By Shin-Ae Young (Leonard Wood)August 17, 2018
The Fiscal Year 2016 National Defense Authorization Act created a new military retirement system that blends the traditional legacy retirement pension with a defined contribution to service members' Thrift Savings Plan account.
The new Blended Retirement System went into effect on Jan. 1. Active Component Service members with fewer than 12 years since their Pay Entry Base Date, and Reserve Component Service members who have accrued fewer than 4,320 retirement points as of Dec. 31, 2017, will have the option to opt into the Blended Retirement System. All Service members who enter the military on or after Jan. 1, will automatically be enrolled in BRS.
So, what now? If you are thinking about opting into the new BRS retirement, there is a suggested five steps checklist to success.
-- Step one: determine your eligibility.
-- Step two: take the mandatory BRS Opt-In Course, Joint Knowledge Online (JKO).
-- Step three: educate yourself on the BRS and use the BRS Calculator to analyze your estimated benefits.
-- Step four: schedule an appointment to consult your installation personal financial counselor.
-- Step five: make your decision between now and Dec. 31.
If a service member elects to opt into the new BRS, he or she cannot change their mind at a later date, the decision is irrevocable.
Here is one of the most frequently asked questions: What should service members be most aware of when deciding whether to opt into BRS?
Service members who have no intention of making the military their career and staying at least 20 years should be aware that BRS would provide government benefits toward retirement through a defined contribution plan, called the Thrift Savings Plan. This new automatic and matching government contribution benefit is worthy of careful consideration.
Early retirement savings, dollar cost averaging, and the power of compounding are important lifelong concepts service members will want to pay attention to during the mandatory BRS Opt-In Course.
Eligible service members need to carefully review each retirement system to understand how their decision to either remain in the legacy retirement system or opt into the new BRS will impact them and their families (Source: https://militarypay.defense.gov/blendedretirement/).
There are two other elements of BRS that service members will have if they decide to opt-in:
-- Continuation Pay: BRS members are eligible to receive a one-time, mid-career (8 to 12 years) bonus payment in exchange for an agreement to perform additional four years of obligated service. This one-time bonus payment is in addition to any other career field-specific incentives or retention bonuses.
-- Lump Sum Option: BRS members may be eligible to elect to receive a discounted portion of their retired pay as a lump sum (25 or 50 percent) at retirement.
In addition, I highly encourage service members to learn more about the Thrift Savings Plan as it plays a big role in the new BRS. The main website to obtain the most accurate information about the BRS is https://militarypay.defense.gov/blendedretirement/.
Have questions or concerns or comments? Please call one of our personal financial counselors at ACS at 573.596.0212.
(Editor's note: Shin-Ae Young is the Financial Readiness Program manager at ACS.)