Troops nearing the end of their military career can take a close look at their retirement pay options with a new online calculator tool released Tuesday.
The Center for Naval Analyses is offering the calculator to show troops the difference between the traditional "high-3" plan, which bases retirement pay on average basic pay during the three highest-paying years on active duty, or the so-called "REDUX" plan, which provides a $30,000 upfront cash bonus with smaller retirement checks over time.
The calculator focuses only on those two current retirement options and offers no details on the future retirement system that Congress has approved and is likely to become law very soon as part of the fiscal 2016 defense authorization bill.
Today, troops at their 15th year of service must choose between the two options for retirement and whether they want the $30,000 cash bonus. Taking the bonus results in a 20-percent reduction in lifetime retirement paychecks.
Despite the lower lifetime payout, the lump-sum cash bonus, first offered in 2001, initially was popular. As recently as 2003, almost half of the troops eligible to take the REDUX option did so, Defense Department data shows.
But these days, virtually nobody takes the deal, which results in a long-term loss of retirement pay that's estimated at more than $300,000.
According to the latest DoD data, the number of service members opting for the $30,000 "Career Status Bonus" during their 15th year of service plummeted to about 11 percent last year, down from 45 percent in 2003.
REDUX is based on a basic premise also reflected in the currently brewing proposals: That troops ultimately prefer cash up front and will accept smaller lifetime payments in exchange for some lump-sum money during their active-duty career. DoD saves money when troops opt for front-loaded benefits.
CNA is a not-for-profit military research organization.