Military Connection – Career Status Military Pay Bonus
Career Status Military Pay Bonus | What is a Career Status Military Pay Bonus? Those service members who entered the military after August 1,1986 and commit to completing at least 20 years of active duty service as well as agreeing to receive reduced lifetime retirement benefits may take a one-time military pay bonus of $30,000. This bonus is part of the “Redux” retirement system. The bonus can be paid in one lump sum or annually after the service member reaches his or her 15th anniversary. This bonus is taxable unless earned while serving combat duty. The bonus may be paid in two to five equal installments so that it may be invested in the tax-deferred Thrift Savings Plan (TSP). This Career Status benefit changes military retirement pay. If the service member selects retirement at 20 years, they receive 40 percent of their average basic pay over their three highest earning years as retired pay in lieu of the traditional 50 percent. The amount of retirement pay increases by 3.5 percent for every additional year over 20 years or until the service member reaches 30 years of service and receives 75 percent of his or her average basic pay over their three highest earning years. This is the same for service members who do not accept this Career Status Military Pay Bonus. The annual cost of living adjustments for those accepting this bonus are one full percentage point less than the adjustment made for those in the traditional retirement plan. However, at age 62, there is a one-time catch up adjustment making the Redux and traditional pensions equal but only for this one year and then Redux returns to being 1 percent less than traditional retirement. | |