I Opted-In to the Blended Retirement System, Now What?
by John Cooney on Jan 6, 2019
The opt-in window for the Blended Retirement System (BRS) has come and gone. You did your research, looked at both the legacy system and the BRS, calculated multiple scenarios with the BRS comparison calculator, and ultimately decided that opting-in to the new system was the best option for you. Good for you, but now what? This article will help outline some basic steps to make sure that you are making the most of the new system. For those that chose to stay in the legacy system, don’t worry, we have some tips for you too.
Make Sure You Are Taking Advantage of the Matching Contributions
Just to review, the main difference between the legacy system and the BRS was in exchange for a lower pension in retirement, the BRS added government contributions to your TSP account. For everyone who opted-in to the BRS, the Department of Defense will be contributing an automatic 1% of their base pay, each paycheck, into their TSP account. Participants get this automatic 1%, regardless of whether they contribute any of their own pay to the account. The DOD contributions can, but should not stop there. In addition to the 1% automatic contribution, DOD will also match service members contributions up to 3%. So for those service members in the BRS who defer 3% of their salary to their TSP, they will get an additional 4% from DOD deposited into their TSP account (1% automatic + 3% match). It doesn’t stop there either! For those service members contributing over 3% and up to 5%, DOD will contribute an additional ½ %. So for those contributing 4%, DoD will contribute a total of 4.5% (1% automatic and 3.5% match) and for those contributing 5%, DOD will contribute a total of 5% as well (1% automatic and 4% match). All total, service members deferring 5% of their paycheck to the TSP will see a total of 10% of their base pay going into their TSP account every paycheck! You have made the decision to opt-in to the BRS, now make the most of that decision and get those matching contributions!
Know Where Your Money is Going!
With the BRS, your TSP takes on an even increased importance to your retirement planning, giving you all the more reason to understand what you are actually investing in. This article explains your different options and helps you determine which one or ones are right for you to be investing in. Just like you did in determining whether to opt-in or not, you need to do your own research, talk to professionals and decide which funds are right for you based on your retirement goals and your risk tolerance. Remember, you are not locked in to funds you select when you open the account, you are free to log into your account at TSP.gov, and change which funds your contributions are going into, as well as which funds you are currently invested in.
Continuation Pay was another feature added by the BRS and can affect those BRS service members between their 8th and 12th year of service. The specific details on continuation pay are set by the individual service you belong to. The Army just released the details for those serving on either Active Duty, National Guard, or Reserves for calendar year 2019. For Active Duty army members, BRS participants who entered service in 2007, can receive 2.5 months of pay, in exchange for agreeing to serve an additional four years. For those serving in the Army Reserves who opted in to the BRS and who joined the service in either 2007 or 2008, they can receive 4 months of basic pay in exchange for agreeing to four more years of service. Finally, those serving in the Army National Guard, who opted in to the BRS and joined in 2007, they are eligible to receive four months of basic pay in exchange for four more years of service as well. Regardless of which Army component you serve in, signing up for continuation pay is completed on the form titled “Request For Continuation Pay (Blended Retirement System).” For all service members, I recommend you talk to your local finance office to get all of the specific details and confirm both your eligibility and the request procedures for your specific component.
What If I Remained in the Legacy System?
The BRS was not necessarily the best option for everyone and some of you rightly chose to stay in the legacy system. The TSP however, is not a BRS-only benefit, it is available for every member of the uniformed services! Just because you are not in the BRS does not mean you can not contribute to a TSP account. In fact, even with the legacy retirement system, the TSP should be a part of your retirement income plan. The TSP is one of the most inexpensive retirement plans you are likely to find. As a non-BRS participant, you will not be eligible for DOD contributions to your account, however you should still be contributing on a monthly basis. The TSP is a portable plan, it is still your plan even after you leave service, whether you serve twenty years and qualify for a military retirement pension or not. After you leave the service, you can leave the money in the TSP, or you can roll the funds into another qualified retirement plan, like a civilian 401K as well. Bottom line, don’t let the fact that you did not opt-in to the BRS keep you from contributing to a TSP account.
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It is Your Retirement, Take Charge of It!
Hopefully, you have already started taking control of your retirement by doing your research, talking to professionals, and choosing the military retirement system that was best for you. Your job is not done just because the opt-in window is now closed. To maximize benefits available in the BRS, you have to commit to making deferrals into the plan, which may require you to spend smartly now and invest in the future you. Even if you did not opt-in, the TSP needs to be part of your retirement plan. The best day to start saving for your retirement was yesterday, but since yesterday is over, do the next best thing and start today. It is your retirement, take charge of it now, so you can enjoy it later.