Aviation Continuation Pay (ACP - The Bonus)

[Hunter Rose]

On 6/13/2018 at 9:40 AM, ihtfp06 said:

You’re still receiving flight pay, BAH, BAS, potentially a bonus, and your eventual retirement check is going up 2.5% of your base pay for every year past 20. So it’s more like you’re working for 2/3s.
 

 

No, you're not working for 2/3s pay either.  That''s the same incorrect logic as the working for 50% pay argument.  It's fallacious reasoning based on retirement being only 50% of base pay and discounting what the 2.5% increase means in real dollar terms because 2.5% is a very small number.

 

In simplest financial terms, at 20 years you're working for:

(100% pay + any bonuses) + (2.5% added retirement) - $54K.  The $54K is what a Lt Col would get if they retired at 20 and you forgo by continuing to work.

The 2.5% retirement increase for a Lt Col averages about $3K per year past 20.  It's also almost zero risk. Using a conservative 4% rate of return, you's have to earn $75K net to generate the same annual income stream increase.  However, you're giving up the $54K in retirement income, so you subtract that from $75K to get $21K.  This $21K net would get added to your full Lt Col pay when making a comparison to a civilian job.  

So what you're really working for in that 21st year is Lt Col salary + any bonuses + $21K.  This would be a base income number that you would compare to a civilian job to see if you would do better or worse financially by leaving at 20 years.  You'd also have to add in extra money to account for your tax free BAH/BAS pay. 

Granted there's tons of other factors that go into the decision of when to retire:  QoL, you prefer money in the bank as opposed to a gov't pension/annuity that goes away when you die, risk tolerance, etc.  

 

 

 

 

Edited June 14, 2018 by Hunter Rose

[Guardian]

Wow. That blew my mind. Nice.

[pilot]

What do the smart folks here calculate as more valuable...years added on to AD retirement, or years/seniority lost at a major? I can't imagine a scenario where an additional year of AD retirement is worth a lost year of seniority/longevity.

[ThreeHoler]

What do the smart folks here calculate as more valuable...years added on to AD retirement, or years/seniority lost at a major? I can't imagine a scenario where an additional year of AD retirement is worth a lost year of seniority/longevity.

 

Here’s one: you lose your medical at age X where X is less than or equal to 65.

 

Edit: the forum stripped out the math symbols because they thought I was doing an SQL injection hack.

[pilot]

7 minutes ago, ThreeHoler said:

 

Here’s one: you lose your medical at age X where X

 

Agree. Ditto for airline X going bankrupt/out of business, or merging and the pilot group getting stapled to airline Z. Some things can't accurately be forecast/accounted for and will only be known at the age of 65. Medical status being one of them. 

But I assume in these NPV spreadsheets, opportunity cost (seniority/longevity) is accounted for. Just curious what the assumed value is. And what the assumed probability is that one loses a medical or goes to an airline that goes out of business, thereby negating and resetting seniority/longevity. Anecdotally, I would think the odds seem to favor being able to see an age 60-65 airline retirement and an airline not going bust and/or getting stapled (or some other seniority losing event), but I have zero data on that.

[SFG]

40 minutes ago, FlyArmy said:

Agree. Ditto for airline X going bankrupt/out of business, or merging and the pilot group getting stapled to airline Z. Some things can't accurately be forecast/accounted for and will only be known at the age of 65. Medical status being one of them. 

But I assume in these NPV spreadsheets, opportunity cost (seniority/longevity) is accounted for. Just curious what the assumed value is. And what the assumed probability is that one loses a medical or goes to an airline that goes out of business, thereby negating and resetting seniority/longevity. Anecdotally, I would think the odds seem to favor being able to see an age 60-65 airline retirement and an airline not going bust and/or getting stapled (or some other seniority losing event), but I have zero data on that.

My calculations show that getting out at 12 YOS, joining the Guard and flying for the majors for 8 years, then “retiring” from both, murders the active duty check of the month club if you have the discipline to live on senior captain pay and save everything above that. If you suck at saving or investing and need someone to pay you twice a month then you should not think about getting out.

