Separately, Hagel said 900 additional Marines would be assigned to bolster security at embassies around the world under his proposal.
Diplomatic security has received close scrutiny since a terror attack on the U.S. consulate in Benghazi, Libya, in 2012 killed Ambassador Christopher Stevens and three other Americans.
Also, Hagel said the plan envisions increasing special operations forces from 66,000 today to 69,700 in the future to better meet tactical needs of a modern military requiring counterterrorism and crisis response.
Other provisions would reduce some benefits for military personnel, resulting in them having to shoulder more of their housing and medical costs. Reducing the federal subsidy to commissaries would mean smaller discounts for groceries on U.S. bases.
Through his remarks, Hagel warned that if Congress fails to eliminate planned across-the-board spending cuts beyond 2016, the military reductions would be on a greater scale and significant enough to compromise U.S. national security.
Some of those forced cuts, known as sequestration, were eased for this year and next under the budget deal worked out by Congress in December.