Blended Retirement 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.

A: The BRS has three parts: a Thrift Savings Plan, which is like a civilian 401(k) retirement savings plan, a “continuation pay” bonus after 12 years of service if you choose to reenlist, and an annuity payment.

A: Blended retirement enrolls all service members who joined beginning January 2018 into the TSP, with automatic and matching Defense Department contributions. You are “vested” after completing two years of service, which means you have full ownership and that money belongs to you. If you leave, it goes with you.

A: All service members who joined beginning in January 2018 are enrolled into the TSP. Upon 60 days of you entering service, the government contributes 1% of your base pay to your TSP. You can contribute another 4% of your base pay to get a 5% total contribution.

After completing two years of service, you become vested, so if you leave the military, your entire TSP account goes with you. While the TSP is also available for service members not enrolled in the BRS, the department does not contribute to those plans.

A: Once you are enrolled in the Blended Retirement System, the Defense Department will contribute 1% of your basic pay to your Thrift Savings Plan after 60 days of entering service and will begin to match your contributions (up to an additional 4% when you contribute at least 5%), at the start of your third year of service. Both the 1% contribution and matching contributions from the Defense Department continue through the end of your 26th year of service.

A: Between seven and 12 years of service, you receive a cash payment if you opt to stay in for a minimum of three more years. The payment will be a minimum of two-and-a-half months of basic pay for the active component member and half a month’s basic pay for the reserve component member. When the payment is offered, the payment amount and the number of years you must agree to serve will vary by service.

A: The third part of the BRS is a monthly annuity, similar to the 20-year retirement system now in place. Members who retire will still get their monthly annuity pay but at a reduced amount. The annuity’s formula is 2% times years served times the “high 3,” or the average of the highest 36 months of basic pay received. The BRS annuity is close to the legacy retirement formula, which uses 2.5% as the multiplier. Find out more about the calculations behind the annuity-based payment.

A: Yes, for those who retire after at least 20 years of service, the retirement remains predominantly a defined benefit in which you will get monthly retired pay. Instead of being calculated at 2.5% times the average of your highest 36 months of basic pay, (or your last month of basic pay, if you are under the older, final-pay system), your monthly retired pay will be calculated with a 2% multiplier.

A: The DOD BRS website contains a number of resources for learning more about the BRS. DOD has also provided various retirement calculators to inform members of their benefits under the legacy and BRS systems.

A: Many more service members will start saving for retirement earlier. From a readiness point of view, the department now has a 401(k)-like component to the retirement system, which increases the appeal to potential recruits.

This step is the simplest. Select “Active Duty,” then choose whether you expect to retire from active or reserve duty. For demonstration purposes, we’ll assume retirement straight from active duty.

Press “Continue” to proceed.

In this step, you’ll be asked, “How many years do you think you’ll serve before you leave?” You may not know now, so put in your best estimate. Remember, the longer you stay in, the longer you can contribute to your TSP account. You’ll only be eligible for a pension payment if you retire after serving 20 years on qualifying active service.”

In all, you’ll put in:

• Your birth date
• Your pay entry base date (This is the month and year you first got paid by the military. This can be found on your LES.)
• Your current pay grade
• Your active service date (This is the month and year you first went on active duty. It can be found on the DD Form 214, block 12a.)
• The number of years you’ll serve (This is the number of years you serve before you separate or retire. To show your future pension payment, make sure you put in at least 20 years.)

Once you’ve put in your answers, press “Continue.”

For this step, you might not know the answers now. Many of these boxes are pre-filled with the most common responses. Try starting with the suggested common responses. You can always customize the responses through drop-down menus.

You’ll enter your:

• Life expectancy
• TSP withdrawal age (This is the age when you decide to start withdrawing money from your TSP account. This defaults to 67, BRS’s “Full Retirement Age,” but you can start withdrawing at 59½ years without paying extra income taxes. The longer you can wait to withdraw, the more money you will earn.)
• TSP contribution rate (This is the percentage of your basic pay you plan to contribute to your TSP. This defaults to 5% since that’s what’s needed for the government to contribute a max of 5% of your basic pay. However, you can increase or decrease this amount if you plan on deducting more or less money from your monthly pay.)
• TSP rate of return (This is how much extra money you think your retirement account will make each year before you start withdrawing from it. This defaults to a 7% average annual increase. You can decrease this percentage for a more conservative estimate and a lower future TSP payment. You can increase it if you think the market will perform better by the time you withdraw your funds.)
• TSP rate of return after withdrawal (This is how much you think your account will make each year after you begin to withdraw. This defaults to 3%.)
• Current TSP account balance (This consists of what you’ve contributed so far and what the government has matched. You can find this information online at the official TSP website.)

