Has anyone taken this "bonus"? Does anyone think it's worth it?? $30,000 is a big number to turn down.....

Davey,

Didn't take it as I wasn't on that retirement plan. However, I'd keep as far away from it as possible.

It's a loan...a nightmarish loan. You get a taxable $30,000 and spend the rest of your life paying it back. You make those payments through a reduced monthly pension, and reduced annual COLA increases.

Do a search for CSB and REDUX and you'll get plenty of things to read. For example, http://www.militarymoney.com/money/1084549756

With the exception of a limited number of Coasties who have bought property, most folks simply blow the money. The money is gone, and they'll spend the rest of their life paying it back, to the tune of $100,000, $200,000 or even $300,000.

Crunch the numbers. It's a personal decision that applies only to you.

Very True.

Another source of information:

http://www.cna.org/documents/D0013312.A1.pdf

Don't do it!!!!!!!!!!!

I have a question about this as well since I have until May to make my decision. It is offered to have this 30k roll over into TSP without taking the initial tax hit. My question is, will that make it worth it? I have not invested into the TSP and had no intentions to. I plan on staying in for at least another 15 years which will give that 30k ample time to mature in the TSP. Basically, is the 1% annual COLA hit really that big of a deal when I will have this to fall back on in 15 years?

A: Check your facts carefully - unless you are serving or served in a combat zone this year, you can't put the whole thing in TSP. FY08 limitations (set by IRS) is $15,500. ($46K if you are in a Combat zone). See the back of your LES.

Being at 15 years and 'thinking' you are staying to 30 is a pretty big assumption too. First off - remember that High Year Tenure still exists. If we decide to enforce below the E-9 level any time soon, you can not make it to 30 w/o being an E-9.

But - assuming all of your assumptions were good, yes the 1% cola is big enough. Remember it is not 1% less of a raise, it is 1 percentage point less of a raise. For example - this year you would have got 3.5% COLA I believe. Under REDUX, you would get only 2.5%, nearly 30% less of a raise! With the exception of the year you turn 62, this applies to your entire life!

Try this site as well: defense link


If you think all you lose is 1% pay increase each year using the REDUX program, you MUST go over your options. You will lose well over the $30,000 you would receive if you take that option.

The references above are excellent and you need to read them before you make a decision but here are some high points.

If you retire at 20 years, you will lose 10% right off the top.

But let's say you stay in 30 years. then you get 75% just like the High-3 folks. You lose on percentage point EACH year not in total. In essence, in 20 years, you will make 20% less than High-3 and it is only equalized once at age 62. Then it goes down again. So for ONE year you make the same as High-3 the rest of the time you are losing money.


It is feasible that you could make more money using REDUX in the very long run assuming you do not spend a dime (ever) of your ($30,000) and you make a consistent high interest/dividend or higher over the course of the investment. If you are in a warzone when you take it congrats, you have a leg up. Taxes will take out a huge chunk if you are not careful how you invest and withdraw it.

Everyone has to make the decision but the big point is, if you plan on spending the money, you will come out way behind. If you do not invest it wisely you will come out way behind.

Good luck.

Unlike most loans, where you can pay them back and not make anymore payments, or can even pre-pay the loan, and payoff early, REDUX is like a $30k loan you can Never finish paying back, and can Never pay off.

quote:

Originally posted by Mightyz90_93:
A: Check your facts carefully - unless you are serving or served in a combat zone this year, you can't put the whole thing in TSP. FY08 limitations (set by IRS) is $15,500. ($46K if you are in a Combat zone). See the back of your LES.

According to the U.S. Code, Title 37, Chapter 5, S322, (d) (2), a member can elect to have the bonus made in two payments of $15,000 each - AND have $30,000 in TSP, within a 12-15 month period - TAX Free - No Combat Zone needed.


Ex. Member enlists in summer/fall of 19XX

Fast forward 14.5 years. Member must decide to take or not take CSB.

Member sets up TSP (if not already done so) and elects to take CSB in two payments.

Member has $15,000 sent to TSP before end of December of that year (I.e. End of Tax year).

Member then has another $15,000 sent to TSP, 12 months after receiving first $15,000.

Member is now at approx. 16 years in the CG and has $30,000, in which no taxes have yet been paid, working in TSP.

Member elect to mix it up in TSP, 30% I-Fund, 25% S-Fund, 25% C-Fund, 15% F-Fund, 5% G-Fund.

Member plans on retiring at 30 years, going after CWO4 and/or LT/LCDR.

Member retires at 30 years, receives 75% retirement of High-3 pay formula.

On Date of Retirement, assuming a modest 8% annual growth of the $30,000 - the TSP balance is now just under $100,000. (ah, but member cannot take any money out for another 10-12 years - assuming he/she came in a 18-20 years old - until member is 59.5 years old).

The $100,000 in TSP when member retires at 30 years of service (still in TSP - or at that point moved to another IRA broker), if kept in TSP for another 12 years, would grow to approx. $325,000 (again, assuming a modest 8% growth) by the time member is 60 years old.



There is a CSB Calculator to run numbers for various scenarios, to better educate anyone in this matter, at the DOD's OSD Website.


This may not be the best choice...but since no one ever discusses "Responsible Investing" and other alternative ways to invest with the CSB, and/or often referres to CSB as being on par with Getto Payday Loan Outfits, I thought I'd throw another log on the Point/Counter-Point fire!


