RT Journal Article
SR Electronic
T1 Implied Discount Rates for the U.S. Military Blended Retirement System
JF The Journal of Retirement
FD Institutional Investor Journals
SP 22
OP 32
DO 10.3905/jor.2018.6.1.022
VO 6
IS 1
A1 Brian C. Payne
A1 William W. Jennings
A1 Thomas C. O’Malley
YR 2018
UL https://pm-research.com/content/6/1/22.abstract
AB We evaluate the 2018 option for U.S. military service members to switch from the legacy defined benefit (DB) pension to the new DB/DC hybrid Blended Retirement System. We show that the required return on the pre-retirement matching and incentives in the new system is unrealistically high. Alternatively, those switching to the new system must anticipate a substantial improvement to the current levels of incentive Continuation Pay. We construct our own analysis and a calculator that takes a financial economics perspective missing from previous analyses of the decision as well as consider the positive attributes of the Blended Retirement System. We conclude that those facing the 2018 choice between the two plans should favor the current DB plan if they anticipate serving 20 years.TOPICS: Retirement, legal/regulatory/public policy, pension funds