We are more than halfway through the Blended Retirement System (BRS) election period for those members of the uniformed services who were in the service as of December 31, 2017 and had less than 12 years of service at that time (less than 4,320 retirement points for members of the reserves). All service members who had 12 or more years of service (4,320 or more retirement points) are grandfathered into what is now called the “legacy retirement system”. All members of the uniformed services who enlisted January 1, 2018 or later are automatically covered by the Blended Retirement System.
For those who have a choice, whether or not to opt for the blended retirement system has a lot to do with whether they think they will spend 20 or more years in the military, as 20 years (or its equivalent in reserve points) is necessary for military retirement, regardless of whether one is in the blended or the legacy retirement system.
Members of the military can participate in the Thrift Savings Plan, just like civilian employees. Those in the legacy retirement system receive no matching contributions from the government (like civilian employees covered by CSRS), while those in the blended retirement system will receive up to 5% of their salary in matching contributions from the government (like civilian employees covered by FERS).
The legacy retirement system provides 2.5% of salary per year of service, so a 20-year service member would receive 50% of their military pay for retirement. While the blended retirement system provides 2% of salary per year of service, so a 20-year service member would receive 40% of their military pay for retirement.
There are two big questions that all service members who have the choice to elect BRS should be asking themselves when they make their election. First is: “Will I stay in the military for 20 or more years?” Currently, roughly 19% of active duty enlistees stay for 20. The number for reserves is 14%. If one stays for 20 years, they will get a certain 50% of their military pay. If they leave before 20 years, they are not entitled to military retirement at all, and the matching contributions to the TSP that they would receive through BRS will leave them with a larger nest egg.
The second question is: “Will I be able to contribute enough to the TSP (and will my contributions have sufficient earnings) so that I can come out even (or perhaps ahead) compared to the legacy retirement system. Tools like the TSP calculators can help. So can helpful websites such as https://militarypay.defense.gov/blendedretirement/.
Once these two questions are answered, the answer about whether to enroll on BRS or to stay in the legacy system will become self-evident.
What does BRS mean to the Thrift Savings Plan? Well, it means a lot more participants. Last year, Kim Weaver, the Director of External Affairs for the TSP said that there will be an influx of 500,000 to 750,000 new participants as some current service members switch to blended retirement and enroll in the TSP and all new enlistees are automatically enrolled. The Thrift Board believes that the current computer system is up to the task of handling the new enrollees.