Commissioning? Understand Your Blended Retirement System Options

May and June are the biggest commissioning time of year. Not only do all the service academies graduate then, but thousands of ROTC students also graduate and enter their active military service. This years’ group of newly commissioned officers face a unique question: should they opt into the military’s new Blended Retirement System (BRS), or should they remain in the legacy, High 3 retirement system?

It’s probably the biggest financial decision they’ve made so far, and it may be the biggest financial decision they ever make. So if you know someone commissioning this year, please share this with them and encourage them to become educated on this subject.

What Is The Blended Retirement System?

BRS is the military’s new retirement system. It’s called blended because it includes both a defined benefit component, like a pension, in the form of military retirement pay and a defined contribution component, in the form of the Thrift Savings Plan (TSP.)

So What’s The Choice?

For most folks, the window to opt into the BRS closed on 31 December 2018.

However, if your Date of Initial Entry into Military Service (DIEMS) date was on or before 31 December 2017, you are grandfathered into the legacy retirement system with the option to switch during your first 30 days of active service. As long as you signed those papers before 31 December 2017, you get to make the decision upon commissioning.

If you do nothing, you’ll remain in the legacy, High 3 retirement system.

Or, you can choose to be put into the military’s new Blended Retirement System.

You can learn all about the two systems in the many links listed at the end of this article.

So, I Need To Worry About This After Commissioning

No. Worry about it before then. Maybe not right now, if you’re studying for finals. But carve out some time.

As you can imagine, there are often a lot of other things going on during those first 30 days of active service. You might be moving, you might be in a school, you might be learning a new job. This is not an ideal time to be making big decisions. So go ahead, get educated, and make your decision now, so that you’re ready when the crazy starts.

Another thing: you’re probably not going to have anyone tracking you down and reminding you when the 30 days is ending. Most importantly:

The opt-in option does not become available immediately after commissioning. It takes the Defense Finance and Accounting Service (DFAS) a little while to get things organized. In the past two summers, the option appeared in MyPay in July or August or September, and the 30 days clock started when the option became available.

So,

a) don’t panic if the opt-in option isn’t there ASAP, and
b) keep an eye on MyPay so that you don’t miss the window when it does appear.

In short: be prepared for the possibility that your opt-in window won’t happen at commissioning, but also keep your eyes and ears open because perhaps it will get implemented better this year and the window will be open earlier.

This will be a great exercise in the patience and attention you’re going to need throughout your military career when it comes to admin and pay stuff. (I’m sort of laughing, but in an ironic way.)

Where Can I Learn More?

The Basics of Retirement Plans, and the Military’s Old and New Plans

Everything About The Blended Retirement System

50+ Places To Learn About The Military’s New Blended Retirement System (BRS)

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

The Blended Retirement System Decision: Part Math, and Part Life

BRS: DIEMS vs. PEBD

BRS Interview with Doug Nordman

What Should I Pick?

On one hand, this is a personal decision and I’m not going to tell you what to do. On the other hand, I will tell you that less than 50 percent of officers will serve long enough to earn military retirement pay. I will also tell you that the dollar-for-dollar difference between the two plans is pretty small if you make a 5% contribution to your TSP account each month and you do serve until retirement. And if you don’t serve until retirement, the BRS is the clear winner – you leave the military with government contributions to your retirement savings. With the legacy retirement plan, if you leave the military before earning retirement pay, you leave with only your own TSP contributions.

Some Parting Thoughts

Whether you opt into the BRS, or stick with the legacy retirement system, please start saving in your TSP as soon as you start getting paid.

1. The math doesn’t lie: It’s relatively simple to amass a huge retirement savings account if you start early enough. (I made my kids start in high school.) Every year you delay starting saving will mean that much more you have to save each month. It’s staggering.
2. You won’t miss it if you don’t see it: You’re just starting out. There’s an incredibly high likelihood that your active duty paychecks will be the biggest paychecks you’ve earned so far. You won’t even notice 10% missing before it gets to you. Automatic deductions are an amazing thing – somehow, you just learn to live with the money you’ve got.
3. You’re not stuck: Worst case scenario, you buy too much car and rent too much apartment and generally overspend, and you’re truly broke. You can change your TSP contributions quickly and easily through MyPay, and the change will go into effect on either the next paycheck or the one thereafter. You’re not locked into your TSP contribution rate.

You really want to get this decision right. The folks I find are happy with their decision are the ones who took the time to learn all the details and really think about things. The folks I know who are unhappy with their decision didn’t do their own research and just made a decision based on limited information and/or what somebody told them to do. And if you find the decision is too difficult to make on your own, I would be glad to help or point you towards another personal financial professional who can explain all the options.

Questions, comments, concerns, or other thoughts? Please share them in the comments!