ARTICLE
5 minute read•Jan. 31, 2024
The Blended Retirement System can put your service member on the path to long-term financial security. The more a service member contributes to their own retirement, the more the Defense Department matches it.
Anyone who enlisted after Jan. 1, 2018 – whether active duty or reserves, was automatically enrolled in the BRS, and they are already covered by its benefits. Your family member or friend may not be thinking about military retirement right now. But, by encouraging them to fully participate in the BRS, you can have a big impact on their financial well-being down the road.
How the Blended Retirement System improves on the old military retirement plan
Under the old retirement plan, you had to serve 20 years to qualify for a military pension. That was a challenge because if you left the service before completing 20 years – which many people do, you did not receive any government-provided retirement benefits.
TheBRS improves on the old planby combining a pension with a 401(k)-like savings account. Most service members will get some retirement benefits – even if they don’t finish 20 years.
How the Blended Retirement System works
- Pension:
The BRS starts with a pension – a fixed payment – that the government pays a service member if they complete 20 years of service. The monthly pension payment is based on this formula:- 2% x number of years served x the “high 36” (the average of the highest 36 months of basic pay received) = monthly payment
- For example: 2% x 20 (years) x $6,250 (high 36) = $2,500 per month
If your service member qualifies for a pension, they will receive it for the rest of their life once they retire.
- Thrift Savings Plan:
As part of the BRS, your service member is enrolled in a retirement savings account – similar to a 401(k) – called theThrift Savings Plan. To start with, all service members contribute 3% of their basic pay to the TSP each pay period. The government also automatically contributes 1% of the service member’s basic pay to the TSP. Plus, they’ll match your service member’s own contribution up to 5%.- Here’s an example: 3% (member basic pay) + 1% (government contribution) + 3% (government matching contribution) = 7% contributed to TSP each pay
Service members can increase their contribution as much as they want up to IRS retirement account limits, and the government will contribute 1% plus up to a 4% percent matching contribution. As their TSP account grows, they can choose to invest it in stocks or government securities.
Here’s how you can really make a difference: Encourage your service member to contribute as much as possible to their TSP account. The more they save, the more the government puts in too. Over time, those contributions can add up to a big nest egg.
After three years of service, service members are fully “vested” in their contributions – the money is theirs and they can take it with them when they leave military service. However, if they hang in there for 20 years, they will receive both the money in their TSP account and a monthly pension as their military retirement. That can add up to a nice retirement income and comfortable financial future for your service member.
- Continuation bonus:
When a service member reaches 12 years of service and commits to four more years of service, they can get a cash bonus called Continuation Pay. For active duty, the bonus equals 2.5 times monthly basic pay. For the reserves, it is 0.5 times their monthly basic pay. Continuation Pay varies by each service, however, so service members are encouraged to speak with their pay/finance office for more detailed information.
Options for collecting military retirement benefits
Say your friend or family member makes the military their career. When can they start collecting those retirement dollars?
Active duty can get retirement pay at any age when they choose to retire after 20 years of service. National Guard and reserves can begin receiving retirement pay at age 60.
When your service member retires, they choose from two options:
- Take their full retirement pay.
- Take a lump-sum payment of either 25% or 50% of their gross estimated retired pay.
- If they take a 25% lump sum payment, their monthly retirement pay will be 75% of their full retirement pay. If they take the 50% lump sum, they will get 50% of their full retirement pay.
- But when they reach age 67, their retirement pay goes back up to the full amount.
Want to take a deeper dive into the military’s retirement system?Check out the Blended Retirement System MilLife Guide. And subscribe to theto get military life information like this sent straight to your inbox.
FAQs
Under the BRS your multiplier is 2 percent per year of service. Longer years served equals a higher retirement benefit. If you retire at 20 years of service under BRS, you'll receive 40 percent of your highest 36-months* of basic pay as your defined benefit.
Is the blended retirement system worth it? ›
The Blended Retirement System can put your service member on the path to long-term financial security. The more a service member contributes to their own retirement, the more the Defense Department matches it.
