On Jan. 1, 2018, the Department of Defense is replacing the current military retirement plan, the High-3, with the new Blended Retirement System (BRS). To help those facing the retirement plan decision, we’ve provided an overview of the BRS and how this new plan affects you. Additional resources can be found at usaa.com/brs.
The two systems are easy to compare based on whether or not you plan to retire from the military.
Your situation: You plan to retire from the military
- Best Choice: High-3 (old system)
- Why: Your retirement benefit under the High-3 system includes a larger pension. However, if you separate without retiring, you’ll leave without any government-provided retirement benefits. Keep in mind that you must retire from the military to receive the military pension. According to the DOD, only 19% serve long enough to qualify for retirement benefits under the High-3 system.
Your situation: You plan to separate before reaching military retirement or are unsure if you will make it to a military retirement.
- Best Choice: BRS
- Why: Under BRS, you can leave the military before 20 years and keep your vested DOD automatic and matching contributions. This is important since DOD reports that 81% of military members do not retire from the military and thus would not receive any retirement benefit under the High-3 system. If you serve long enough to retire from the military, the BRS still includes a pension for life.
Next: Consider how your military career goals will impact your retirement needs.
USAA has developed the Military Retirement Comparison Tool to help you compare the High-3 and BRS from a financial perspective based on your military career goals. The tool is available to the public, and you can find it at usaa.com/brs or the USAA Mobile App.
Between Now and Then
Before the BRS takes effect in 2018:
- Research how the changes may affect your retirement plans.
- If you aren’t already funding your retirement savings, make a plan and get started.
- Make it a priority to contribute to your retirement savings. The general rule of thumb is to save 10% to 15% of your pre-tax income — or whatever amount is needed to reach your retirement goal.
- If you are considering the BRS, remember that you must contribute at least 5% of your basic pay to the TSP in order to receive the full benefit of the DOD match.Visit usaa.com/brs where you can find tools and other resources to help you navigate the change to BRS.
USAA Launches Military Retirement Comparison Tool - Press Release
No Department of Defense or government agency endorsement.
The Department of Defense will release more details of the plan before 2018. Details of the plan are subject to change pending National Defense Authorization Act (NDAA) approval.
Information is accurate as of Jan. 2017 and is intended for use by USAA, its members, and prospects.
The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article is no way attempts to provide financial advice that relates to all personal circumstances.
USAA means United Services Automobile Association and its affiliates.