Blended Retirement System: How To Choose Between The Military’s Retirement Systems

This post was sponsored by USAA as part of the military personal finance bloggers #BRSBlitz education campaign.

As 2018 comes to a close, there is a lot of stuff going on. We’re preparing for various holidays, some people are moving, and there is a general last minute rush to get things done before the end of the year. It’s extra important if you have a deadline. And for the 1.2 million military service members who are eligible to switch to the military’s new Blended Retirement System (BRS) but haven’t opted in, there’s a potentially life-changing deadline coming up on 31 December. That’s the last day you’ll be able to make the switch from the military’s old legacy retirement system to BRS.

(Not sure if you’re eligible to choose between the legacy plan and BRS? Check out the criteria in Everything About The Blended Retirement System.)

Now, I need to say this up-front: Whether you want to stay with the legacy system or switch to BRS is an individual choice. There’s no single right answer for every person. And no one is (or should be) pushing folks either way. I know it may seem like the Department of Defense and the military personal finance community are pushing people to opt-in, but what we’re pushing is making a thoughtful, educated choice one way or another. Stay legacy or opt-in to BRS – I don’t care either way. What I do care, very much, is that you’re actually making a choice and not just pushing the decision off to another day until it is too late.

And that’s another one of my concerns: the “too late” part. The deadline is 31 December 2018. I don’t know you, but I know myself, and I know that I’ll start dealing with a 31 December deadline somewhere around 30 December. That’s a problem, because the end of the year is a horrible time for a deadline. Folks are traveling, there are holidays, things are crazy. What really, really worries me is that we’ll have a whole bunch of military members who meant to opt in to the BRS, but they forgot or their kid got sick and they ended up in Urgent Care for the whole day or their internet went out in a snowstorm. And then those folks, who truly meant to opt-in, will be locked in to the legacy retirement system. And again, there’s nothing wrong with choosing the legacy retirement system, if that’s the right choice for your situation. But being locked into the legacy system if BRS is a better choice for you would be a sad thing.

So, how do you know which system is right for you? There are three steps to the process, but they’re not hard. They might take a little time, though, so again – don’t wait!

Education: Learn About The Military’s New Blended Retirement System

First, you have to understand what it is. You can get this information in person or online.

In person: Your installation may be offering BRS information sessions, or you can have a one-on-one meeting with a personal financial specialist at your family service center (Army Community Services, Fleet and Family Service Center, Marine Corps Community Services, or Airman and Family Readiness Center.)

You may also choose to meet with a civilian financial advisor. Just be aware, some of those financial advisors have a financial interest in talking you out of BRS, because they want you to invest with them. Be sure you understand the whole picture.

Online: There are so many resources to learn about BRS online, and one advantage to reading a wide variety of resources is that you can hopefully filter out any personal bias about BRS. I’ve put together a list of resources: Where To Learn About The Military’s New Blended Retirement System (BRS).  The resources on my list include the military’s BRS training that you were supposed to take in 2017 – it’s good stuff. Take some time, maybe get a cup of coffee, and read everything you can about BRS.

Analysis and Consideration

Once you understand the BRS inside and out, then you need to start thinking beyond the facts. How do these facts apply to real life situations? Some things to consider:

• How having more money in your TSP account gives you flexibility
• What happens if you plan to stay in the military until retirement but then life changes
• How a larger TSP balance may impact the decision to utilize the Survivor Benefit Program (SBP)
• What happens if you don’t contribute 5% to TSP every year, and miss out on some government matching funds
• How the stock market will impact your retirement accounts, and how you might react to that
• How much you’ll earn in government match in your remaining years of service

Your Individual Decision about BRS

Once you have a firm grasp on the facts of BRS, and how they impact other things, then you need to apply this information to your family’s specific situation. This includes your military career plans, your overall financial picture, your family situation, your spouse’s employment or educational situation, any special needs in the family, or anything else that seems relevant.

• The financial educator at your installation’s family readiness center. This person should be well-versed in BRS, but that isn’t always true. Plus, as individuals, we all bring our own bias to the conversation. While this is a great resource to figure out how to apply the BRS offer to your unique financial situation, please don’t expect (or let) the financial educator to make the decision for you.
• Utilize the online or telephone financial education available through Military One Source. Same warning as above.
• Play with the BRS calculators available from the Department of Defense and USAA. (They are different, so be sure to do them both.)
• Check out this webinar offered by my friends at Redeployment Wealth Strategies.
• If you’ve exhausted all these resources, and you still aren’t confident in your decision, then you may benefit from the help of a fee-only financial planner who understands BRS. Just be sure, as I said above, that the financial planner doesn’t have a financial interest in steering you away from BRS and into something else (generally something that will earn them a commission.)

If you have any inkling that you’ll get out of the military before reaching military retirement, choosing BRS is almost a no-brainer: free government money to take with you. If you do plan to earn a military retirement paycheck, BRS still offers many benefits and might be right for you.

But, as I said at the top, the important thing isn’t which system you choose. The important part is that you make a choice, and don’t end into the default legacy retirement system because you didn’t make a choice.