Is the Blended Retirement System Right for Me?
Important retirement changes all military members need to know about
If you’re in the military, you need to know that the retirement system changed on January 1, 2018 to the Blended Retirement System (BRS). There are some things you need to understand about it and what it means to you.
The Blended Retirement System
The “blending” comes from blending two major sources of retirement income – the existing annuity provision for anyone retiring after 20 or more years of service and the Thrift Savings Plan (TSP). The TSP is a government managed 401 (k) account that allows military members to invest their own money in either stocks or government securities. A contribution from your employer is also allowed.
BRS will use the current annuity formula (highest 36 months of basic pay x 2.5% of years of service) but the 2.5% rate makes a shift downward to 2%. To make up for this difference, the government will contribute to the service member’s TSP; depositing 1% of basic pay into the service member’s account each month. The service member will also be automatically enrolled to contribute 3% of their pay each month to the TSP. After two years, the government will match the member’s contributions up to an additional 4%, allowing for 5% government contribution.
Why Adding TSP is a Good Thing
TSP contributions are a benefit for those who don’t stay in the military long enough to get a retirement check. Government statistics show that 83% of people who join the military don’t stay long enough to retire. Before, when they left after 5 or 10 years they got nothing towards retirement. But with TSP, military members can leave the service at any time and still have a retirement fund they can take with them anywhere.
What Else is New?
BRS also includes a mid-career continuation pay (at about 12 years) as an incentive to continue serving for a full 20 years. When you do retire, you’ll be given an option to take your full retirement pay or take a lump sum payment of either 25% or 50% of your gross estimated retirement pay. Doing this will reduce your monthly annuity until the age of 67 when your retirement pay goes back up to its full amount.
Current service members with less than 12 years of service as of January 1, 2018 will be able to switch over to the new system. No back pay will be offered, but matching contributions will start at enrollment.
If you became an active duty member
- Before January 1, 2006 – you’ll remain with your current retirement plan
- After December 31, 2005 and before January 1, 2018 – you can choose BRS or your current retirement plan
- After December 31, 2017 – you’ll be automatically enrolled in BRS
The opt-in period for BRS begins January 1, 2018 and ends December 31, 2018.
If you’re eligible to make the choice of BRS or your current retirement plan, the best thing you can do is run the numbers. Determine which will be a better payout based on how long you plan to remain in the military.
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