When low military wages are discussed, those who know better will call out the fact that marines also receive untaxed benefits, such as those for housing and sustenance. So, let’s clear that out of the way: Yes, a young marine with a wife and/or child will receive untaxed benefits that are decent, like a home on base, or funds to get a home off base. But mentioning these benefits without also noting how hard he gets screwed on the back end turns a fair point for consideration into a debate tactic where a fact is chosen, but not considered in its entirety. And that is what will be done here.
This article will outline the following:
- When you are in the military, you do not get paid enough, so you are forced to choose between taking proper care of your family and your sense of pride, dignity and manhood by applying for welfare
- Untaxed portions of military pay
- How untaxed pay leads to pitiful retirement pensions, which have now been reduced by 20%
Welfare v. Manhood
For those who read my book, War Poems: A Marine’s Tour 2003-2008, you know we had a lot of financial struggles. As a LCpl, I was married with a child, and had one on the way. Money was very tight, but because we didn’t smoke or drink, didn’t have car payments thanks to my grandmother giving us a vehicle, and received large tax refunds, we weren’t accumulating unmanageable credit card debt.
My father told me I should take the benefits, which I found absolutely appalling. After all, I had a job, and my family never missed a meal.
“You’re a government employee,” he explained. “Congress determined your salary, and also the welfare thresholds. This is a part of your pay.”
He continued with how food stamps are part of the agriculture budget, and that this was a way to divert funds from the Department of the Agriculture to the Department of Defense.
Luckily for taxpayers, I was too stupid to see reason, as I imagine many hardworking men and women in the military are. I stuck to my convictions that I had a job, I was a man, and I should have been able to take care of my family by combining the two. Obviously, this is total horseshit due to mathematical impossibilities.
But we can’t gripe about this without addressing the fact that actual military pay is higher than the taxable portion.
Military Pay Isn’t That Low
Many civilians would be shocked to know that among the lazy people on welfare are combat troops, not to mention 50-hour-a-week daycare workers, teacher’s aides, and many hospital employees – basically, those who do the most for us wherever there is a frontline.
A major difference between a LCpl and a daycare worker is that the former can live in a condo on base housing that has great lawn care and a very responsive police force, as well as a nice pool, community center, gym, and many cul-de-sacs for the kids to play safely. For those who don’t like living on base for reasons that include, but are not limited to, past use of toxic Chinese drywall, allowing lead pipes/paint to remain present decades after the risks were known, or because they’d simply like to leave work at the end of the day, there’s a housing allowance.
Those based in Southern California, Northern Virginia, or New York City receive an extra $30,000-$40,000 per year, which is anywhere from 1-3x their base salary, affording troops to live where they are stationed.
And it is this tax-free portion of a service member’s pay that is the problem. None of this is included in retirement. And the 2018 updates to military pensions have made it even worse.
Tax-free Pay = Pitiful Pensions
New military pension rules dictate that the traditional pension for retirees is reduced by 1/5. Instead of receiving half your base pay at 20 years, it’ll be 40%. After 30 years, it won’t be 75%, but actually 60%. This means that troops will not only receive sub-standard wages while in service, but they’ll get 1/5 less in retirement than those who joined before 2018. In fact, the new retirement could keep even a GySgt’s pension below the poverty line.
This is supposed to be made up for by having troops invest in the stock market with a Thrift Savings Plan (TSP), which is like a 401(k). If a troop elects to put in 5% of his pay, the government will match that 5%, but only after 2 years of service.
The new military rules for retirement can keep even a 20-year Gunnery Sergeant’s pension below the poverty line
EXAMPLE: Let’s say the average career income for a retired troop is that of a SSgt with 10 years of service ($3,500 per month). He retires at 20 years as a GySgt, earning $4,700 per month.
Despite the fact that all other federal employees qualify for a 5% match the first day they start working, members of the military do not. To be crystal clear, if you got a job mopping the floors in the chow hall on Camp Lejeune, your pay would be about that of a LCpl, plus you’d get a 5% match on your TSP. If you are hired to answer phones at the VA hospital, your salary (on day 1) would be the base pay of a Cpl, and you’d get a 5% match on your TSP. But if you join the armed forces, you not only have to go wherever you’re told for basic training and MOS school, and then to your duty station, but you’ll receive a lower salary than the lowest federal employees while being ineligible for a retirement match.
