Redux Retirement~Would You Trade $300K For $30k?

[mickeyd]

Would you take out a lifetime mortgage on your retired pay with an APR of 35%? What about 24%?

That's pretty much the deal the services now present to officers and enlisted members, respectively, at the 15-year point in their careers. They're offered a $30,000 taxable "bonus" if they agree to accept dramatically reduced retired pay for life. In essence, they're asked to trade $300K-$600K of retired pay to get $23,000 after taxes up front. And many troops are doing it.

Seems like a short term solution to a long term problem, but every service member that is affected by this should make an informed decision if this is offered.


MOAA: Military Officers Association of AmericaAs I See It — REDUX “Career Status Bonus” — A $30,000 Scandal

 

[Fireup2020]

Of course not!

 

[OAG]

I wonder what the acceptance rate has been since the inception of this farce. Having a Son and SIL that will or have retired from the AF and Navy in the last 2 years I never had that question come up. I think if I had heard it from either one I would have been tempted to taking a baseball bat or some other item and knock some sense into them.

 

[JPatrick]

Really, really bad deal....

But, a question... Without regard to the so called bonus, is the below an accurate description of the current retirement deal??

As background, Congress passed the REDUX system in 1986 as a means of cutting defense spending. REDUX cut retired pay for subsequent new service entrants to 40 percent (versus the previous 50 percent) of high three-year average basic pay at 20 years of service and reduced annual COLAs in retirement by 1 percent a year. REDUX retirees see a one-time “catch-up” increase at age 62, but then suffer the annual COLA caps for life.

 

[soupcxan]

Why does this surprise anyone? The federal government is doing the exact same thing, en masse: borrowing trillions from future generations (of which I am a part) to spend on baby boomers today. At least with the REDUX program, I have a choice in the matter...

 

[Bikerdude]

Why does this surprise anyone? The federal government is doing the exact same thing, en masse: borrowing trillions from future generations (of which I am a part) to spend on baby boomers today.

Yeah, just like they did to me to pay for the WWII generation. Get used to it.

 

[Nords]

Of course not!

But... but... I'm going to use the money to [-]buy a pickup truck[/-] pay off my debts, I mean buy a house for my family, no, no, I mean start my own business! I'll be responsible!!

As background, Congress passed the REDUX system in 1986 as a means of cutting defense spending. REDUX cut retired pay for subsequent new service entrants to 40 percent (versus the previous 50 percent) of high three-year average basic pay at 20 years of service and reduced annual COLAs in retirement by 1 percent a year. REDUX retirees see a one-time “catch-up” increase at age 62, but then suffer the annual COLA caps for life.

Yep. That's accurate.

Except for the part about not showing a spreadsheet or a chart of how the REDUX pension loses to inflation.

It used to be the rule, not the option. But when the heads of all four services stand up in front of Congress singing barbershop-quartet harmony about this being a bad idea for retention, then you can rest assured that it's a really really bad idea. I think it was the first time in over 50 years that the JCS actually had a unanimous opinion about an issue.

 

[mickeyd]

Yeah, just like they did to me to pay for the WWII generation. Get used to it.

If I recall correctly, part of the stim/tax package that just was signed into law in Denver included money for Filipino war fighters that are WWII vets. A nice gesture, but I'm not sure how that will stimulate the USA economy.

 

[deepc]

I'm with you all on the bad deal a twenty year retiree gets by taking the money, no question.

But, unless I'm remembering incorrectly, at thirty years you're whole again. So someone staying the full ride could take the money and win.

Or course, they're asking the military member to make that decision a long time before thirty years of service. We always counseled how bad a deal it was (my Command Master Chiefs were very knowledgeable and persuasive) but the service member sometimes felt the short term gain was the better way.

 

[Boxkicker]

I'm with you all on the bad deal a twenty year retiree gets by taking the money, no question.

But, unless I'm remembering incorrectly, at thirty years you're whole again. So someone staying the full ride could take the money and win.

Or course, they're asking the military member to make that decision a long time before thirty years of service. We always counseled how bad a deal it was (my Command Master Chiefs were very knowledgeable and persuasive) but the service member sometimes felt the short term gain was the better way.

If you can stay 30 years these days in the military (especially the Navy). These days its forced retirement at 20 that is catching peoples.

For example:

A PERFORMANCE-BASED BOARD FOR CONTINUATION OF ENLISTED
PERSONNEL WITH OVER 20 YEARS OF ACTIVE SERVICE WILL BE HELD FOR
SELECTED ACTIVE AND FULL-TIME SUPPORT (FTS) SAILORS IN SEPTEMBER 2009. THIS BOARD IS A PART OF OUR CONTINUED EFFORT TO OPTIMIZE THE QUALITY OF THE FORCE WHILE SHAPING OUR END STRENGTH TO MEET FUTURE CHALLENGES. THE BOARD WILL BE FOCUSED ON RETAINING OUR TOP PERFORMERS SERVING IN OUR MOST DEMANDING BILLETS. CONTINUATION BOARDS WILL BE HELD ANNUALLY IN FUTURE YEARS.

THE FY-10 E7-E9 CONTINUATION BOARD FOR ACTIVE DUTY AND FTS
PERSONNEL WILL CONVENE ON 21 SEPTEMBER 2009. CHIEF PETTY OFFICERS NOT SELECTED FOR CONTINUATION MUST TRANSFER TO THE FLEET RESERVE OR RETIRE EFFECTIVE NOT LATER THAN 30 JUNE 2010, UNLESS WAIVED BY THE CHIEF OF NAVAL PERSONNEL (CNP).

ACTIVE AND FTS E7 THROUGH E9 PERSONNEL WITH AT LEAST 20 YEARS OF ACTIVE SERVICE AND THREE YEARS TIME IN RATE AS OF 1 SEPTEMBER 2009 WILL BE SCREENED BY THE CONTINUATION BOARD.