

DoD is reluctant to change military retirement, but they’re in charge of the system. They’re forced to squeeze every dollar out of a smaller budget, and Congress asked for this study as part of the “Military Compensation and Retirement Modernization Commission”. The study is due in early 2015 so formal debate is a year away, and no member of Congress will change military retirement just before an election year. The DoD proposal suggests the same pension evolution that has already occurred in the civilian and civil-service workforces: more 401(k)-style defined contributions, a mid-career retention bonus, a lump sum at military retirement, and reduced benefits until at least age 60.

How’s that worked out for civilian employees and the civil service? Would today’s American workers prefer their modern 401(k)s or the old defined-benefit system? Yeah, I thought so. DoD’s latest proposals remind me of the 1980s REDUX changes to the military pension system and the 2000s attempt to reform their civil-service system. Remember how both of those reforms worked out? Yeah, they’ve already been scrapped. People can still do math, and once they analyze the changes then retention will plummet and recruits will stay out of uniform.

If you’re a fan of political theater then order a big bowl of popcorn and settle back to enjoy the show. If you want to support your fellow servicemembers and retirees then join a military advocacy group. But if you’re a current retiree or servicemember then you have better things to worry about.

Scrapping Tricare Prime– but not now

For example, should you worry about losing Tricare Prime? DoD has already tried to cut off Tricare Prime for those who live more than 40 miles from a military base. Their latest budget proposes consolidating all of Tricare Prime’s programs into a new fee structure. DoD claims that shifting Tricare fees to families & retirees will free up more funds for military training, maintenance, and supplies.

In my opinion, this is more political theater with DoD casting Congress as the villain. DoD is trying to force Congress to either cut back military spending & defense contracts in their own districts, or to burden their constituents with higher healthcare fees. I doubt that either tactic will work.

Tricare Prime seemed like a great idea during the 1980s Cold War military expansion, with more bases being built and more beneficiaries for a large doctor’s network. But the military drew down over 25% during the 1990s, and now it’s embarked on another drawdown of at least 15%. Tricare Prime’s fixed costs are threatening to become the biggest expense in DoD’s budget. The 2012 premium increase (the first in nearly 15 years) will at least keep up with inflation, so doctors will still have an incentive to see Tricare patients. The Patient Protection and Affordable Care Act will also give care managers new incentives to hold down costs, and I think that will also offer more tools to apply to Tricare Prime. An example is the Tricare mail order pharmacy, which is expected to cut DoD’s cost of filling retiree prescriptions at military treatment facilities. It’s not just the military– that’s happening with Medicare and other civilian healthcare plans too.

Tricare Prime is not healthy, but I doubt that Congress has the political will to scrap it and pass higher expenses on to beneficiaries. DoD will be forced to figure out how to control costs on their own without starting a new system. It took five years of legal challenges just to change Tricare’s western region contract, and implementing a new military healthcare system could take over a decade– even if Congress supported DoD’s plan. In the meantime, the PPACA, the Veterans Administration, and DoD will figure out ways to streamline the current system. Everybody knows where the waste is, and now they have a new reason to fix it.

Military retention during a drawdown

Even without the uncertainty over retirements and healthcare, the servicemembers are still struggling with the biggest drawdown in 20 years. Combat pay and hazardous duty pay are being cut. Bonuses are vaporizing. Promotion rates are dropping and re-enlistment approval is getting harder. The Army is even getting tougher with rules on grooming and tattoos. Congress has authorized the services to use separation payments and even 15-year retirements. Should you stay in? Should you get out while the getting is good?

I think you should take a deep breath, and then take control of your own career. After more than a decade of war, the military will have to stop forcing people to stay in and stop throwing more money at them. For at least the next decade the only people staying in the military will be the ones who want to stay in uniform, instead of being “persuaded” to hang around. Training and operations will be drastically cut, but you’ll have a chance to find new ways to make every opportunity count. If you joined the military to serve your country, to be part of something bigger than yourself, and to build a great team– then this is your chance. Get all the schools & training you can, take care of your people, and do your best with your service’s budget. You know what you can do, and maybe the military will recognize your potential.