After you have made your choices, click “Continue.”

How much you contribute to your retirement accounts will depend on your basic pay amount. That amount increases with promotions and years of service. Therefore, the calculator asks what you think your pay grade will be every year to your projected separation year.

If you are unsure, the system automatically fills in each year’s possible pay grade following a “typical military career progression.” You can simply continue from this step, or you can override the calculator’s suggestions with the drop-down menu.

During your career, you may receive large bonuses. One of these is called “Continuation Pay,” which you will receive on agreeing to serve for at least three more years. This step will ask you for some basic information to determine how big a bonus you might receive and the amount you may put into your TSP retirement account.

Again, the calculator will automatically fill in this section for you, based on common scenarios for most service members, but you can customize it, too. Once you are done, press “Continue” to see the results.

Select “Reserve Component,” then say that you’ll separate or retire from the “Reserve Component.” Press “Continue” to proceed.

This is the step where you’ll need to know how many retirement points you’ve earned so far.

During this step, you’ll enter:

• Your birth date
• Your pay entry base date — basically, the month and year you first got paid by the military, which can be found on your LES
• Your current pay grade
• Expected years of service by the time you retire
• Your total active service days to date – any time you spent on active duty before going into the National Guard or reserves, plus any time on active duty since then
• Your total “qualifying years” toward retirement and your total retirement points, which can get a bit complicated

Basically, you can retire from military service and receive retirement payments only after 20 years of “qualifying service.” You need to earn 50 points in a given year for it to count toward that retirement minimum.

A typical year as a member of the National Guard or reserves should net you 78 retirement points. If you’re not sure about points, check out “Learn more about retirement points” on the BRS calculator. Clicking on it will bring up a pop-up window that explains retirement points in detail.

Notice that most of the responses in this section will have answers. The exception is your projected years of service. Remember, the longer you stay in, the more you’ll make in retirement, and you’ll need 20 years of qualifying service to receive the pension.

When you’re done entering all the required information, press “Continue.”

This is the step where you can start fiddling with the automatic answers the BRS calculator offers to see how choices you make today can impact your retirement income.

Here, you’ll enter your:

• Life expectancy
• TSP withdrawal age — how old you’ll be when you decide to start withdrawing money from your TSP account. This defaults to 67, BRS’s “Full Retirement Age,” but you can start withdrawing at 59½ years without paying extra income taxes. The longer you can wait to withdraw, the more money you’ll earn.
• TSP contribution rate — how much you think you’ll contribute to your TSP while you’re serving, as a percentage of your Basic Pay. This defaults to 5% since that’s what’s needed for the government to contribute a max of 5% of your base pay. However, you can increase or decrease this amount if you plan on deducting more or less money from your monthly pay.
• TSP rate of return — how much extra money you think your retirement account will make each year before you start withdrawing from it. This defaults to a 7% average annual increase. You can decrease this percentage for a more conservative estimate and a lower future TSP payment. Or, you can increase it if you think the market will perform better by the time you withdraw your funds.
• TSP rate of return after withdrawal — how much you think your account will make each year after you begin to withdraw. This defaults to 3%.
• Current TSP account balance — both what you’ve contributed so far and what the government has matched. You can find this information online at the TSP website.

Once you’ve decided on your answers, click “Continue.”

How much you contribute to your retirement account will depend on how much your basic pay is. That amount increases with promotions and years of service, as well as how many days you’ll serve on active or inactive duty.

If you’re not sure, the system automatically fills in each year’s possible pay grade following a “typical military career progression.” National Guard members and reservists also can adjust the estimated number of inactive duty paid and nonpaid days. These will impact retirement point counts for the given year.

After reviewing the calculator’s suggestions, you can simply continue from this step without changing anything. Or, you can override the calculator’s automatic inputs with the drop-down menus.

During your career, you may receive large bonuses. One of these is called a “Continuation Pay,” which you’ll receive on agreeing to serve for at least three more years. This step asks for some basic information to determine how big a bonus you might receive and how much you might put into your TSP retirement account.

For members of the National Guard and reserves, this bonus may be anywhere from 0.5 to 6 times your monthly Basic Pay when serving on active duty.

Again, the calculator will automatically fill in this section for you, based on common scenarios for most service members, but you can customize it too. Once you’re done, press “Continue” to see the results.

This first tab shows you how much the government will pay you every year, from now through retirement.

