As the opt-in period for the military’s Blended Retirement System (BRS) comes to an end, eligible service members really, really need to sit down and make a thoughtful, educated decision about whether they should opt into the new plan.
BRS is the military’s new retirement system. It blends the traditional military pension with government contributions to your TSP account. This means that you’ll have government money for retirement even if you leave the military before earning a military retirement paycheck.
Not everyone gets to pick. Anyone who entered the military after 31 December 2017 is automatically placed in BRS. Anyone who had more than 12 years of service (4320 points for reservists) on 31 December 2017 will stay in the legacy retirement system. The folks who get to choose are the people who are in between: already in the military on 31 December 2017, but not yet at 12 years of service (4320 points.)
For those eligible to opt-in, the deadline to elect BRS ends 31 December 2018. But please don’t procrastinate! We all know how “I’ll do it at the last minute” things can go wrong, and the last week of the year is a horrible time to accomplish anything. Learn all you can, make your decision, and if you choose to opt-in to BRS, do it ASAP. (If you’re BRS-eligible, and you don’t opt-in by 31 December 2018, you are permanently locked into the legacy retirement system.)
Military members asked for it. The Military Compensation and Retirement Commission report found that 53% of service members liked the idea of having government contributions to the Thrift Savings Plan (TSP.) As the private sector has moved away from traditional pensions, workers see the benefit of having retirement funds that they can take with them even if they don’t stay in a job for decades.
There are three main differences between BRS and the legacy plan.
BRS offers automatic and matching government contributions to your TSP account. The government will contribute 1% of your base pay to your TSP account each month, starting after 60 days of service (but immediately for those who are opting-in.) You are vested in, or “own,” that money after 2 years of service. Then, if you contribute from your own pay to your TSP account, the government will match the first 5% that you contribute to TSP. It’s a 100% match for the first 3%, then a 50% match for the next 2%. In total, if you contribute 5% to your TSP account, you’ll get 5% from the government (1% automatic and 4% matching.)
BRS results in a smaller military retirement paycheck. Under the legacy plan, retirement pay is calculated by multiplying your years of service x 2.5% x your average highest 36 months base pay. Under BRS, retirement pay is calculated by multiplying your years of service x 2.0% x your average highest 36 months base pay. The difference between a 2.5% multiplier and a 2.0% multiplier means that at 20 years of service, BRS folks will earn a 40% retirement check instead of the 50% retirement check
BRS provides a mid-career continuation pay bonus for an additional service commitment. Each year, the military branches will announce their continuation pay times and amounts. They must be paid between 8 and 12 years of service, and the amount can be between 2.5 and 13x of base pay (Between .5 and 6x base pay for reservists, based on AD pay charts.)
I’ve compiled a list of many BRS resources. Working through this list should answer all the factual questions, and a lot of the emotional questions. If it doesn’t, send me an email from my site and I’ll see what I can find for you! Where To Learn About The Military’s New Blended Retirement System
This choice is very personal, and there’s no single right answer. There are some key factors to consider:
Do you have any idea that you might like to stay in the military until you reach retirement? If the answer is no, then BRS is a no-brainer. You’ll leave with some government contributions to your TSP account, which is better than leaving with nothing.
Will you contribute to TSP to get the government match? Getting the full government match is key to making BRS work for you. Yes, the 1% automatic government contribution is good, but the full 5% government contribution is huge.
Where are you in your career? Switching makes more sense for someone with fewer years, because they’ll get more years of government contributions.
What is your investment style? TSP is great, but not if you stay invested in the G fund for your entire career. If you’re afraid of the stock market, then you won’t make the most of your TSP’s potential.
The Blended Retirement System is a great choice for the over 80% of folks who leave the military before they reach retirement, and it has a lot of good features for those who do earn a retirement paycheck. There’s no right answer for everyone, just the right answer for you and your specific situation. Get all the details and make a decision.
If you choose to opt-in to BRS, go ahead and do it now. It’s easy through MyPay, and you won’t have to worry about forgetting or getting locked out of your MyPay or having a computer crash during the last week of the month.