Is REDUX Retirement Worth it?

I recently received a reader question regarding the CSB / REDUX Retirement System and whether or not it was worth it to take the cash and reduced retirement pay, or stick with the High 3 Retirement System. In almost every situation, the High 3 Retirement System results in a higher monthly pension for military retirees.…
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I recently received a reader question regarding the CSB / REDUX Retirement System and whether or not it was worth it to take the cash and reduced retirement pay, or stick with the High 3 Retirement System. In almost every situation, the High 3 Retirement System results in a higher monthly pension for military retirees. But let’s break it down so you can learn how to make your own decision and decide whether you should choose the CSB / REDUX Retirement System or the High 3 Retirement System.

What is the CSB / REDUX Retirement System?

The CSB / REDUX Retirement System was created by the Military Reform Act of 1986, and applies to all military members who joined on or after August 1, 1986. The system was designed to save the government money when paying out military retirement pensions to the ever growing number of military retirees.

How REDUX works: The REDUX Retirement System pays out a $30,000 Career Status Bonus at the 15 year mark to military personnel who select the REDUX retirement plan. In addition to the $30,000 Career Status Bonus, military retirees will receive a reduced military pension compared to the High 3 retirement plan, and a lower annual Cost of Living Adjustment (COLA).

Cost of Living Adjustments (COLA) for retired pay are given annually based on the increase in the Consumer Price Index (CPI), a measure of inflation. Under REDUX, the COLA is equal to CPI minus 1%. Here are more details about the REDUX Retirement System.

REDUX Retirement system:

  • $30,000 Career Status Bonus.
  • 40% monthly retirement at 20 years, plus 3.5% per additional year.
  • *Maximum monthly retirement benefit 75% of base pay at 30 years.
  • COLA = CPI -1%.

*Some military members may be eligible to retire at 100% base pay after 40 years of service, depending on high year tenure status, military needs, and other factors.

The High 3 Average Retirement System

The high 3 Average retirement System pays an average basic pay for the highest 36 months of the individual’s career. The High-3 Average Retirement System does not come with a cash bonus, but base retirement pay and COLA accrue more quickly than under the REDUX plan.

Cost of Living Adjustments (COLA) are given annually based on the increase in the Consumer Price Index (CPI); under the High-3, the annual COLA is equal to CPI.

High 3 Average Retirement System:

  • 50% monthly retirement at 20 years, plus 2.5% per additional year.
  • *Maximum monthly retirement benefit 75% of base pay at 30 years.
  • COLA = CPI.

*Some military members may be eligible to retire at 100% base pay after 40 years of service, depending on high year tenure status, military needs, and other factors.

Which military retirement plan is better – REDUX or High 3?

It is possible to receive the same percentage of your final pay with both retirement plans, however, you would need to serve 30 years under REDUX to receive the same amount as you would receive if you retire under the High 3 retirement plan. Retirees under the REDUX plan will accrue lower COLA increases to their retirement pay, so even if the retiree completed 30 years and ended with the same base pay they would have had under the High-3 retirement system, a gap will steadily grow between the amount they receive under REDUX vs. what they would have had under High-3.

REDUX Adjustment at Age 62. To counter the pay gap between the two retirement systems, retirees under REDUX receive an adjustment at age 62 to bring their retirement pay up to the level it would have been under the High-3 retirement system. However, the COLA remains at CPI – 1, and the gap begins to widen once again. Over the course of a lifetime, the difference can easily reach into the hundreds of thousands of dollars, and for higher ranking individuals, the difference can reach well into the million dollar range.

Military Retirement Calculators

I recommend visiting the DoD Retirement Calculators for additional information:

When you compare the REDUX Retirement System to the High 3 retirement plan, you can see how the difference between the two plans can add up quickly. Unfortunately, the $30,000 bonus is sometimes enough money to entice many military members to mortgage their future pension.

Your situation may differ, so I encourage you to examine your situation, play with hte calculators, and speak with a professional advisor for more information.

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About Ryan Guina

Ryan Guina is The Military Wallet's founder. He is a writer, small business owner, and entrepreneur. He served over six years on active duty in the USAF and is a current member of the Illinois Air National Guard.

Ryan started The Military Wallet in 2007 after separating from active duty military service and has been writing about financial, small business, and military benefits topics since then. He also writes about personal finance and investing at Cash Money Life.

Ryan uses Personal Capital to track and manage his finances. Personal Capital is a free software program that allows him to track his net worth, balance his investment portfolio, track his income and expenses, and much more. You can open a free Personal Capital account here.

Featured In: Ryan's writing has been featured in the following publications: Forbes, Military.com, US News & World Report, Yahoo Finance, Reserve & National Guard Magazine (print and online editions), Military Influencer Magazine, Cash Money Life, The Military Guide, USAA, Go Banking Rates, and many other publications.

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  1. charlotte says

    The one time Catch up at the age of 62 is what exactly? You are caught up to the 50 Percent rate?
    Then the COLA each year is still the same -1%, is this correct?

    And the Percentage is it based off of the year you retired? I retired in 2014 so the retirement would be based off of the base pay table for that year correct??

  2. Elove says

    If I was to take the REDUX, I know I will be taxed and receive 22,500…but when I come tax rolls around, will I be penalized/taxed again and/or will have to owe the IRS with just a basic income table as a reference???

  3. Peter says

    The key to the REDUX payment is to not spend it. 20-30k invested in the market gives you a nest egg at 60 y/o worth 3-500k$ with even low average market returns.
    Now if you buy a Harley with the REDUX money, well life is about choices.

  4. Tim Walton says

    Are they still doing this program? What I am gathering that the only way this works is if you invest all of it and don’t lose your shirt. Being a government employee there is no guarantee benefits will be there and using the stock market, no guarantee that it won’t crash. Slippery slope for sure.

  5. Mark says

    Also something to think about… If you take the redux and invest it (Roth, IRA or TSP) and god forbid something bad happens to you. You still have a hard investment that your family will control & recieve. I think you have to take all posibilities into account when your talking about long term investments and retirements. Thoughts?

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