Second best scenario, again purely by the numbers, is staying until 20 and then flying for the majors for 7 years. If they’re still hiring...

Of course, in either case, if you continue flying for the majors until 65 you’ll just be stupid filthy rich in retirement... as long as you don’t spend $200,000+ a year.

BUT this doesn’t account for QOL or job satisfaction. If you love coming to work everyday in the worlds greatest Air Force then getting out might not be worth it to you, even for a Ferrari or two in your 70s.

Edited June 14, 2018 by Klepto

[HossHarris]

Don’t discount the fact that most of the majors have pretty good disability insurance..... should you get a debilitating case of vertigo around age 55 or so ....

[Ebony zer]

Klepto, best option get out, go airlines, get off probation, drop mil leave with the guard or reserves, bypass crap seniority, collect AD retirement, then truley start airline career with up to 8 years of seniority. 

[Ebony zer]

BTW guard and reserves have the same pilot bonus if your AGR.

[Guardian]

Not true

[Ebony zer]

What's not true? Length may differ but it's still $35k per year. To be honest I think a 3 year $35K per year bonus is better because you can still curtail your orders if you choose. Plus in 3 years if it goes up you can sign up for more. I don't think the bonus is going down or away anytime soon. Good luck getting out of the AD ADSC if you happen to be offered a dream job. 

[ViperStud]

Guard bonus is better than AD. First and foremost, it’s not an ADSC and can be curtailed if you change your mind. Second, you can sign multiple contracts (newsflash, dollar amounts have been going up, not down). Third, they’re even offering a bonus, albeit smaller, to DSGs who get a full year of MPA. The flexibility far outweighs the negative factor of annual amounts that lag a year behind AD. 

[Ebony zer]

Viperstud your 100% correct and no matter how much I try to tell dudes that not only is the grass greener in the guard and reserve it's lush and soft, they're skeptical. AD does a great job brainwashing folks that 1. They can't make it in the civilian sector.  And 2. If they join the guard/reserves they can never get an AD retirement. Both are patently false. 

[Guardian]

not only is the grass greener in the guard and reserve it's lush and soft,

Especially if it is a stand alone unit. No active duty to be seen. If it is a TFI, they usually are as bad if not worse than active duty because not only do you have your unit expectations to live up to. You have the active duty’s brow beating as well. But at least you don’t have to move or do involuntary 365’s. Oh wait. That’s coming to a guard and reserve unit near you now. TFI sucks.

[matmacwc]

15 hours ago, Ebony zer said:

Viperstud your 100% correct and no matter how much I try to tell dudes that not only is the grass greener in the guard and reserve it's lush and soft, they're skeptical. AD does a great job brainwashing folks that 1. They can't make it in the civilian sector.  And 2. If they join the guard/reserves they can never get an AD retirement. Both are patently false. 

I think it's cause dudes are afraid of the unknown, and it can be a big step.  It is much better on the dark side with few exceptions.

[war007afa]

So AvB allows you to increase your amount through renegotiation so long as you increase your ADSC by 3 years. But if you get passed over twice, law makes continuation your option (up to 20 with waiver up to 24 for O-4). So if you’re passed over you can extend the ADSC at the higher rate and opt to only stay until 20 when twice passed over.

If you’re already sucked in with the devil’s money and looking for options, consider the contradictions associated with these programs which work in your favor. 

[ThreeHoler]

So AvB allows you to increase your amount through renegotiation so long as you increase your ADSC by 3 years. But if you get passed over twice, law makes continuation your option (up to 20 with waiver up to 24 for O-4). So if you’re passed over you can extend the ADSC at the higher rate and opt to only stay until 20 when twice passed over.
If you’re already sucked in with the devil’s money and looking for options, consider the contradictions associated with these programs which work in your favor. 

What about people who are eligible for the 2nd bonus? Say the 11M $30K/yr for at least 3 years but must go to 22 YAS.

