CNA Releases 2009 Retirement Calculator And Retirement Choice Study

Alexandria, Va. — Today, CNA released a new, web-based calculator that allows military servicemembers to determine which Department of Defense retirement plan will best serve their needs — a decision that could cost them hundreds of thousands of dollars in retirement benefits.

The calculator, developed as part of CNA's annual Retirement Choice study, allows future retirees to determine how much they would earn under two competing retirement plans and decide which one is right for them. The two plans affect servicemembers who joined the military after July 31, 1986 and must choose between the High-3 plan, which bases retirement pay on the highest average basic pay for three years of a career, or the REDUX plan, which provides a $30,000 upfront bonus with smaller retirement checks over time.

To use the calculator, servicemembers plug in the year they entered military service, the number of years they will have served when they retire, their tax rate, their paygrade at retirement, and an estimate of their life expectancy. They then receive an instant estimate of which plan will best meet their financial needs. The calculator can be accessed online.

The latest report, Retirement Choice: 2009 finds that the REDUX retirement plan plus a $30,000 bonus paid at the 15th year of service is a bad choice for almost all servicemembers, significantly reducing their retirement income. "The higher the grade, the lower the years of service at retirement, and the longer the servicemember lives, the greater the reduction," the report concludes. "Even if servicemembers invest the bonus, the required interest rates make it virtually impossible for them to break even."

"The REDUX bonus effectively amounts to an early, partial cash-out of a servicemember's retirement plan, which translates into less future retirement income," said Anita Hattiangadi, a team leader in CNA's Resource Analysis Division and a co-author of the report. "The bonus is appealing, but it's important to understand the cost of that short-term gain in long-term benefits."

CNA's Resource Analysis Division also focuses on such issues as infrastructure and readiness, costs and acquisition, education, training and housing.