What percentage does the blended retirement system pay? ›
If you retire from active duty at 20 years under the BRS, you receive 40% of the average of your highest 36 months of basic pay as your defined benefit — and that percentage increases by 2% for each additional year of service.
What is the difference between high 3 and blended military retirement? ›
Like High-3, BRS pays out monthly annuity payments after 20 years of service, however, these annuity payments are slightly lower than what is paid out by the High-3 plan. That said, servicemembers enrolled in BRS do receive some matching TSP contributions from the government while High-3 enrollees do not.
What is the difference between the blended retirement system and the old system? ›
A: Under the legacy system, only those who serve 20 years receive a retirement benefit. That means about 81% of service members leave with no benefit. Under the Blended Retirement System, about 85% of service members will receive a retirement benefit, even if they don't qualify for full retirement.
Can you opt out of the blended retirement system? ›
While you can opt out of this automatic enrollment, by law you will be automatically re-enrolled each calendar year. You can adjust your contributions anytime, as long as you stay within the annual limits set by the IRS.
Can I still switch to a blended retirement system? ›
Other service members either elected to join the new blended retirement system or chose to retain the legacy retirement plan. If you previously chose to keep the legacy plan but now wish to switch to the blended retirement system, you are currently unable to do so.
Is it too late to opt into BRS? ›
The Blended Retirement System opt-in enrollment period closed at midnight on Dec. 31, 2018, capping off the successful roll-out of a new retirement system for members of the uniformed services.
What is the new military blended retirement system? ›
The new retirement system is known as the "Blended Retirement System" or BRS. The “blending” in BRS comes from the blending of two major sources of retirement income: the existing annuity provision for those who retire after 20 or more years of service, PLUS the Thrift Savings Plan (TSP).
How much is a 20 year military pension? ›
Defined Benefit: Monthly retired pay for life after at least 20 years of service (so if you retire at 20 years of service, you will get 40% of your highest 36 months of base pay).
What is the 7 Percent Rule? In contrast to the more conservative 4% rule, the 7 percent rule suggests retirees can withdraw 7% of their total retirement corpus in the first year of retirement, with subsequent annual adjustments for inflation.
What is the 95% rule retirement? ›
Under the Rule of 95 members can retire when their age plus their years of service equal 95, provided that they are at least 62 years old. For example, a member who is 62 years old could retire with 33 years of service rather than waiting until their schedule based eligibility date (62 + 33 = 95).
What rank do most military retire at? ›
Officers commonly retire at O-5, with the Lieutenant Colonel rank in the Army, Air Force, and Marine Corps, and the Commander rank in the Navy being prevalent. This shift might correlate with longer service durations and improved retention initiatives.
Does high 3 get TSP matching? ›
Military TSP Matching Contributions Are Exclusive to BRS Members. As a general rule of thumb, military members in the High 3, Final Pay, or REDUX retirement plans are not eligible for matching TSP contributions. This policy was changed on January 1, 2018, with the introduction of the Blended Retirement System.
Does the military have the best retirement plan? ›
Regarding federally sponsored programs, GAO concluded that, although many similarities exist among all programs, the military system offers more distinct advantages: (1) military members can retire at an earlier age; (2) pension calculations have a more favorable basis; and (3) members are not required to make ...
What is a defined benefit at retirement? ›
A defined benefit plan promises a specified monthly benefit at retirement. The plan may state this promised benefit as an exact dollar amount, such as $100 per month at retirement.
What is a defined benefit in the military? ›
(pension) Under the Blended Retirement System (BRS), if you stay in the Uniformed Service for 20 or more years, you are eligible to receive a defined benefit, (pension), based on a percentage of your basic pay.
What are the disadvantages of defined benefit pension plans for employees? ›
Employees have little control over the funds until they are received in retirement. The company takes responsibility for the investment and distribution to the retiree. That means the employer bears the risk that the returns on the investment will not cover the defined-benefit amount due to a retired employee.