Pentagon janitors and White House cafeteria workers qualify for a 5% TSP match from the first day they start working. New marines stationed at the Pentagon and White House do not
If the GySgt in our example wants to finish his career on Long Island at the Hempstead, NY duty station, or a recruiting office, so his kids have excellent public high schools and colleges, he’d receive a monthly $2,700 in BAH. Upon retirement, his $88,800 income of combined housing and base pay will now be just 40% of the base pay ($22,560 per year), which is below the poverty line if he is married with two kids.
To just get to even, he would need to land a new career that starts at over $66,000.
If he lived on base instead of getting BAH, he’d be worse off because he would have failed to secure a home and build equity, so not only would he have less by way of accumulated wealth (a common shortfall of a military career due to frequent moves), but he’d have to move homes the same month he leaves his career to start a new one.
Now, there is the TSP. This GySgt can have saved money in the TSP with a 5% match for 18 years. But could he really? I can tell you from personal experience that if you have a wife and child, you must save, but likely cannot at the ranks of Sgt and below. My wife and I did not buy alcohol once in the 5 years I served. We only took two vacations (once camping a few hours away, and once staying in a family timeshare) and only after I was an NCO. We didn’t smoke, or have cable or car payments. And the margin was razor thin. Every year we slowly racked up credit card debt, then paid it off with our tax refund.
However, the real problem with this 5% TSP match isn’t that it’s hard to come by that money, but that even in 2013, there was no match, so I couldn’t even have taken advantage of it when I would have hit 10 years of service, and hopefully had some room to save for retirement. Let’s not ignore the fact that the most basic incentive for federal workers to invest in the TSP is only recently available to military members, and only as a compromise to their compromised pensions. On top of this, they are paid low wages, then told to store some away. It’s simple to do so long as you ignore things like “math” and “real life.”
Keeping it overly simple, and using generous numbers, let’s say this future GySgt put away 5% of his base pay with the match from the time he was a LCpl with 2 years in. We’ll assume his average career income was $3,500/month with contributions of $350, and the fund grew at a rate of 7% per year.
Using this retirement calculator,the GySgt (after saving $350/month for 18 years) will have $153,000 in his TSP. Not bad, right? But he can’t withdraw it for another 20 years without a 10% penalty, and it’s all taxable upon withdrawal, so taking out the $153,000 will look more like $80,000 as a lump sum.
This is a system that impoverishes our marines by design. Our elected officials have worked to make low-paid military members responsible for their own retirement without raising their pay while reducing the old-fashioned pension by 1/5.
Military members are being made responsible for their own retirement while receiving the same low pay. At the same time, their traditional pensions are being cut by 1/5th.
How This Works out
The GySgt noted above, under the old retirement system, would have received not $22,560 (40% of base pay) as a pension, but $28,200 (50%). If he lives another 40 years, the difference is $225,600 under the new system.
While the TSP could reasonably grow to more than that, it is only the result of the GySgt having sacrificed 5% of his pay on the front end, and then giving up 1/5 of his retirement pension on the back end.
The way it works is that in the first few years of a marine’s career he receives pay that is below the poverty level. He has a house or a room in a place he would not have likely chosen to live, and when he can’t make ends meet, he can apply for food stamps, welfare, and WIC vouchers. And now we’ve got this scheme to reduce his back end benefits – the thing that was supposed to make it worth it. But the reality is that he has less money – money he really needs – that will go into a stock market he doesn’t understand, which is supposed to cover the shortfall he’ll lose with funds he can’t access for 20 years!
- You’re lower pension is covered by
- You paying 5% of the money you need
- Into the stock market
- To cover the 20% reduced pension
- With money you can’t get for 20 years
- To cover the 20% reduced pension
- Into the stock market
- You paying 5% of the money you need
But it’s not too late. We can reverse this by getting this information to our elected officials, getting it to our local American Legions and VFWs, and also by telling any service member we know so that they know not to leave the 5% on the table, if possible. Because single marines have no reason they can’t take advantage of it, and married ones have every reason to at least try.