Frequently Asked Questions
Click on a question to be taken to the answer.
Q.1: How do I know if I'm under High-3 or the pre-1980 system?
A: In the same way the Date Initially Entered Military Service (DIEMS) determines who is in High-3 versus who may choose their retirement system, your DIEMS determines if you are under High-3 or the pre-1980 system referred to as Final Pay. Here are the common examples of circumstances that cross the September 8, 1980, date.
Q.2: I've always been told my Academy time doesn't count toward my retirement. You're telling me differently?
A: No. You've been told correctly. Academy time does not add to your years of service and, thereby, increase your retirement pay. But, the date you entered the Academy determines (in most cases) WHICH retirement system you receive.
Q.3: For retirement choice, when do I have to decide?
A: Typically, you must decide between 14 1/2 and 15 years of service. The date may be later if you receive your notice of eligibility late.
Q.4: When do I get the bonus?
A: Should you decide to obtain a single lump-sum payment, you will receive your bonus within 90 days you submit your election paperwork and it is accepted by your Service. Thus, you will normally be paid by the 15 year and 3 month point of your career. Alternatively, you may decide to accept your payment in installments over a period of up to five years. This alternative was authorized in the FY2002 NDAA, and, therefore, exact mechanics on this option will be forthcoming. An advantage of accepting your bonus over a period of time is that you will be able to place more funds (potentially the entire bonus) into the TSP.
Q.5: Suppose I take the Career Status Bonus and later change my mind, can I? Even if I give the bonus back?
A: Electing your retirement system is an irrevocable decision. You can not change your election, even if you return the Career Status Bonus. Your decision is not considered a final decision until you complete your 15th year of active duty service. Check carefully with your Service to see when your election will be considered final and thus, no longer revocable.
Q.6: What happens if I take the Career Status Bonus and am forced to separate?
A: Generally speaking, if you fail to complete a 20-year career, by law, you are required to return a pro-rated share of the retention bonus for the time you did not complete.
Q.7: When is it advantageous to take the bonus?
A: Each individual's unique circumstances will determine which retirement option is better. The CSB/REDUX option should be carefully considered for individuals who are planning longer careers. The multiplier under REDUX comes closer to the High-3 multiplier the longer the individual stays in beyond 20 years, and finally the multipliers become equal at 30 years. Also, everyone that invests the bonus would have 5 to 15 years of compounded savings accumulated at their retirement point.
Q.8: This is a hard decision; who can help me decide?
A: In the end, only you can make the decision, but there are many sources of assistance. This webpage hosts a "calculator" that will aid you by estimating the value of the two options in relation to your personal situation. You should also seek assistance from resources on your base such as financial counselors, your chain of command, and your personnel office.
Q.9: I'm a member of the Reserves, how does this affect me?
A: If you are a post-July 1986 member
who is serving on active duty with 14 and 1/2 years of retirement creditable
active service, you may also choose between High-3 and CSB/REDUX. The
reduced retired pay Cost-of-Living Adjustments (COLAs) of REDUX will apply
only to persons who elect the CSB.
Q.10: I'm under High-3 (entered service before August 1986), can I take the bonus and switch to REDUX?
A: No. Only service members who entered the service on August 1, 1986, or later are authorized to choose their retirement system.
Q.11: Is the $30,000 bonus taxable?
A: Yes. If you receive the bonus in a single payment, by using a TSP, you may shelter up to the IRS maximum, which is $11,000 for the year 2002, from taxes by placing it into a TSP account. However, if you receive the bonus in installments, you may contribute money to the TSP each year, and, thus, increase the amount you are sheltering from taxes. Other rules and limits may apply to those in receipt of non-taxable pays in a Combat Zone or Qualified Hazardous Duty Area (QHDA). Consult your Service tax authorities and TSP information sources for more specifics.
Q.12: At what rate is the bonus taxed?
A: The bonus is taxed at your Federal, and, if applicable, state, tax rate. Upon receipt, the portion not placed into the TSP will be subject to the same tax consideration as any other bonus pay. Should this exceed your tax rate, you would have the excess returned in your Federal tax refund.
Q.13: Will I be able to put the bonus in my IRA?
A: Standard IRA rules are unaffected.
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