If you’ve thought about leaving active duty, then take it one service obligation at a time. When the fun stops and you’re no longer challenged or fulfilled, then it might be time to leave. If you feel like you’re on top of your game then consider sticking around for another tour. If you and your family are tired of the military life and looking for new choices, then it might be time to turn those discussions into plans. Don’t just passively hang around hoping that your service will bribe you to leave– when that happens then you’ll be only one more new job seeker in a huge crowd. Instead, take control of your career, make a transition plan, and consider moving to the Reserves or National Guard.

If you joined the military for the pension then you need to rethink your decision. If you’re staying in uniform to get to 20 (or hoping for 15) then you need to make sure that you have better (and more fulfilling) reasons to report for muster. It makes no sense to risk your mental and physical health (and your family’s happiness) simply to grind out the years for a pension. There are better ways to reach financial independence.

Yeah, I know, it’s easy for me to claim that while I’m sitting fat & happy on my own military pension. Well, here’s your chance to learn from my mistake: I should’ve resigned from active duty at 12 years and joined the Reserves. We had started a family, my priorities had completely changed, and the fun had stopped long ago. I was afraid to leave active duty because I didn’t think I could handle Reserve drills or a civilian career. My subsequent eight years were a triumph of ignorance, obstinance, & persistence. I might have been “lucky”: I have no idea what physical price I’ve paid for those years of chronic fatigue, stress headaches, high blood pressure, and cholesterol levels. I was on the edge, and if there had been a health emergency or a family crisis then I would have not had the capacity or the resilience to handle it. I write about the “military inferiority complex” and the attitude of “it’s only money” because I’ve lived through it. When my active-duty spouse reached the same retention decision a few years later, she resigned for the Reserves– and her life immediately got better.

The debates between DoD and Congress over military pensions and Tricare are just that: debates. Any new plans that come out of the debates will be completely different from today’s headlines. Even if everyone agrees on the changes, it’ll still take years to implement them.

In the meantime, use these headlines to start your own family discussion. If a new retirement system or a more expensive healthcare system would not keep you on active duty, then is today’s retirement or healthcare enough to motivate you?

You have skills. Is the drawdown military enough challenge and fulfillment for you, or would you (and your family) find a more fulfilling life after active duty?

While you’re grappling with those decisions, consider how you’re going to reach financial independence. This discussion would be a lot easier if you already had enough money for the rest of your life. Financial independence gives you lots of choices, and it’s a lot better than dealing with today’s fear and uncertainty.

While you’re taking control of your military career, take charge of your finances too. It’s all on this blog, and it’s in the book. We’re here to help.

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. This is sage advice. Though I have been pretty fortunate that my career arc has turned out well, I needed to think much more carefully about where I wanted to be post-military and how what I was doing from year five to twenty-something shaped that.

    • Thanks, Mike!

      It looks as though you’ve already taken charge of your career and your financial independence. From here on it all depends on your savings rate and compounding time.

      Anyone who has the guts to tackle a PhD thesis will also have no trouble being responsible for their own entertainment after they retire…

  2. Excellent write-up, Doug. The benefits are due to change, but it will be a political mess. My thought is military retirement benefits will change in the future, but those under the current system will be grandfathered in, and will experience little, to no, change in their benefits. Health care, as you mentioned, is a completely different ball game. I don’t know where that is going, but it is not sustainable in its current form.

    As for staying in or getting out, you have great perspective. I got out after my initial 6-year enlistment. I had accomplished everything I had set out to do, and more. But it was no longer fun, or a positive challenge. Instead of opting for the Guard or Reserves, I took a clean exit. In hindsight, I wish I would have gone into the Guard or Reserves, as I miss certain aspects of serving, and I would be nearing that magical 20 year mark in the next few years (I would hit 15 this year). The retirement pension of the Reserve Corps certainly isn’t the same as active duty, but it would be a nice retirement bonus to go along with Social Security, retirement accounts, and other savings. The health care in retirement may actually be the most valuable, however.

    In the end, I’m not upset I got out. I made the right decision for myself at the time I made it. So I have no regrets. I still gained so much from my military service and I’m grateful I had the opportunity to serve.

    • Thanks, Ryan! I agree with you that those in uniform now will be grandfathered. I also agree that it’ll be a political mess until the final legislation is passed…

      I pass your Guard/Reserve advice on to everyone who tells me that they’re leaving active duty. Not all of them are ready to make that commitment, but they’re aware of how they might feel a few years down the road.

    Comment? Question? What's on your mind?