Can Choosing REDUX Guarantee A Military Retirement?

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I’ve heard stories and answered questions about financial independence for well over a decade. I realized pretty quickly that I’d never hear it all, but I have to admit that this reader comment on the REDUX post rocked me back on my heels a little.

It’s a very logical question, yet the consequences would set the servicemember back several hundreds of thousands of dollars.

I am about to hit 15 years in the Marines. I am an E-6. My problem is that my current contract takes me to one month before 18 years. I have a small defect in my record that makes me scared I won’t get promoted. If I don’t promote then I may not be able to re-enlist. If I can’t re-enlist then doesn’t that make the Career Status Bonus a good idea guaranteeing me a 20 year retirement?

I can understand the attraction. At 15 years of service, it’s tempting to give up a shaky opportunity for a High Three pension opportunity if you can agree to a REDUX retirement right now.  It seems like a good idea to give up a few percentage points off your pension (and another percentage point off the inflation-fighting cost of living adjustment) if you can guarantee that you’ll still get a pension.

REDUX is tempting.

However, there are better options, and REDUX shouldn’t be on the list at all.

Even taking the $15,000 Career Status Bonus and committing to 20 years now is no guarantee of a pension. The military could cancel its side of the contract, recoup the CSB (or even forgive it), and release a servicemember at 17 years 11 months.

Instead, consider these issues:

The high-year tenure rules are constantly changing, but E-6s have high-year tenure of at least 20 years. Those who don’t promote to E-7 (or O-6) are still eligible to continue through the end of an enlistment contract or a commissioned obligation. E-6s who maintain their promotion eligibility are considered for E-7 selection boards all the way up to retirement. (I’ve personally seen two E-6s selected for E-7 just a few months before retiring, and they both kept on serving.) Don’t give up– stay as competitive as possible until you sign your retirement papers.

When servicemembers reach 18 years, federal law protects the opportunity to reach a 20-year retirement. This prevents involuntary discharges when we’re nearly vested in a pension and other retiree benefits. (Of course, servicemembers still have to stay on active duty and serve the remaining two years.) Because of that law, this reader’s goal should be to reach 18 years of service.

The most straightforward way to reach 18 years would be to re-enlist. (As the reader points out, the small defect would still be taken into account on the re-enlistment request.) However, re-enlistment could also require staying on active duty past 20 years.

Another option would be an extension on the current enlistment contract. Here are some reasons to incur additional service while also reaching 18 years:

  • to be eligible to transfer your GI Bill benefits to your spouse or kids
  • to receive tuition assistance for college classes
  • to qualify for advanced technical or leadership training schools
  • to comply with a minimum tour length at a new duty station (at least two years)
  • to comply with the minimum area tour to be relocated at a new duty station (2-3 years)

Every service has additional rules that could require an extension. For example, if the next set of orders begins at a new location after the 15-year point, then an extension on the current enlistment contract would ensure that there are three years of service remaining at the new duty station. The extension qualifies for the next tour of duty and it might even be required in order to obtain those orders. As a side bonus, it also gets the servicemember past the 18-year mark.

In this reader’s case, even a one-month extension (for any reason) would take them past 18 years and give the protection of serving to 20.

REDUX is not a guarantee of serving to 20 years, but it does guarantee giving up a lot of High Three pension. In this situation, an extension is a much better choice.

(Toy soldiers image courtesy of Justin McCurry.)

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Over A Decade Later, REDUX Still Sucks

WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. Good and wise counsel. Back in my department head days many a sailor faced a similar situation and conserns . And this was in the mid-90s, Riffs, 15 year retirement, Tera, and allot of that. Much anxiety in the force.

    I think the introduction of the reform commission recommendation in 2016 sort of muddies the water a bit and we still do not know how all of that will get rolled out. But my counsel to those sailors in similar situations remained, stay on active duty as long as possible, and if not able do not throw those years and points away, affiliate with the Reserve/Guard. At 60 you’ll thank me. And not not always take the 1st deal the DOD throws at you. Remember to ask this question, ‘What does the DOD or Navy get out of this?” And usually the answer to that question is never in your personal financial benefit. Hang in there, promoted many a Chief who thought they would remain in the 1st class mess forever. One with 19 years, 8 months. Never give up.

    Comment? Question? What's on your mind?