Air Force News, news from Iraq - Air Force Times

Specific plan can make Redux better option

Navy Command Master Chief (SS/AW) John Cooper has been telling sailors about the dangers of taking the Redux retirement option for 10 years now.

During that time, he’s done five tours as a command master chief and has personally counseled more than 40 sailors on what they stand to lose by taking the $30,000 Career Status Bonus — and the reduced retirement annuity that comes with it.

He now travels the world for the Millington, Tenn.-based Center for Career Development, giving lectures to groups of 20 to 200 sailors on the Navy benefits package — including a 10- to 15-minute discussion on Redux.

“Of all those sailors at my past four commands, I only had two that took the bonus,” he said. “I tell them the pros and cons of the programs and, for most, all you have to do is show them the numbers — they can speak for themselves.”

Still, Cooper says there is a “very narrow sliver” of the military population that could come out ahead financially by taking the Redux bonus — if they are smart and patient.

Those people, he said, are enlisted E-8s when they come into the bonus window at 15 years of service and who have a solid shot at being promoted to E-9. That’s because to make this work, they must be able to make E-9 before hitting the E-8 high-year tenure point at 26 years of service.

If they’re already an E-9 when they take the bonus, they are “already golden,” Cooper said, because the key to this plan is qualifying for retirement payments of 75 percent of basic pay for serving at least 30 years — which you can do only if you reach the E-9 paygrade.

They must then request to take the bonus in five annual payments. Congress changed the law on the Redux retirement option in 2002 to allow people to take the $30,000 in installments over five years — which makes it possible to invest all the money in the federal Thrift Savings Program.

Finally, when they retire from active duty, they cannot touch the bonus money they have invested until they are at least 62, when a one-time “catch-up” raise restores the value of retirement pay under the Redux system to what it would have been under the more generous retirement plan — though Cooper said the longer the money stays invested, the better off the retiree will be.

If they follow those steps, Cooper said, people under Redux can come out ahead on retirement pay compared to another E-9 with the same years of service who didn’t choose Redux and its bonus.

But for the many other service members looking at building a good nest egg for retirement, Redux simply doesn’t make sense, Cooper said.

When he talks to sailors, he said, “I show them how much they’re going to lose based on how many years of service they expect to serve.

“It’s an enticing idea, collecting $30,000. But after taxes, it’s usually just over $21,000. Then you also need to remember that if for some reason you don’t finish your 20 years, you’ll have to pay that money back.”

The only exception to that rule, he said, is forced retirement because of medical disability.