As you’ve probably noticed, the United States is facing serious financial challenges. Budgets are being cut everywhere, including in the Department of Defense. As a result, lots of people are looking at the military retirement structure and speculating about whether changes can be made, both to retirement pay and health care benefits. In my opinion, it is almost inevitable that military retirement will change at some time in the future. The big questions then become:
- When will the retirement structure change?
- What will retirement changes look like?
- How will these changes be implemented with regard to retired personnel, and currently serving servicemembers?
Nearly all discussions of modifying the military retirement pay structure have included provisions to grandfather in the changes, so that currently retired and presently serving servicemembers will not be impacted. That is great news if you’ve built your financial strategy around the prevailing retirement pay plans. Our family has spent years calculating our retirement strategy. If the retired military benefit changes now, we will be just one of many people scrambling to make adjustments. Thankfully, it doesn’t look like this is going to be a problem. I’m still keeping my eye on the issue, but I’ve moved on to other, equally challenging potential problems.
Col. Mike Hayden, USAF (Ret), of the Military Officers Association of America (MOAA), brings up an equally important point in his recent piece The Bottom Line – Who Shot Your Grandfather? Hayden brings up the very relevant issue of changes to health care benefits, including how these changes might look and the unlikelihood of grandfathering the changes.
For those of you a little younger, you may not remember the challenges presented to military retirees before the implementation of the Tricare for Life program. Prior to this victory, military retirees lost their Tricare coverage when they became eligible for Medicare. As a result, military retirees incurred medical expenses for the out-of-pocket costs of Medicare coverage. Military retirees made the argument that their 20+ years of military service had been performed with the promise of “health care for life.” After years of petitioning Congress, Tricare for Life was implemented in 2001.
Similar challenges face us now. Costs for Tricare coverage in retirement continue to increase, and it certainly isn’t free as many people feel they were promised. Increasing premiums, deductibles and costs shares on Tricare’s retired population is a popular way to decrease the Department of Defense’s growing medical care responsibilities. MOAA and many other veterans organizations will continue to lobby against such changes, but some modifications to the present-day system are nearly guaranteed.
If you are planning to use the military’s health care system or Tricare insurance coverage during retirement, it is essential that you have a Plan B. A reduction in military retiree health care benefits is likely, and there are no indications that such changes would be grandfathered. Retirees can anticipate paying an increasing portion of their medical costs, and it’ll be a lot easier if you’ve got some idea how you are going to do it.
photo by nayrb7 at http://www.flickr.com/photos/nayrb7/
Do you want to know more about your military pay and benefits?
Things change fast around here! Keep up-to-date with email alerts about the topics that are important to you!