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Fewer troops choosing Redux plan

The good news: The percentage of eligible service members choosing the $30,000 Redux bonus — and the diminished lifetime retirement annuities that come with it — are a lot lower than in 2001, the first year that anyone could actually get the bonus.

The bad news: Even those lower figures, particularly for enlisted troops, are still robust enough to be worrisome.

Last fiscal year, 28 percent of eligible enlisted Marines chose the fast cash over the security of a healthier retirement. In the Navy, the figure was 24 percent.

At press time, the Army could not provide figures for the percentage of eligible enlisted soldiers and officers who chose the bonus, nor could it provide raw numbers of enlisted members who grabbed the money.

But its raw numbers on officers shows a rollercoaster effect — an increasing take rate from fiscal 2001 through fiscal 2004, when 401 officers chose the bonus, then a decline over the next two years, then a sharp spike to 449 in fiscal 2007, the highest number ever, followed by another steep drop to 342 in fiscal 2008.

At first, the Air Force said nearly half the enlisted airmen who came into their 15th year of service in fiscal 2008 took the bonus, down from a high of 68 percent in fiscal 2002.

However, officials subsequently said those numbers appear to be skewed by coding errors, and at press time, despite a week’s notice, the Air Force could not provide reliable statistics on how many airmen have taken the Redux bonus since its inception in 2001.

Military officials said they wonder whether the take rate may begin to turn upward at a time of economic uncertainty and pinched family budgets — despite an abundance of common-sense evidence and educational efforts showing it’s a bad move.

“We haven’t spoken about it much, but that’s something that people might look at,” said Pam Gamble, financial counselor at the Norfolk Fleet and Family Service Center in Virginia.

She said her consistent message to people facing a personal money crunch is that “there are much better ways to get help” than by flushing away hundreds of thousands of dollars in retirement money.

Known as the Career Status Bonus or the Redux plan — worth about $22,500 after taxes — the money is enough to make a down payment on a house, pay off high-interest debts or create a comfortable nest egg in a Thrift Savings Plan.

But for most people, the drastically reduced retirement checks that come after taking the bonus make it a bad deal for post-military life.

“It doesn’t take rocket science to see the differences in the bottom line of the two plans,” Marine Corps Commandant Gen. James Conway said. “The $30,000 Redux bonus may seem tempting — especially in these times of economic uncertainty — but its appeal loses much of its luster in the face of the facts.”

For the most part, far fewer Marines sign up for the bonus in 2008 than when it first became available in 2001.

The Corps saw a slight increase in its bonus take rate in fiscal 2007, and although the fiscal 2008 figures have come back down, that upward blip, coupled with an economy in bailout, has Marine officials reinforcing to their people that they need to take a long, hard look at the Redux decision.

The Center for Naval Analyses, a federally funded think tank supporting the Navy and the Corps, published an Oct. 15 memo outlining the Corps’ success in educating Marines on the pitfalls of the plan.

However, the researchers cautioned that more work remains to be done.

The services counsel personnel who become eligible for the Redux bonus on the basic structure of their two retirement options. Troops have a six-month window to make the decision, which ends on their 15th anniversary of service.

For example, the Redux bonus election form that the Navy gives its sailors comes with a detailed cover sheet laying out the two plans — and bluntly noting which one Navy officials think is the better option.

The cover sheet notes that a petty officer first class facing the Redux decision currently and retiring five years from now would get about $1,229 in monthly pay at retirement and about $1,574 per month 10 years after retirement.

The more generous retirement plan, known as “High-3” because retirement pay under that system is based on average basic pay over a member’s three highest-earning years in uniform, would pay $1,537 per month at retirement and $2,095 per month 10 years later.

In other words, a decade after retirement, the sailor who chose the High-3 plan would earn 33 percent more — and the disparity only grows over time.

“Given all this information, High-3 is most likely the best choice for sailors,” the cover sheet states. The Redux plan, it goes on to say, might be a good deal only if a member serves at least 30 years, and even then only if the bonus is invested.

“It is essential that every sailor examines both options and makes an informed choice,” the cover sheet states.

Such straightforward guidance has helped cut the number of bonus takers considerably since fiscal 2001. The take rate for enlisted members and officers has dropped by more than half over that time in both the Navy and Marine Corps.

Still, the take rate remains high among certain categories of service members. In fiscal 2008, for example, the Marine Corps saw about 40 percent of staff sergeants and 24 percent of gunnery sergeants sign up for the Redux plan, compared to 3.4 percent of officers.

“Unfortunately, the retirement choices that many Marines are now making will substantially lower their future standards of living,” the CNA memo said.

The trouble starts with the very nomenclature of the Redux program.

“It’s fair to say it’s misconstrued as a bonus,” said Maj. Andrew Wilson, deputy of separation and retirement with Marine Corps Manpower and Reserve Affairs. “It’s more of a loan when you look at it — a loan against your future retirement.”

Chief Warrant Officer 3 Jace Hamlett, personnel officer at Henderson Hall, Va., said financial status is the single biggest factor in who selects the Redux plan, and those who are determined to do it are difficult to sway otherwise.

“I think there have only been one or two that I have been able to talk out of it,” said Hamlett, who has counseled about 300 Marines at Henderson Hall and Camp Lejeune, N.C.