The Six Things You Need to Know About the Blended Retirement System
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The Six Things You Need to Know About the Blended Retirement System

October 17th, 2018 | 8 min. read

Key takeaways from the BRS to get you on track for retirement

The new Blended Retirement System (BRS) represents a major shift in military retirement planning, one that introduces more risk and more complexity for our Nation’s military families.

Generations of retired military families have depended on the traditional retirement pension with guaranteed monthly pay to provide them with a lifelong retirement income. But that long-time benefit changed in January with the launch of the BRS. It’s the new standard retirement package for service members who’ve joined the military since Jan. 1, 2018. But service members with less than 12 years of service as of Dec. 31, 2017, are also eligible. They can stick with the legacy benefit or switch to the BRS, and they only have until Dec. 31, 2018, to make their choice.

What’s the difference between these two programs? We’ve outlined six key things that active duty service members need to know. 

  1. Like the traditional military pension, the BRS has a guaranteed lifelong pension benefit for members who serve for 20 years. However, this pension is reduced by 20 percent.
  2. In addition to the guaranteed—but smaller—pension for career military members, the BRS offers matching contributions in the Thrift Savings Plan (TSP), similar to 401(k) plans that are common with private companies. This means that after two years of service, the government will match your pre-tax contributions dollar for dollar up to the first three percent and 50 cents on the dollar up to the next two percent.
  3. The government contributes one percent of a member’s salary on a pre-tax basis to your TSP every pay period, beginning 60 days after your start date. This one percent is an automatic contribution, and you don’t have to do anything to receive it.
  4. The guaranteed contributions are fully vested after two years. At that time they are yours to take with you if you leave the service, and they are eligible to roll into another qualified retirement plan. The money you contribute to the plan is not subject to a vesting schedule. 
  5. The BRS offers continuation pay, which is a bonus paid mid-career in exchange for a commitment of continuing service, which will be at least three years. Continuation pay is calculated as 2.5 months of basic pay.
  6.  Under the BRS, service members are eligible to receive a discounted lump sum payout in exchange for reduced monthly pension payments leading up to full retirement age. The reduced retirement pay remains in effect until you reach full retirement age, which is currently 67. 

The bottom line is the BRS is transforming the way service members should think about and plan for their lifetime financial security. It places the weight of increased financial decision making and its attendant risk directly on the shoulders of the active-duty force. That means it will be important to make the right decisions at every step of your career in order to be successful.

For the new generation of career service members (i.e., those who’ve joined since Jan. 1, 2018), making up for the 20 percent cut in retirement pay will require amassing significant income-generating assets through disciplined savings behaviors and smart investment choices. And for eligible service members who opt in to the new system, success will depend on amassing enough wealth to justify giving up a sizeable portion of their guaranteed retired pay.

Now that you’re armed with the basics, there are many more details that should be discussed as part of your overall retirement plan. Your Financial Advisor  can help you make sense of your military retirement benefits. And if you are eligible to opt in to the BRS and have not yet made your decision, your Advisor can help you weight your options. 

For more information, check out First Command’s Blended Retirement System infographics for active duty  and Reserve  families and other materials on the BRS webpage. 

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