Brian, and others on here, are real savvy with investing and numbers...I wish we could get these folks to chime in and provide a "fairy tale" version of making CSB a wise investment choice and how, possibly, a member could benefit.



One last thing - this is along the lines with the "fairy tale" scenario in the previous sentence.

There is often this talk of how a member will get 1% less COLA every year, until age 62 (catch-up COLA), and then continue to lose 1% per year.

What about this?

In a liberal, California State of Mind thinking/hoping, many future retired military members - who also vote (many who probably blew the $30k on a car, vacation, credit card debt, etc), will complain to their Reps/Senators that, "they didn't know" they were signing away the 1% COLA payment and ask to have legislation drafted to reinstate or eliminate the 1% COLA penalty (after all, it is a penalty, right?). They have already taken a hit on the lesser retirement percentage - how can the Government, which relied on these Military members for 20+ years, also take away a "measly" 1% COLA payment.

- How much you want to wager that we'll be reading that article/statement in Navy Times in 10-15 years?

quote:

Originally posted by UnknownCoastie:

- How much you want to wager that we'll be reading that article/statement in Navy Times in 10-15 years?

Well said, Unknown Coastie. We can count on hearing exactly that. Yes indeed.

quote:

What about this?

In a liberal, California State of Mind thinking/hoping, many future retired military members - who also vote (many who probably blew the $30k on a car, vacation, credit card debt, etc), will complain to their Reps/Senators that, "they didn't know" they were signing away the 1% COLA payment and ask to have legislation drafted to reinstate or eliminate the 1% COLA penalty (after all, it is a penalty, right?). They have already taken a hit on the lesser retirement percentage - how can the Government, which relied on these Military members for 20+ years, also take away a "measly" 1% COLA payment.

- How much you want to wager that we'll be reading that article/statement in Navy Times in 10-15 years?

That may show up in the future but the litigants will not have a leg to stand on. There is not a single person who is receiving 40% and losing 1% cola that did not sign a mountain of paperwork stating they wanted to take the money and they wanted to live under that retirement system. They can claim they didn't know but the paperwork says they did.

Tank - please reread my example.

You gave great advice but were miles off the mark in your math. It is not 1% less of a raise, it is one percentage point less of a raise. This years numbers means you would get 28.5% less of a raise in dollars! ($25 per $1000 instead of $35 oper $1K) In 20 years, you will loose MUCH, MUCH more than 20%. If we use this years numbers of 3.5% every year for 20 compared to 2.5% raise every year for 20, it is actually 35.1% difference in the payraises. In actual dollars in the paycheck, the difference would be about 17% less money after 20 years.

quote:

Originally posted by Brian_Jordan:
Davey,


Crunch the numbers. It's a personal decision that applies only to you.

This is really what it boils down too.

I TOOK IT!!!!!!!

"With the exception of a limited number of Coasties who have bought property" THAT WAS ME.

VERY HAPPY WITH MY DECISION. I GOT 100% RETURN ON MY MONEY AND THEN SOME, AND NOW I AM MOVING ON TO OTHER INVESTMENTS.
GOOD LUCK WITH YOUR CHOICE. DON'T BLOW THE MONEY ON A NEW CAR OR SOMETHING.

MightyZ,

I most definitely did screw up the math. One should not do numbers after being at work 36 hours. Thank you for the correction.



Wotufuka,

Congrats on the investment. I have said this to many who have asked and to many who haven't. If you are going to invest, invest in something you are comfortable with.

In your case it seems to have worked at least for now(I hope it keeps working). However, if you didn't know what you were doing, took the money and invested it into the real estate market last summer, this year you would be down in your investment. At least in most markets.

If one is not a saavy investor, that $30,000 will be the worst thing to happen to you.

Like others have said, it is your decision and you have to figure out what you are comfortable with.

And like I said in another thread, the government doesn't give you money to accept a program that is in your best interest.

Don't do it...

Of the few I know who took, they only took it to pay down credit card/ school loan/ petty debt or buy a new car. Boggled my mind. They could've managed their last five years of spending and paid off those debts before retiring.

If you had bought your home without the $21K wouldn't you still have made the same profit from the sale of your home minus the $21K?

Example- You pay $150K for a home. You use the $21K left over from your CSB to pay down payment. You finance the other $129K with a 15 year mortgage. You live there for your 3 year tour. Upon transfer to sale the home for $170K. (4% average increase in value a year) You pay off your $110K mortgage leaving you with a gross return of $60K. Back out your CSB that you used for a down payment, gives you a net return of $39K.

You would have made the $39K either way if you had used your VA benefit and still have the other $9K you lost to taxes if you had put it all in TSP. Better yet you'd have a 50% retirement instead of 40% if you'd not even taken the CSB (loan).

Like has been said above, you need to really do your homework and study your own situation. Master Chief said it right. You think you can guarantee yourself a 30 year career? With HYT, least desired billets, uncertain political scenarios, and family decisions there are too many variables to guarantee you another 15 years in the Coast Guard. Get professional assistance before you do anything with your future you might pay to regret later.


FSCS

CDA, CFS

quote:

Originally posted by searchingfor67:
Don't do it...

Wow, GREAT POST!! I'm glad I found this, I was really thinking about taking the $$! I'm still not sure what exactly all of you are saying with all that math...but it's to hear people talking about this!! You don't hear it much...