Blended Retirement System (BRS): The New Military Retirement System
Saving for retirement is hard work, and it doesn’t get any easier when you’re serving in the military. Fortunately, the government has established unique ways of paying for retirement for service members who make their career in the military. Let’s find out more about how veterans can plan for retirement without worrying about the future.
Table of Contents
- 1 What Is the Blended Retirement System?
- 2 How Does the Blended Retirement System Work?
- 3 Who Does the New Blended Retirement System Affect?
- 4 Does the Blended Retirement System Affect VA Benefits, Disability, or Survivor Benefits?
- 5 Blended Retirement System Calculator
- 6 How to Opt Into the Blended Retirement System
What Is the Blended Retirement System?
The Blended Retirement System (BRS) is a source of a retirement income that uses two distinct forms of retirement savings:
- The old annuity system for service members with 20+ years of their career spent in the military.
- A 401(k) retirement savings account operated by the government called the Thrift Savings Plan (TSP).
Why Was the Blended Retirement System Created?
Historically, pension plans have helped people pay for retirement once they finish their careers. However, pensions are proving costly to maintain for businesses, and the military is no different. For this reason, many businesses are switching their employees over to 401(k) retirement savings accounts. These accounts are funded by the employees’ own paychecks, and sometimes supplemented by employers.
Instead of sticking with the old system, or completely revamping their entire retirement savings program, the military has decided to go with a blended system. The BRS replaces the old system, which only gave retirement pensions to service members with 20 years or more of military service. Although there are some exceptions for disabled veterans, or people who have left the military for medical reasons.
This system helps to make retirement accessible for the new generation. In an age where people are changing jobs more than ever, a retirement account that sticks with you is critical. However, the military still wants to encourage people to make a career out of their service, so they include the pension for 20-year service members alongside the TSP. Together, these two components make up the BRS.
How Does the Blended Retirement System Work?
The BRS has two components, so we’ll talk about each of them in turn.
Thrift Savings Plan
The TSP operates like most 401(k) accounts. After 60 days of service, you can divert a portion of each paycheck into your TSP and the Department of Defense will match it, up to 4 percent when you contribute 5 percent of each paycheck. The DoD will also automatically contribute 1 percent of the value of your paycheck, no matter how much you contribute, so it is possible add 10 percent of the value of each paycheck. This is a great value, so it’s highly encouraged to contribute 5 percent of each paycheck whenever you can. After three years of service, you are considered fully vested and you will always have access to this savings account, regardless of whether or not you leave the military.
Once this money is in your savings account, you can choose whether you’d like to have it invested in the stock market or in government securities. Either is fine, what’s important is that you focus on long-term growth. A retirement savings account that you start in your 20s can turn into something very impressive with regular contributions and reliable growth from the stock market or government securities.
The New Pension System
The old pension became available after 20 years of service in the military. This requirement is still there, but the amount in the pension has been reduced. The old formula was the average service member’s highest 36 months of basic pay times 2.5 percent of their career length in years. The new formula is down to just 2 percent of career length in years, with the expectation that the TSP will make up for the difference in addition to giving service members more flexibility when it comes to saving for retirement.
Who Does the New Blended Retirement System Affect?
The BRS was created in 2016, but that doesn’t mean that it has gone into effect right away for everyone. How the BRS will affect you depends on when you joined active duty:
- Active duty service members who began before 2006 will stay on the old pension plan.
- Active duty service members who began after December 31, 2005 and before January 1, 2018 can choose to stay on the old pension plan for opt into the BRS.
- Active duty service members who began their military service in 2018 or later will be automatically enrolled in the BRS.
However, the BRS isn’t just available to those on active duty. If you are in the Reserves, you may be eligible for the BRS depending on how many retirement points you’ve accumulated. Members of the reserves with more than 4,320 retirement points will stay on the old plan, but those with fewer than 4,320 retirement points will have the choice to opt into the BRS.
Does the Blended Retirement System Affect VA Benefits, Disability, or Survivor Benefits?
If you choose to save for retirement with the BRS, you can still apply for survivor benefits. Disability benefits from the VA will also be unaffected by your choice to save with the BRS.
Blended Retirement System Calculator
The Department of Defense has no opinion on which system (the BRS or the old pension plan) is better. Instead, it’s up to individual service members to consider which system fits their own financial needs and circumstances better. The Department of Defense has created a BRS calculator to help service members find out which retirement plan will serve their families better.
How to Opt Into the Blended Retirement System
If you’re ready to opt into the BRS, then you’ll need to take the BRS opt-in course. This course will help you understand how your retirement plan could change under the new plan and how to best save for your future with the BRS.
If you are eligible to opt into the BRS, then a link will appear on your myPay portal directing you to apply for the new system.
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Nick Cesare is a writer from Boise, ID. In his free time he enjoys rock climbing and making avocado toast.
This post was updated May 29, 2018. It was originally published May 23, 2018.