Alternative Active Duty Military Retirement Plan

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The purpose of this thesis is to explore the monetary effect of implementing an alternative military retirement system for incoming active duty service members who retire after a minimum of 20 years of service. This alternative system combines elements of both a defined contribution plan and a defined benefit plan. Upon entering the military, all members would have a monthly contribution placed into the Thrift Savings Plan (TSP) on their behalf in exchange for a decreased monthly payment from the government upon retirement. The research model is based on case studies of Air Force members using historical data and Monte Carlo simulation. The results include an in-depth sensitivity analysis on various influential factors such as individual career length, inflation, and TSP rate of return. The research indicates that this alternative system may be able to generate substantial cost savings for the government. In addition, results show a likelihood of equal or increased monetary benefits for military members after retirement. The proposed alternative plan supplies a promising combination of retiree benefits and government savings.