Online Calculator Helps With Redux Retirement Decision
By Jim Garamone
American Forces Press Service
WASHINGTON, Jan. 13, 2000 DoD has unveiled an online calculator designed to help service members decide which military retirement plan is best for them.
The site, http://www.dod.mil/militarypay/, will help service members compare future benefits under the Redux and the High-3 retirement systems.
The Fiscal 2000 Defense Authorization Act reformed the military retirement system. The retired pay reform in the act gives a choice to service members subject to the Redux retirement system -- all those who entered the service on or after Aug. 1, 1986 -- who reach their 15th year of service beginning in 2001.
First choice: Service members can join the pre-Redux retirement system. This so-called High-3 system gives members 50 percent of their average basic pay for their highest three earning years before retiring after 20 years of service. To compute retired pay after 20 years of service, for instance, E-7s would total their basic pay for the highest three years -- probably the last three -- divide the sum by three and then again by two. Retired pay for additional service increases 2.5 percent per year to a maximum of 75 percent for 30 years of service. Also, annual cost of living adjustments are fully indexed to inflation as measured by the Consumer Price Index.
Second choice: Eligible service members subject to Redux can take a taxable $30,000 lump-sum bonus, agree to complete at least 20 years of service and choose to remain in the Redux plan. The bonus is immediately payable and can be used any way the member wishes. Retired pay starts at 40 percent of the high three earnings average after 20 years and rises to a maximum of 75 percent for 30 years' service. Redux adjusts pay each year at the rate of the CPI minus 1 percent.
To use the calculator, click on the "You decide -- A personalized calculator" link on the Retirement Choice Web page. Then on the Personalized Retirement Calculator page you click on the "Proceed to the Retirement Calculator" link and then fill in information including your age at 20 years of service and your expected final rank and years of service at retirement. Note whether you would invest your $30,000 bonus if you choose to stay with the Redux option.
The calculator makes some assumptions about the economy -- inflation, tax rates, etc. You can accept these defaults or play "what-if?" Click on the "Calculate" button and let the system work.
By law, DoD must notify people facing the decision after they have served 14.5 years. They must make the choice at 15 years of service. The first group facing the choice will be notified in January 2001 for a choice in August 2001.
"We've put this calculator up a year early so people can use it and really understand the choice they are to make," a senior DoD compensation official said. "This is a complicated decision and should not be made lightly."