Get Paid Now or Get Paid Later: What Are Sailors Deciding?

Service members now choose between the High-3 retirement and a bonus at 15 years of service with a reduced (REDUX) retirement. Sailors’ take rates for the bonus/REDUX have declined since the choice was first offered in August 2001. The paper estimates 2 models (economic model of competing interest rates and information learning curve model) to explain the choice, suggesting that the learning curve model is more plausible. Personal characteristics also play a role in these choices. We find substantially lower take rates for bonus/REDUX for female, better educated, and single Sailors without dependents and higher take rates for black Sailors, those who have more dependents, and Sailors moving from the enlisted to the officer ranks.