How to Switch to Blended Retirement System
The U.S. military has recently implemented a new retirement system known as the Blended Retirement System (BRS). This system combines elements of the traditional military retirement plan with a defined contribution plan, offering service members more flexibility and financial security in their retirement. If you are a military member considering making the switch to the BRS, this article will guide you through the process and help you understand the benefits and considerations involved.
Understanding the Blended Retirement System
The Blended Retirement System became available to all service members on January 1, 2018. It is designed to provide a more balanced retirement plan that includes both a defined benefit and a defined contribution component. Here’s a brief overview of the two main parts of the BRS:
1. Defined Benefit: This part of the retirement plan provides a lifetime annuity based on your military service, rank, and pay. The annuity is calculated using a formula that takes into account your length of service and your final pay rate.
2. Defined Contribution: The second part of the BRS is a Thrift Savings Plan (TSP) account, which is similar to a 401(k) plan. Service members contribute a portion of their basic pay to the TSP, and the government matches those contributions up to a certain percentage.
Eligibility for the Blended Retirement System
To be eligible for the Blended Retirement System, you must have at least six years of active duty or reserve service. If you have less than six years of service, you can still opt into the BRS, but you will have to serve an additional four years to receive the full benefits of the system. Here’s how to switch to the BRS:
1. Meet the Eligibility Requirements: Ensure that you have at least six years of active duty or reserve service, or are willing to serve an additional four years if you have less than six years.
2. Understand the BRS Components: Familiarize yourself with the defined benefit and defined contribution components of the BRS, as well as the associated costs and benefits.
3. Review Your Options: Consider the long-term financial implications of the BRS, including your current retirement plan, any other financial obligations, and your retirement goals.
4. Consult with a Financial Advisor: If possible, seek advice from a financial advisor who can help you make an informed decision about whether the BRS is right for you.
5. Complete the Enrollment Process: Once you have decided to switch to the BRS, you will need to complete the enrollment process. This typically involves submitting a form to your service branch and ensuring that you understand the terms and conditions of the new retirement plan.
Considerations and Benefits
Before making the switch to the Blended Retirement System, it’s important to consider the following:
– Costs: The BRS requires you to contribute a portion of your basic pay to the TSP, which may reduce your take-home pay.
– Benefits: The BRS offers a more secure retirement plan with a combination of a defined benefit and a defined contribution component.
– Flexibility: The BRS provides more flexibility in terms of retirement planning and the ability to make changes to your retirement strategy as needed.
In conclusion, switching to the Blended Retirement System can be a significant decision for military service members. By understanding the system’s components, eligibility requirements, and potential benefits, you can make an informed choice that aligns with your financial goals and retirement plans.