How does one retire at 20 years when they have an ADSC to 22 YAS if they’ve already elected the 24 year option? I realize without the ADSC one could retire at 20 years since the 24 is their option. But how does that work when it is no longer your option because of an ADSC?

[war007afa]

Because continuation is offered, but not required (as is the election to accept beyond 20 years of service). And because DOPMA trumps ADSC, regardless. 

[olevelo]

What about people who are eligible for the 2nd bonus? Say the 11M $30K/yr for at least 3 years but must go to 22 YAS.

How does one retire at 20 years when they have an ADSC to 22 YAS if they’ve already elected the 24 year option? I realize without the ADSC one could retire at 20 years since the 24 is their option. But how does that work when it is no longer your option because of an ADSC?

My guess is that if you’ve already elected 24, you’re stuck with an adsc that takes you to 22. However, if you only elected 20, they may not be able to enforce the 22 adsc. Just a guess though.

[Guardian]

Those of you in the guard familIar with the bonus, if you stop in the middle of one of your years in the bonus do you get any credit for that partial year?

[Lord Ratner]

On the QoL front:

Yes, the airlines can tank. If you're not willing to take that risk, nothing will change you mind.

But here is what you are giving up. This is American airlines, saying what my projected seniority number will be every year based only on retirements. I was hired in March.

Right now the lowest wide body captains are ~2000-3000 in seniority. So you may get it after retiring from the AF, but it won't be for long, and you won't have the seniority to control your schedule.

[Flyingnut]

   I think I might need a sanity check and wanted the brain trust's weigh in.  I'm leaning towards taking the bonus.  A little background.  Late to rate so I just qualify for the bonus this FY.  I have 4 years and 9 days until retirement (continued to 20) and a DEROS in 2019.  With three years left most of my math says transition afterwards would be fiscally smoother staying.  I'm worried about a few things; finding a guard/reserve unit that would even take me this long in the tooth, if I had to stick it out in the regionals for a few years(I have a few flying skeletons), 4 years of lost seniority, and finally is anyone worried about stop loss?  Thanks in advance! -FN  

[Buddy Spike]

19 minutes ago, Lord Ratner said:

On the QoL front:

Yes, the airlines can tank. If you're not willing to take that risk, nothing will change you mind.

But here is what you are giving up. This is American airlines, saying what my projected seniority number will be every year based only on retirements. I was hired in March.

Right now the lowest wide body captains are ~2000-3000 in seniority. So you may get it after retiring from the AF, but it won't be for long, and you won't have the seniority to control your schedule.

It's all about luck and timing.  I was hired at 33 also but my Sen@65 is only 141.  Guys getting hired now with 30+ years to go will be in the top 1%.  

[Lord Ratner]

It's all about luck and timing.  I was hired at 33 also but my Sen@65 is only 141.  Guys getting hired now with 30+ years to go will be in the top 1%.  

141 is still incredible!

[Termy]

14 minutes ago, Flyingnut said:

   I think I might need a sanity check and wanted the brain trust's weigh in.  I'm leaning towards taking the bonus.  A little background.  Late to rate so I just qualify for the bonus this FY.  I have 4 years and 9 days until retirement (continued to 20) and a DEROS in 2019.  With three years left most of my math says transition afterwards would be fiscally smoother staying.  I'm worried about a few things; finding a guard/reserve unit that would even take me this long in the tooth, if I had to stick it out in the regionals for a few years(I have a few flying skeletons), 4 years of lost seniority, and finally is anyone worried about stop loss?  Thanks in advance! -FN  

If I offered you $1.6mm to stay in with the only stipulation being you could only take $50k a year of it out would you do it? I’d stay in personally if you can avoid 365 and your family supports. 

Minor thread derail but people’s “expected earnings” stuff for the airlines never seem to discount to present value. In other words, the fact that by staying in a couple years you might miss a couple years of $300,000 in your sixties isn’t that big of a deal.