Servicemembers who accept a 15-year retirement incentive approved by Congress this month stand to lose hundreds of thousands of dollars over the lifetime of their retirement payments, according to early estimates.

This realization, combined with poor national economic factors that are expected to compel many servicemembers to stay in uniform, could make it even tougher for service officials to entice troops to leave on their own to meet the services' goals of reduced end strength.

Earlier this month, the chiefs of the military services received approval to reinstitute Temporary Early Retirement Authority – better known as "15-year retirement" – that allows officers and NCOs to retire up to five years before the traditional 20-year service mark at a reduced pay rate.

The services have not yet announced if they will offer early retirements, but defense analysts expect the services to try to use the incentive to pare down their forces, especially in the Army and Marine Corps, the two branches likely to suffer the deepest reductions.

A servicemember's retirement pay is calculated similar to traditional retirement pay: A Soldier might receive 50 percent of his basic pay after serving 20 years. However, those who accept an early retirement must subtract 3.5 percent for each year of service below the 20-year mark.

For example, a servicemember with 15 years in will receive 32.5 percent of his basic pay over the lifetime of his retirement payments.

Troops receive credit for their service to the number of months they served. Thus a servicemember who served 16 years and 11 months will receive credit for those 203 months, rather than just those 16 years.

The military services received this same kind of offer in the 1990s, as Congress shrank the post-Cold War force. About 7,500 officers took the 15-year retirements between 1991 and 1996. But Defense Department analysts today expect fewer officers and NCOs to accept the retirement incentive because of the general perception that employers aren't hiring due to the poor economy.Officers and NCOs also stand to lose a significant chunk of money if they accept an early retirement.

Calculating the amount of earnings from retirement payments a servicemember would receive, assuming he or she lives to 77, that officer or NCO could lose up to $638,000 by accepting an early retirement, versus serving the full 20 years.

An Air Force active-duty major with 15 years of service would lose $638,105 if he got out at the age of 40 – the average age for Air Force majors with 15 years of service – and lived to 77. And that's not accounting for a possible promotion and an increase in pay between his or her 15th and 20th years of service.

"Who's going to take that deal unless they are in a nasty circumstance or a tough family deal? It doesn't make sense," one major considering his retirement options told Military.com.

To be sure, the potential amount of losses varies dependent on years of service, rank and status. For example, an E-6 who has served 15 years would lose $386,496 if he or she got out at the age of 35 and lived to be 77.

These are the kinds of financial calculations that servicemembers must make before deciding to get out early. But military personnel benefits experts warned there are more variables to consider and that troops shouldn't dismiss the early retirements out of hand.

For example, an early retirement still comes with full medical benefits. NCOs or officers who were recently passed over for a promotion or those who would rather retire than face more time away from home could consider accepting a reduced early retirement rather than no retirement payment.

There's also the old principle that a bird in the hand is worth two in the bush: An offer for early retirement at least is a sure thing in an uncertain budget environment. If the deal isn't as good as a full 20-year stretch, today's environment means there's also less of a guarantee of serving a full 20 years.

"If the services can't find enough who voluntarily leave, they are going to have to force some out," said retired Col. Mike Hayden, the former chief of the Air Force's Military Personnel Policy Division and currently the deputy director for the Military Officers Association of America's government relations department.

The Army could cut its force by 80,000 Soldiers over the next 10 years. The Marine Corps stands to lose 15,000 from its end strength. The Air Force and Navy don't expect to sustain such serious drawdowns, but could still use the early retirements as a "force-shaping" tool.

The 15-year retirements helped ease the pain of reducing the force in the 1990s, but they did leave certain career fields decimated, Hayden said. Some areas just translate better to the civilian job market. For instance, a computer engineer is going to have an easier time finding a job than a tank commander.

Hayden said he expects the services to be more careful about how many officers and NCOs they let walk away early this time around.

When deciding whether or not to accept an early retirement, a servicemember must realistically consider what job they could earn and how long that job search will last, said Jim Hoseck, a RAND senior economist who specializes in defense manpower.

The military has shrunk the pay gap between servicemembers and their civilian counterparts – and in some cases, servicemembers earn more than the civilian counterparts. Overall, surveys have placed military pay in the 80th percentile of the civilian wage distribution. For most people seeking a new civilian job, they must expect a slight decrease in compensation, especially when considering the military's benefits package, Hoseck said.

"It will take years, oftentimes, for a military member to make up that decrease in compensation. They must take that into account when considering getting out early," he said.

On the other hand, if a Sailor can find a job quickly after getting out of the military, than she must account for the extra years of service she'll tabulate in that new job toward potential retirement benefits, said Beth Asch, a RAND senior economist who also specializes in defense manpower.

And if that Sailor got out of the military early enough and got a job elsewhere in the government, she could serve enough years to earn a second retirement. In the civilian world, it would also benefit servicemembers to start making payments to their 401K earlier than later, Asch said.

The national unemployment rate has slightly increased to 8.6 percent.

"This might be the time to make a move and find a job for some people," Hoseck said.

Articolul original: aici