The Economic Pros and Cons of Staying in for "Just One More Month"

We've all heard it: every month you stay in after 20, you're "working for half pay." But it's not nearly that simple.

Here are the different costs and benefits I looked at when considering whether I should stay in for a few more months or punch out now:

ECONOMIC BENEFITS OF STAYING IN. These benefits are easy to quantify:

• You get BAH and BAQ. And tax-free, at that. That's $1000-3000 a month, depending.
  
• You don't pay state income taxes (which can be 0-10% of your paycheck, depending on the state)
• Your retirement paycheck gets bigger every month you stay on active duty. In my case, I crunched the numbers and found that for every month I stayed in, my monthly retirement paycheck would increase by $25 (i.e., for each month that I gutted it out, I'd get an extra $25 a month for life, or $300 a year for life; assuming an average lifespan, that increase has a present value of $3000 or more). About half of the increase was due to my "top 36 month" average pay getting bigger, and the other half of the increase was due to the 2.5% per year retirement pay multiplier.
  
• And of course, as long as you're still on active duty, you get paid that other "half" of your base pay.
  

ECONOMIC COSTS OF STAYING IN. These costs are a lot harder to quantify, and vary a lot according to your personal circumstances and values:

• Second career opportunity cost: every day you're still on active duty, you're not building seniority/experience in your second career.
  
• Actuarial cost: your retirement is worth less because you'll receive it for fewer years. Assuming a constant lifespan, each month you stay in is one less month you'll receive your retirement pay. In my case, I found that although my potential retirement paycheck went up $25 every month, the total future value of my retirement package really only went up roughly half that much, given that the Air Force would have to pay me one less month. This is something to keep in mind if you hate active duty and you're only staying in "for a bigger retirement check."
• Life experience opportunity cost: can't even begin to put a pricetag on this one. What are you missing out on every month you're on active duty? If your dreams and your family are on-hold while you're on active duty, and job stress is chipping away at your health, this may be the biggest factor of all.
  

BOTTOM LINE:

Unless you're retiring at 30 years, your take-home pay is going down a lot. Don't expect "half pay." It will probably be a lot more like "one-third pay." Crunch the numbers yourself so you can make an informed decision.

But remember that it's still a guaranteed steady income stream equivalent to winning a several-hundred-thousand-dollar lotto prize. Figuring out when/how to use that money should be one of your life's most pleasant challenges.

RESOURCES:

The DoD has very rudimentary on-line calculators to compute your approximate retirement check.

HOWTO: Dropping Papers

I don't know how hard it was before the Internet Age, but AFPC has recently made it drop-dead simple to "drop papers."

STEP 1: ON-LINE RETIREMENT ELIGIBILITY CHECK

Go to the vMPF. Click on "Self-Service Actions" and then "Retirement". One of your menu choices will then be "Retirement Elgibility Check." On that page, you'll be asked what year and month you'd like to retire on (all retirements are effective on the first of the month). Once you submit the form, AFPC will check to see if you're eligible to retire on that date (i.e. do you have 20 years, etc), and whether any waivers will be required (i.e. is the retirement date less than 120 days away, are you under any assignment codes, etc). Within 5 duty days (and usually a lot sooner), they'll send you an answer via e-mail

If, for whatever reason, you decide that you don't want to retire on the requested date, you don't need to do anything. The "case" opened by submitting the Requirement Eligibility Check will be closed and go away 14 days after AFPC provides a response.

If you do want to retire, you will need to drop papers within 14 days of receiving your Retirement Eligibility Check response, or you'll have to go through this step all over again (not a big deal, really).

If, after submitting a Requirement Eligibility check but before dropping papers, you decide you want to retire on a different date, you can just let 14 days go by and start the whole process over again. If you don't want to wait 14 days (or you're on a short timeline to get out), you can just call the AFPC "Contact Center" (the DSN/commercial numbers are prominently posted on vMPF) and tell them to close your case. [Note: For those of us used to what passes for "customer service" in the military, the AFPC Contact Center is surprisingly responsive: you can call them anytime 24x7, and a real human will actually answer and help you.] The contracted civilian who answers the phone at the contact center can't close the case on his/her own authority; they have to call a guy sitting in the Retirements Branch. But it's still an easy one-phone-call transaction for you.

STEP 2: RETIREMENT APPLICATION

So, AFPC has sent you an e-mail saying that you're eligible to retire. You now have 14 days to drop papers. But no one in your unit has been notified yet, and your personnel records don't say anything about "retirement pending." So you can still back out at this point, and no one will be the wiser.

Assuming you've decided you really, really want to retire, it's now time to "drop papers." Ironically, this process is now entirely paperless. You just go pack to vMPF, click on "Self-Service Actions", then "Retirement", and then "Apply for retirement."

You'll be prompted to read and electronically acknowledge a "Pre-Retirement Counseling Checklist." This won't take you more than 5 minutes.

Then you'll get to the actual "Retirement Application." It will ask you when you want to retire, what your forwarding address will be, and what you're commander's e-mail address is. Once you click "Submit" on this form, you will have "dropped papers" and effectively ended your career. Rescinding your retirement application is not an easy or painless process; it requires AFPC approval and I'm guessing they really would rather see you gone at that point.

Before you hit "submit", you may want to let your commander know that you're planning on retiring, so it won't be a total surprise to him when the AFPC sends him an automated e-mail asking for his coordination. That e-mail will be the first time anyone in your unit gets notified by AFPC of your intention to retire.

