June 18, 2011:
The U.S. is currently paying $40.2 billion a year to nearly two million retired military personnel. About 75 percent of the retirees are simply men or women who reached 20 (or more) years of service and retired. The remainder include 93,000 receiving $1.38 billion in medical retirement, 357,000 reservists received $4.89 billion and survivors of deceased retirees receiving $3.65 billion.
What is expected to make these costs skyrocket in the next decade or so is that people are living longer, and many more injured veterans of Iraq and Afghanistan are expected to qualify for medical retirement (having to leave the service because of service related injuries.) Costs for medical retirement and disability payments may be much larger than anticipated because PTSD (post traumatic stress disorder) is now easier to diagnose, although there is still a lot of uncertainty of how debilitating it is. If it becomes politically expedient to classify PTSD as a severe disability, this could mean a lot more permanent payments to victims.
Despite the high cost of retirement pay, the military has found experience is often worth it. Thus, four years ago, the U.S. Congress approved a Department of Defense proposal to increase the pay of troops who stay in the military for up to 40 years. Up until then, time-in-service pay raises stopped at 36 years of service, and the pension benefits maxed out at 30 years of service. In other words, there were no financial incentives to stay in uniform longer than 30 years. That's changed, with the maximum retirement pay now increasing to 40 years (at which point you retire with 100 percent of your current pay.) Retirement pay caps for generals and admirals have also been lifted, giving really talented officers an incentive to stay in and become flag (general or admiral) rank officers. The changes also benefit reservists.
What the military has noted is that people are staying fit and healthy as they get older. It's no longer unusual to see sixty year old senior (E-9) NCOs who can still do more push-ups than most twenty year olds. While officers tend to be forced out if they don't get promoted regularly, some specialists (especially in medicine) are encouraged to stay in as long as they are physically able. But there are other technical specialties, where officers predominate, and "up or out" rules are waived to allow valuable experts to stay in uniform. Otherwise, they tend to retire, then get hired as civilians to do the same work, for more money. But for many senior officers and NCOs, doing the job in uniform is important. It's pride in the service and patriotism, and it matters. But so does the money.
These new policies won't keep a lot of people in uniform, perhaps only a thousand or so a year. But those who are willing, and physically able, to stay, are among the most skilled, experienced and talented people in uniform. This small group makes a big difference, and the additional retirement costs are not huge.