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Military Retired Pay

WaltBasilWaltBasil El Paso, TX Posts: 1,757 ✭✭✭
For those who don't know (I've posted in a day job thread here) I'm an RSO (Retirement Service Officer) for Department of Defense. I know there are some military retirees here on these forums. I posted this on my facebook, and thought the retirees here might benefit from knowing what's going to happen:

What the change in Military Retired Pay means.

For those of you who have attended my Pre-Retirement Briefing, this should have come as no surprise to you. I've been preaching for years this was coming. There were only 2 ways this could've gone: money taken from other budgets and/or higher taxes, or cut existing benefits. They chose to cut existing benefits. Here's a brief explanation of what is happening. I'm not saying it's right, just an explanation.

What does the reduction in the Cost Of Living Allowance (COLA) mean to you? Remember, retired pay has never been promised to be raised with the COLA every year. Most years it just happens. There have been a few times in the past where COLA has been set at one rate, while the raise given to Retirees has been at a lower rate. This is the first time that it has been set as a foreseeable future practice.

In essence, every retiree will be treated as though they had taken the REDUX/CSB without the initial offset of pay or the reduced COLA continuing after age 62. Those that took the REDUX/CSB have a difference between what their full pay is, and what they receive instead. That difference is on average about $300-400 per month at retirement. Every year that difference increases because their full pay (even though retirees that elected to receive the REDDUX/CSB do not receive full pay, their full pay is still calculated) increases with the full COLA, while the amount of reduced pay they are receiving will be increased by COLA minus one full percentage point. Using this formula, the government “saves” over at least $1 million per 5 people that elected to take this REDUX/CSB. By the time these REDUX/CSB recipients reach the age of 62, the average difference in their full pay versus reduced pay is between $1500-2000 per month. At age 62 REDUX/CSB recipients will then begin drawing what their full pay has increased to by that point in time. Apparently the government wasn’t saving enough money, especially as time increased and fewer soldiers began electing to take the REDUX CSB at their 15th year of service because now word is getting around – don’t take that REDUX/CSB! You are in fact getting a loan that will never be paid off. You are receiving a $30,000.00 ($22,500 after taxes) loan that you will end up paying back $300,000-400,000 over the period of your life beginning at retirement and ending at death. At age 62, these CSB/REDUX recipients will then begin drawing their full retired pay, whatever that retired pay has grown into by that point in time. However, that pay will only last until January 1st of the following year – as that will be when they feel the effect of the COLA minus 1 percent again and there will never be another reset of their pay.

So the big difference between a REDUX/CSB recipient and a regular Retiree will be that initial offset. There will be no difference in what their pay actually is and what they are getting until after the first COLA increase, then there will a small difference. And that difference will increase dramatically as Retirees reach age 62.

Another unseen effect of this will be in Survivor Benefits. Survivor Benefits are protected under USC Title 10 and cannot be changed unless Title 10 is changed. Survivor Benefits are maintained by the Retiree by having 6.5% (in most cases) deducted automatically from their retired pay. Because Congress can choose to give out a reduced COLA increase, the amount of Survivor Benefits will be based on what the Retiree’s pay would have been had that retiree’s pay increased with the full COLA. In other words, if a Retiree’s pay is $1500 per month, and full COLA is deemed to be 3%, then the Retiree’s new retired pay will be increased by 2% for a total of $1530 per month. For the purposes of Survivor Benefits, and the premium paid for those benefits, the Retiree’s pay would have been increased to $1545, therefore the Retiree will pay 6.5% of $1545, or $100.43. This $100.43 will then be deducted from the Retiree’s $1530. Now we’ve branched out to maintaining 2 sets of numbers for Retirees. The following year, assuming another 3% COLA increase, the following will happen. The Survivor Benefit that was based off the $1545 will receive a 3% boost increasing it to $1591, making the premium for such benefit $103.42 (6.5% of $1591). The Retiree’s pay of $1530 will increase to $1560. The 6.5% of $1591 premium will then be deducted out of the Retiree’s pay – essentially making the Retiree pay 6.6% of their retired pay to maintain the Survivor Benefits. Every year it grows larger. Why do they do this? Because the benefits of your spouse are guaranteed to go up by full COLA, unlike the Retiree’s pay. In other words, Survivor Benefits are always 55% of what the Retiree’s full pay WOULD HAVE BEEN. In a way, that’s the one thing they can’t take away. At least not until they change Title 10.

