How do I decide?
Calculating a bottom-line comparison between the old and the new plan isn't simple. If you retire at 20 years under BRS, you get 40% of your final base pay. If you were to stick around and retire after 30 years, you'd get 60% of your final base pay. That compares to 50% of final base pay at 20 years and 75% at 30 years under the legacy system.
Using the only BRS retirement pay calculator the Department of Defense approves, the government estimates that a new service member who joined in October 2017 as a E-4 would – given normal progression to at least an E-7 – accumulate a total retirement package worth $3,027,407 if the service member lived to be 85 and contributed the maximum amount of savings and got the maximum match. The calculator also points out that the government retirement benefit would be worth $2,675,064, compared to a legacy retirement benefit of $2,903,401. That is $228,337 less than the legacy plan offered. But savvy investing could reduce or eliminate that difference.
Why is BRS a good thing?
In a report on military pension reform, the government estimated that only 17% of service people stay in the military long enough to get a retirement benefit. The majority leave before 20 years, and under the legacy plan, aren't eligible for anything. Compounding that issue, most of those service members don't have any retirement savings at all.
The BRS is different; service members are immediately vested in the TSP and can take their money with them whenever they leave the service. Like a 401(k), funds from a TSP can be rolled into a retirement plan offered by a new employer, or it can be invested in another kind of tax-advantaged retirement plan like an IRA. A trusted financial advisor can help servicemembers who are facing a decision by the end of the year make the best choices. It is also smart for servicemembers to get advice from advisors as they move toward retirement. And it is especially important to get savvy advice before separating from the service.
Who is eligible for the BRS?
Current military who had less than 12 years of service on Jan. 1, 2018, can switch to the BRS or stick with the legacy system. There will be no TSP contributions from back pay, but they can begin contributing to the TSP right away.
Otherwise, people who went on active duty:
- Before Jan. 1, 2006 must remain in the legacy system.
- After Dec. 31, 2017 are automatically enrolled in the BRS.
Reserve military members with more than 4,320 retirement points on Jan 1, 2018, remain in the legacy system. Those with fewer than 4,320 on Jan. 1, 2018, have a choice. Reserve members joining after Jan. 1, 2018, will be automatically enrolled in the BRS.
If you have an option to join BRS, you must opt-in before Dec. 31, 2018. Otherwise, you will be locked into the legacy system.