Understanding the Military Blended Retirement System: What It Is and How It Works

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The Military Blended Retirement System (BRS), implemented in 2018, introduced a significant change to the military retirement structure.

It was designed to give more service members access to retirement benefits, combining aspects of the traditional military pension system with a 401(k)-style savings plan.

This system is particularly beneficial for those who do not serve a full 20-year military career, but still want to accumulate retirement savings.

Here’s a detailed breakdown of the military BRS, its components, what you need to know, and how it compares to the legacy retirement system.

Summary of Key Points

• Combination of Traditional Pension and TSP: The BRS blends the legacy pension system with a 401(k)-style Thrift Savings Plan (TSP) that includes government matching contributions, making it accessible to more service members.

• Pension Calculation: Under the BRS, the pension is calculated using a 2% multiplier, lower than the 2.5% in the legacy system. After 20 years of service, members receive 40% of their highest 36 months of basic pay.

• TSP Contributions: The DoD automatically contributes 1% of base pay after 60 days of service and matches up to an additional 4% after two years, encouraging early retirement savings.

• Continuation Pay and Lump-Sum Options: Service members can receive a continuation pay bonus after 12 years of service and have the option to take 25% or 50% of their retirement pay as a lump sum, with reduced monthly payments until age 67.

Key Features of the Current Military Blended Retirement System (BRS)

#1. Defined Benefit Pension

The defined benefit pension under the BRS is similar to the legacy High-36 retirement plan but uses a reduced multiplier. Under BRS, the pension is calculated as:

Pension = 2% × Years of Service × Highest 36 Months of Basic Pay

For example, if you serve 20 years, you will receive 40% of your highest 36 months of basic pay, whereas under the legacy system, you would have received 50%.

If you serve 30 years, you receive 60%​.

#2. Thrift Savings Plan (TSP) with Matching Contributions

The TSP is the 401(k)-style component of the BRS. Here’s how it works:

• Automatic Contribution: After 60 days of service, the Department of Defense (DoD) automatically contributes 1% of your base pay to your TSP account.

• Matching Contribution: After two years of service, the DoD will match your contributions up to an additional 4%, for a total of 5% DoD contribution if you contribute 5% of your own pay​.

For service members who leave the military before serving 20 years, the TSP contributions are portable, meaning you can take those savings with you into civilian life, providing valuable retirement savings even without qualifying for a pension​.

#3. Continuation Pay Bonus

To incentivize mid-career service members to continue serving, the BRS offers a Continuation Pay bonus.

At around 12 years of service, service members are eligible for a one-time bonus in exchange for committing to an additional four years of service.

The bonus can be:

• 2.5 to 13 times your monthly basic pay for active-duty service members.

• 0.5 to 6 times your monthly basic pay for members of the Reserves​.

The exact amount and terms depend on your branch of service and may vary based on specialty or other factors.

#4. Lump-Sum Payment Option

Upon retirement, service members can choose to receive a portion of their retirement pay as a lump-sum payment.

They can take 25% or 50% of their estimated retirement benefits upfront, in exchange for receiving a reduced monthly pension until reaching full retirement age (67).

After age 67, the monthly pension reverts to the full amount​.

The lump sum is taxable, and the exact amount is discounted based on a DoD-determined discount rate to account for inflation​.

Who is Eligible for the Blended Retirement System?

The military BRS applies to:

• All service members who joined on or after January 1, 2018. They are automatically enrolled in the BRS.

• Service members who joined between January 1, 2006, and December 31, 2017 had the option to opt into the BRS or remain in the legacy system during the 2018 transition year​.

Those who joined before January 1, 2006, remain under the legacy system (High-36 or Final Pay), but do not receive matching contributions to their TSP​.

Advantages of the Military Blended Retirement System

The military BRS offers several key advantages:

• Retirement Savings for Shorter Careers: Under the legacy system, only those who served 20 years or more earned a pension. The BRS allows service members to accumulate savings in the TSP, even if they serve less than 20 years.

• Government Matching Contributions: The DoD matches up to 5% of your base pay contributions to the TSP, helping you build a substantial retirement fund.

• Continuation Pay Bonus: The mid-career bonus provides financial incentives for those who commit to additional service.

• Flexible Retirement Options: The lump-sum option offers flexibility for retirees who may need access to larger amounts of money immediately after retiring​.

Disadvantages of the Military Blended Retirement System

There are also some trade-offs with the military BRS:

• Reduced Pension: The pension under the BRS is lower than under the legacy system due to the 2.0% multiplier, meaning smaller monthly payments​.

• Requires Active Saving: To maximize the benefits of the BRS, service members need to actively contribute to their TSP accounts. Without personal contributions, the retirement savings will be limited​.

• Lump-Sum Reduces Long-Term Income: Choosing a lump-sum payment reduces your monthly pension until age 67, which can affect long-term financial security​.