STEP 3: WAIT

As soon as you submit your application, your commander will get an e-mail from AFPC. The commander has to respond to this e-mail before AFPC will act on the application.

In my case, the commander sat on the e-mail for over 15 days. AFPC won't forget about it, though, and will send you periodic reminders that the commander still hasn't coordinated on your application. I'm not sure if the commander also gets "reminder" e-mails.

In any case, the commander does not have the option to "disapprove" your retirement application. Though I'm guessing that they can make comments to the effect that you are mission-critical, pending court-martial, or whatever they think might sway the real approval authority: the AFPC Retirement Branch.

However, I do know that if the commander sits on the application for 30 days without action, AFPC closes the case, as if you'd never applied. I only found out about this when AFPC sent me a 14-day reminder e-mail, telling me that the commander still hadn't acted on my application.

[If anyone has more insight as to what the process looks like from the Commander's site of the desk, please comment!]

STEP 4: ORDERS!

According to buddies who have been through the process, you typically get retirement orders via e-mail about a week after your commander coordinates on your application. We'll see how that works.

How Much Notice?

OK, you've decided that "it's time," and you want to retire. How much notice do you have to give? It turns out the answer is "not much."

THE BASIC RULE: 120 DAYS' NOTICE

The reg says that you must submit your retirement application no less than 120 days before your retirement date, start of terminal leave, or start of permissive TDY. So, in a normal scenario, you can be sitting on the beach and growing a beard within 4 months of dropping papers. For those who, like me, lived in fear of spending a full year as a "lame duck" after dropping papers, learning this was a big relief.

UNCONVENTIONAL TIMELINES: FOUR MONTHS OF 1-DAY WORKWEEKS, AND OTHER TRICKS

But let's say that you can't stomach even 120 days of showing up at the office. There is an answer: just take some/all of your leave as "ordinary leave" (i.e. before you final-out) rather than as terminal leave. A buddy of mine talked his supervisor into letting him take leave Monday-Thursday for several months; as a kicker, the Friday duty day was used exclusively for "outprocessing." If you have 60 days of leave, you can parlay that into 15 weeks of "off Monday-to-Thursday, one outprocessing appointment on Friday."

Alternatively, you can just take some/all of your leave balance as a big, contiguous period of ordinary leave (e.g. 45 days off), before coming back for a few weeks of final outprocessing.

And don't forget that you can also take your 20 days (30 days if OCONUS) of permissive TDY before you final-out. Even better, you don't have to take them all at once! You can take 4 straight weeks of Monday-Friday permissive TDY before you come back and outprocess. Or 5 weeks of Monday-Thursday permissive TDY. Or whatever -- you can break up your permissive TDY however you'd like.

EVERYTHING IS WAIVERABLE

As anyone who's been in 20+ years knows, everything really is waiverable. If you can make a case for hardship or "good of the service", the 120-day notification can be waived. I have no idea how hard it is to get this waiver; AFPC Retirements Branch is the waiver authority, and I'm guessing they're probably very conservative because short-timeline retirements have all kinds of potential for causing administrative problems.

MINOR PLANNING FACTOR: THE RETIREMENT ELIGIBILITY CHECK

When planning your retirement timeline, don't forget that you cannot drop papers until AFPC completes a "Retirement Eligibility Check" on you. This check is painless, is done entirely on line, and no one in your unit is ever notified that it occured. Doing the check doesn't obligate you to retire, and isn't entered into your permanent personnel record. It's just an opportunity for AFPC to look at your proposed retirement date and say either "yup, you could retire on that date" or "no, you can't retire on that date without one or more waivers."

AFPC advertises that it takes "5 duty days" to perform the check. I ended up doing 3 of these checks, for 3 different dates. In my experience, AFPC come back with an answer within a few hours of your request in the best-case scenario, and in about 4 duty days in an absolute worst-case scenario (i.e. I asked them the day before Christmas, they didn't get back to me until the day before New Year's). Once you have a positive "Retirement Elgibility Check", you can drop papers.

BOTTOM LINE: YOU CAN BE RETIRED 127 DAYS FROM NOW

So, when if you're planning on retiring on a short timeline, make sure you allow a week to complete the "Retirement Eligibility Check" before you drop papers. And remember that you can't drop papers less than 120 days before your planned terminal leave date or (if not taking terminal leave or terminal PTDY) 120 days before your retirement date.

Why I Started the USAF Retirement Blog

We PCS every few years. By the time we've been in 20+ years, we know exactly what to do. Retirement is different. You only retire from the Air Force once. It's something entirely new to everyone who approaches it. And those who have already been through it, those who could walk you through it and give you some "gouge", those guys are, well, retired; they aren't hanging around the office to teach the younger guys the ropes.

As I found myself facing retirement, I first turned to the Internet for some inside information on how to gracefully retire, what are the real-world rules of "dropping papers" beyond the black-and-white guidance in AFI 36-3203. To my surprise, the Internet didn't have a lot of answers. There were no "gouge" sheets. So I'm starting one.

I submitted my retirement application a week ago. This blog will capture the issues and insights I run across over the next few months. Things like:

• How much notice do you really need to give?
• How much does staying in an extra month affect your retired pay?
  
• What outprocessing items need to be completed, and when?
• What's the deal with VA claims?
• If you're looking to retire in a hurry, what's the shortest possible timeline?

So, read on, and please do share your comments and questions. Thanks!