The first columns reflect the basic pay you receive until you leave the service — as you do now. You may also see a “Continuation Pay” spike on top of your basic pay.

When you officially retire from military service with at least 20 years of active service, you will receive an annuity payment each month. This is the “BRS Pension” column series that reflects your monthly payments until you reach the age at which you will start withdrawing from your TSP account, which defaults to 67 years old. Those withdrawals from your TSP account will be in addition to your BRS pension.

Remember that if you leave before 20 years, you will receive no pension payment — but you can receive withdrawals from your TSP account.

Remember, your TSP savings account is an actual account that uses your contributions to invest for your retirement. That means your TSP account has a real dollar amount, just like a checking or savings account. You cannot access it before you turn 59½ without tax penalties.

The TSP Summary tab shows you what that account will be worth each year, based on the estimates you inputted earlier. The chart divides itself into your personal contribution earnings and those the government matches, but the total amount belongs to you.

Notice that your account is projected to continue growing, even after you stop contributing when you retire. That’s because the money you already put into the account will usually earn more every year through investments. The amount typically starts decreasing the year you start withdrawing from it.

The previous charts assume that you do not take a lump sum of the value of your future retirement pension. However, if you decide to take a lump sum of either 25% or 50% when you retire, this section shows you how your retirement annuity would change.

Notice how your pension returns to a “full payment” later in the chart. That’s because BRS pensions go back to full payment status once you turn 67 years old — the program’s “Full Retirement Age” — even if you took the lump sum back when you first retired from military service.

Tables beneath the main bar chart discuss the final dollar amounts in more detail. It will also show you how you end up with less money throughout your lifetime if you choose to take the lump sum upfront, instead of waiting to receive the full pension payment each year.

If reading spreadsheets is more understandable to you than bar graphs, this is the tab designed for you. It will list the calendar year and the payments made to you throughout your lifetime.

It will include:

• Annual basic pay calculated from your projected promotions and bonuses
• TSP contributions by both you and the government
• BRS pension payments once you retire
• The projected TSP payouts when you turn 67 years old
• Your total annual retirement payments

This first tab shows you how much the government will pay you every year, both now and when you retire.

The first columns reflect the Basic Pay you receive until you leave the service — just like you do now. You might also see a “Continuation Pay” spike on top of your Basic Pay.

If you officially retire from military service with at least 20 years of qualifying active service, you’ll receive an annuity payment each month. This is the “BRS Pension” column series, which reflects your monthly payments until you reach the age at which you’ll start withdrawing from your TSP account, which defaults to 67 years old. Those withdrawals from your TSP account will be in addition to your BRS pension.

Remember that if you leave the National Guard or reserves before you have the right amount of retirement points or qualifying retirement years, you will receive no pension payment. But you will receive withdrawals from your TSP account.

Remember, your TSP savings account is an actual account that uses your contributions to invest for your retirement. That means your TSP account has a real dollar amount, just like a checking or savings account. You just won’t access it before you turn 59½ unless you want to pay hefty tax penalties.

The TSP Summary tab shows you what that account will be worth each year, based on the estimates you input earlier. The chart divides itself into your personal contribution earnings and those from the government matching, but the total amount belongs to you.

Notice that your account is projected to continue growing, even after you stop contributing when you retire. That’s because the money you already put into the account will usually earn more every year through investments. The amount typically starts decreasing the year you start withdrawing from it.

Let’s say you qualify for a retirement pension when you retire from the National Guard or reserves. That is, you have the right number of retirement points to equal “years of qualifying service.”

If you do receive a pension, you can opt to take a lump sum of either 25% or 50% of the total pension value when you retire. This will reduce the amount of monthly pension payouts you’ll receive by that percentage, as you can see from this tab.

Notice how your pension returns to a “full payment” later in the chart. That’s because BRS pensions go back to full-payment status once you turn 67 years old, the program’s “Full Retirement Age,” even if you took the lump sum back when you first retired from service.

Tables beneath the main bar chart discuss the final dollar amounts in more detail. It also shows you how you end up with less money throughout your lifetime if you choose to take the lump sum upfront, instead of waiting to receive the full pension payment each year.

If reading spreadsheets is more understandable to you than bar graphs, this is the tab designed for you. It will list the calendar year and all payments made to you throughout your lifetime.

It will include:

• Annual basic pay calculated from your projected promotions and bonuses while you serve
• TSP contributions by both you and the government
• BRS pension payments if you retire with the required 20 qualifying years of service
• The projected TSP payouts when you opt to make withdrawals
• Your total annual retirement payments