Pension Plan: Suggesting an Alternative Military Retirement System

The Air Force is in the midst of a drawdown in order to pay for the recapitalization and modernization of its aging weapon systems. During such times of force restructuring, personnel policies must encourage the separation of those members who the service can most afford to lose. Unfortunately, the current military retirement system prevents the establishment of such policy. The 20-year vesting requirement handcuffs military leaders from actively managing the mid-career force. Additionally, in today's fiscally constrained environment, the defined benefit system fails to take advantage of investment returns from equity markets. The purpose of this research is to highlight problems with the current military retirement system and to suggest an alternative system that has the potential for significant cost savings and improved personnel management.By switching from a defined benefit system to a defined contribution system, members have the ability to invest their retirement dollars in market equities.