Contact: Connie Custer
Vice President, Communications and Public Affairs
Alexandria, Va. — Today, CNA released an updated version of its 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 by CNA as part of its 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. Members 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 career status bonus with smaller retirement checks over time. To use the calculator, servicemembers type 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 their anticipated life expectancy. The calculator then generates an estimate of which plan will best meet their financial needs.
CNA’s latest retirement study report, Retirement Choice: 2012, 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. "Moreover, as each year passes, the difference between REDUX and High-3 retirement income increases.”
"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 Dr. Aline Quester, a principal research scientist for CNA’s Resource Analysis Division and a co-author of the report. "The bonus may seem appealing—particularly in today’s tough economic climate—but it’s important to understand the cost of that short-term gain in terms of lost long-term benefits."
CNA’s Resource Analysis Division also focuses on such issues as infrastructure and readiness, cost and acquisition, workforce training and education, and energy and the environment.
CNA is a not-for-profit organization that serves the public's interests by providing in-depth research and solutions-oriented analyses to help decision makers choose the best course of action in setting policy and managing operations. CNA: Nobody gets closer — to the people, to the data, to the problem. www.cna.org
Note to editors: "CNA" is not an acronym and should not carry a parenthetical descriptor. CNA is correctly referenced as "CNA" or "CNA, a not-for-profit research and analysis organization." CNA is the parent organization of the Institute for Public Research and the Center for Naval Analyses, which, if referenced, should be cited as "CNA's Institute for Public Research" or "CNA's Center for Naval Analyses."