Blended Retirement System Designed For Your Service
Those in the armed services have many great retirement advantages available to them. However, service members need to be informed and make certain decisions about their retirement benefits. This is especially true since the Blended retirement system was implemented.
As a service member, you need to understand what the Blended retirement system is and how it works. It's never too early to start planning for your retirement. The sooner you start planning and the more informed you are, the better prepared you'll be for retirement when the time comes.
The following is some basic information about the Blended retirement system you need to be aware of.
The Blended Retirement System (BRS)
The BRS is a new addition to the retirement system that the military offers. The BRS system was added on to the military's retirement offerings at the beginning of 2018. This new system adds some retirement options that service members didn't have before. It is also a change in military retirement benefits from only defined benefit plans to a combination of defined benefit and defined contribution plans.
Previously, the military offered only an annuity provision for service members who retired after serving for at least 20 years. With the BRS, the military has added what's known as the Thrift Savings Plan (TSP) to retirement offerings.
Thrift Savings Plan (TSP)
Basic Terms To Be Aware Of
In order to fully understand the BRS and the TSP, service members should understand a few basic terms. It's important to do your research and understand a few basic concepts. Service members should note that they don't necessarily have to opt in to the BRS option. Some service members can decide to continue with a plan that offers only the annuity provision of the military retirement plan.
The following are four key terms to understand when it comes to the BRS and military retirement options:
Defined benefit
Defined benefit refers to a fixed amount that a retirement plan offers monthly upon retirement. In the case of military plans, a defined benefit is offered after 20 years in the military. The military's legacy system offering the annuity provision is a defined benefit plan.
Defined contribution
Defined contribution refers to an amount the government will put into a service member's TSP account. Service members who opt for the BRS can enjoy a defined contribution of as much as 5 percent of their basic pay.
Lump sum
A lump sum is a full payment of retirement benefits at the time of retirement. Service members can opt to receive a lump sum that is smaller than the total amount they would receive in monthly retirement payments. However, they receive the lump sum all at once and don't have to wait for it.
Continuation pay
Continuation pay is another option service members have. With continuation pay, service members enjoy a bonus midway through their career if they agree to extend their length of service.
Determining Eligibility For the BRS
Not every service member is eligible for the BRS. Some service members can't opt in to the BRS. Others can opt in if they chose to do so. Still other service members have no choice but to receive their retirement benefits through the BRS. The major factor in determining retirement options is how long a service member has been in the military. However, whether a service member is active-duty or enrolled at a service academy or in the ROTC also impacts options.
Service members who have been in the military for more than 12 years before 2017 will receive legacy system benefits. The BRS will not apply to these service members. Such service members will receive the retirement plan they agreed to originally. However, those who served fewer than 12 years before 2017 have the option of opting into the BRS. Military staff who began serving after 2018 are all enrolled into the BRS automatically.
Those who are enrolled at service academies and signed a contract by the end of 2017 are grandfathered into the old legacy system. Also, ROTC participants who signed a contract by the end of 2017 are grandfathered in. Those who were commissioned afterward have an option to enroll in the BRS. Those who enroll at an academy or sign up for ROTC after the beginning of 2018 must enroll in the BRS.
Important Things To Consider
This leaves some service members with a big decision to make. There are numerous things service members should consider if they have the option to opt in to the BRS. The following are three of the most important things to consider.
Finally,
After reading this article, you should have a basic understanding of the Blended retirement system. However, you should reflect over this information carefully before making a decision. Opting in to the BRS might be a good decision for some service members. At the same time, others might be better off foregoing this retirement option.
Whatever decision you make regarding the BRS, you can rest assured that you'll enjoy excellent retirement benefits as a former service member. Preparing now for your retirement will give you greater peace of mind. As you near retirement, you might start to feel stressed. It's essential to be financially secure when you retire. Making important decisions now will help you prepare for the future.
Get started planning out your military retirement benefits by making a decision about the BRS today.