* In recent weeks, the congressional armed services committees voted to make major alterations to the U.S. military's retirement system, as the Pentagon seeks to control personnel costs that threaten to crowd out future spending on modernization and readiness.
Military pay and benefits--including retirement pay for veterans--eat up about one-third of the Defense Department budget. In fiscal 2013, it spent $54 billion on retirement pay alone.
The costly retirement system currently in place provides hefty pensions for those who serve 20 years or more, but no money at all to those who leave before they reach that benchmark. As it stands, 83 percent of troops leave the military without any retirement savings. Many officials and outside observers view the system as unfair, and lawmakers are moving to change it.
The House and Senate versions of the fiscal 2016 National Defense Authorization Act would create a 401 (k)-like savings program for all troops who serve more than two years, while leaving in place a more modest pension plan for those who reach the 20-year mark. The changes would be grandfathered in, although those who joined under the current system would have the option of opting into the new retirement plan.
The Military Compensation and Retirement Modernization Commission, which recommended the reforms in a report released earlier this year, estimated that moving to a hybrid system would save the...