Conclusion & Wrap-Up

The Blended Retirement System provides more flexibility and access to retirement savings, making it a beneficial option for service members who do not plan to serve a full 20-year career.

For those planning longer military careers, the lower pension may be offset by active contributions to the TSP and the Continuation Pay bonus.

Understanding the balance between the defined benefit pension and the TSP contributions is key to making informed retirement decisions under the BRS.

For more details on calculating your retirement benefits under the BRS, the DoD BRS Calculator is an excellent tool​.

The Blended Retirement System: Frequently Asked Questions (FAQs)

What is the Military Blended Retirement System (BRS)?

The Blended Retirement System, or “BRS,” is a military retirement plan that was introduced on January 1, 2018. It combines a traditional pension system (defined benefit) with a 401(k)-style savings plan (the Thrift Savings Plan, or TSP) that includes government matching contributions. The BRS was designed to allow more service members to leave the military with some form of retirement savings, even if they don’t serve a full 20 years.

Who is eligible for the Blended Retirement System?

The BRS applies to all service members who joined the military on or after January 1, 2018. Those who joined between January 1, 2006, and December 31, 2017, had the option to opt into the BRS during the 2018 transition year. Service members who joined before January 1, 2006, remain in the legacy retirement system and are not eligible for BRS.

How is retirement pay calculated under the BRS?

Retirement pay under the BRS is based on a 2% multiplier, which is lower than the legacy system’s 2.5%. The formula is:

Pension = 2% × Years of Service × Highest 36 Months of Basic Pay

For example, after 20 years of service, you would receive 40% of your highest 36 months of basic pay. In the legacy system, you would have received 50% after the same service period.

Where can I see an example BRS pay calculation?

Here’s an example calculation based on the Blended Retirement System (BRS) pension formula:

Formula: Pension = 2% × Years of Service × Highest 36 Months of Basic Pay

Example Scenario:

• Years of Service: 20 years

• Highest 36 Months of Basic Pay: $6,000 per month

Calculation and Result:

• Step 1: Multiply 2% by the number of years served (20 years): 2% × 20 = 40%

• Step 2: Apply that percentage to the highest 36 months of base pay: 40% × $6,000 = $2,400

• Result: In this example, the monthly retirement pay would be $2,400 under the BRS after 20 years of service.

• For comparison, under the legacy High-36 system with a 2.5% multiplier: 2.5% × 20 = 50% 50% × $6,000 = $3,000

So, under the legacy system, the monthly pension would be $3,000.

The BRS results in a lower monthly pension but includes TSP contributions and matching benefits.

What are the Thrift Savings Plan (TSP) contributions under the BRS?

Under the BRS, the Department of Defense automatically contributes 1% of your basic pay to your TSP after 60 days of service. After two years, they match your contributions up to an additional 4%, for a total of up to 5% from the DoD if you contribute 5% of your own pay. This gives you the potential for 10% total contributions to your TSP.

What is Continuation Pay under the BRS?

Continuation Pay is a one-time bonus offered to service members in the BRS at around 12 years of service. In exchange for committing to an additional four years of service, active-duty members can receive 2.5 to 13 times their monthly basic pay, while members of the Reserves can receive 0.5 to 6 times their monthly pay. The exact amount depends on your branch of service and job specialty.

Can service members take a lump-sum payment under the BRS?

Yes, under the BRS, service members have the option to take a lump-sum payment upon retirement. You can choose to take either 25% or 50% of your retirement pay upfront. However, this reduces your monthly pension until you reach full retirement age (67), after which your monthly payments revert to the full amount. The lump sum is also taxable and discounted based on inflation.

What are the advantages of the Blended Retirement System?

The main advantage of the BRS is that it allows service members to accumulate retirement savings even if they do not serve the full 20 years required for a pension. With matching TSP contributions and a Continuation Pay bonus, the BRS provides more flexibility and opportunities to build a retirement nest egg.

What are the disadvantages of the Blended Retirement System?

The key disadvantage of the BRS is that the pension multiplier is lower than in the legacy system (2.0% vs. 2.5%). This results in a smaller monthly pension for those who do serve 20 years or more. Additionally, service members must actively contribute to their TSP to fully benefit from the system, and taking the lump sum can reduce long-term monthly pension payments.

How does the BRS affect those who serve less than 20 years?

Unlike the legacy system, which only offers a pension after 20 years of service, the BRS allows service members who serve less than 20 years to leave with TSP savings. With automatic and matching contributions from the DoD, those who separate before reaching 20 years can still have retirement savings that are portable and can be rolled over into another retirement account.

Where can I calculate my benefits under the BRS?

You can use the DoD BRS Calculator to estimate your retirement benefits under the Blended Retirement System. This tool helps you project your pension, TSP savings, and the potential impact of a lump-sum payment or Continuation Pay bonus. The calculator is available on the Department of Defense’s military pay website.

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