Comments

  • Jetmech_63Jetmech_63 Posts: 3,454 ✭✭✭
    I remember a few years back they had a focus group look at doing away with military retirement proper and replacing it with TSP. It caused such an uproar no politician would touch it. It amazes me how they view the military as easy targets when it comes to budget cuts when there is so much wasteful spending elsewhere. Fewer deployments, less money for aircraft parts, jet fuel, boots, cold weather gear, closing commisaries and hospitals, cutting sailors and replacing with private contractors, closing government websites or certain functions thereof that i use for work every day... i could go on and on. Im an active duty Navy senior chief who retires in 3.5 years, i hope the "focus groups" can be warded off that long. Thankfully i took High-3 and anytime anyone even considers REDUX we promptly talk them out of it. I could easily go off on a tangent but that is awesome info! Thanks for posting it!
  • RainRain Posts: 8,960 ✭✭✭
    I've been in six years. I've been to Iraq and Afghanistan. I have no doubt that in the future, I will have minor or major health problems as a result of my time in.To think of people that served 20 years, multiple deployments....leave them alone. I could show you 1000 more worthy targets for budget cuts.Politicians support the troops...till the bill comes due.
  • jd50aejd50ae West Gnawed Pencil, TNPosts: 7,754 ✭✭✭✭✭
    Of course if your an ILLEGAL IMMIGRANT (CRIMINAL) we will gladly see that you are well taken care of.

  • Jetmech_63Jetmech_63 Posts: 3,454 ✭✭✭
    Rain:
    Politicians support the troops...till the bill comes due.

    Well said bro
  • Amos_UmwhatAmos_Umwhat West TNPosts: 5,052 ✭✭✭✭✭
    But...but...you want to make sure the Wall St. money launderers get their 10 million dollar bonuses? Don't you?
    WARNING:  The above post may contain thoughts or ideas known to the State of Caliphornia to cause seething rage, confusion, distemper, nausea, perspiration, sphincter release, or cranial implosion to persons who implicitly trust only one news source, or find themselves at either the left or right political extreme.  Proceed at your own risk.  

    "There is nothing so in need of reforming as someone else's bad habits."   Mark Twain
  • christian1971christian1971 Posts: 442 ✭✭
    I always thought other countries where crazy for having riots in the streets. Not our country I said. Well I think the time has come. I understand more clearly now more then ever. Its time to take back our country from govts overreach.
  • christian1971christian1971 Posts: 442 ✭✭
    Did you know that Obama gets military health benefits. I didnt know he was in the military?
  • phobicsquirrelphobicsquirrel Posts: 7,349
    I'm surprised this hasn't happened much sooner. The more money the govt spends on wars and handouts to companies the more people will be hurt. We saw what happened when congress shut down the govt and all those federal workers lost all their pay, they didn't give a ***. Also how capital police had to work even though they were not getting paid. Thing is, we have the money, we always did and will have. The problem is our officials are spending it wrong and in the times when we have the power to fix things we fight over BS that really is only there because of the money being used to support it, to divide the country on a few issues that really aren't as important as what is really going on.
  • Amos_UmwhatAmos_Umwhat West TNPosts: 5,052 ✭✭✭✭✭
    christian1971:
    Did you know that Obama gets military health benefits. I didnt know he was in the military?
    Well, he is. He's the Commander in Chief.

    What will be interesting is to see if he does what some of his predecessors have done. For instance, before Richard Nixon "resigned" (ahem..), he took advantage of his position as Commander in Chief to make himself a Vice-Admiral in the Navy, with 20 years back pay and full retirement benefits. After all, he was only going to be receiving retirement benefits as a Senator, Vice-President, and President, so why not sweeten the deal?
    WARNING:  The above post may contain thoughts or ideas known to the State of Caliphornia to cause seething rage, confusion, distemper, nausea, perspiration, sphincter release, or cranial implosion to persons who implicitly trust only one news source, or find themselves at either the left or right political extreme.  Proceed at your own risk.  

    "There is nothing so in need of reforming as someone else's bad habits."   Mark Twain
  • jd50aejd50ae West Gnawed Pencil, TNPosts: 7,754 ✭✭✭✭✭
  • RainRain Posts: 8,960 ✭✭✭
  • jd50aejd50ae West Gnawed Pencil, TNPosts: 7,754 ✭✭✭✭✭
    Thanks Rain.....

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