December 12, 2018 @ 2:36 PM | 8 Min Read | 150733 Views
Frequently Asked Questions Regarding the Blended Retirement System
Q: Why did the military retirement system change? add
A: Under the traditional system, only those who serve 20 years receive a retirement benefit. That means about 81 percent of service members leave with no benefit. Under the Blended Retirement System, about 85 percent of service members will receive a retirement benefit, even if they don't qualify for full retirement.
Q: How did the military retirement system change? add
A: Service members who joined the service before 2006 will remain in the legacy retirement system, but those who joined after 2006 but before Jan. 1, 2018 have the choice to stay with the legacy system or opt into the Blended Retirement System. Those who joined starting on or after Jan. 1, 2018 will be automatically enrolled into the Blended Retirement System. To learn more about the Blended Retirement System, take the training at Joint Knowledge Online.
Q: Is there an important decision I have to make before Dec. 31, 2018? add
A: Yes, if you joined between 2006 and Dec. 31, 2017 and have not yet opted to stay in the legacy system or switch to the new Blended Retirement System, you will need to choose by Dec. 31, 2018. If you do not choose by Dec. 31, 2018 you will remain in the legacy system permanently and nothing about your current retirement plan changes. That means if you do not serve a full 20 years, you will not get a retirement benefit.
Q: What do I need to know about the Blended Retirement System? add
A: The Blended Retirement System has three parts: a Thrift Savings Plan, or TSP, which is like a civilian 401(k) retirement savings plan; a “continuation pay” bonus after 12 years of service if you choose to re-enlist; and an annuity payment.
Q: How does the Thrift Savings Plan figure into the system? add
A: Blended retirement enrolls all service members who joined beginning January 2018 into the Thrift Savings Plan, with automatic and matching Department of Defense contributions. After completion of two years of service, you are “vested," having full ownership, and that money belongs to you. If you leave, it goes with you.
Q: I'm in the Blended Retirement System. Will the Department of Defense match my contributions? add
A: All service members who joined beginning in January 2018 are enrolled into the Thrift Savings Plan, or TSP. Upon 60 days of you entering service, the government contributes 1 percent of your base pay to your TSP. You can contribute another 4 percent of your base pay to get a 5 percent total contribution.
After completion of two years of service, you become vested, so if you leave the military, your entire Thrift Savings Plan account goes with you. While the Thrift Savings Plan is also available for service members not enrolled in the Blended Retirement System, the department does not contribute to those plans.
Q: What is the second part of the system – continuation pay? add
A: After 12 years of service, you receive a cash payment if you opt to stay in for four more years. The payment will be two-and-a-half months of basic pay for the active component member and half a month's basic pay for the reserve component member.
Q: What about the third part – the annuity? add
A: The third part of the Blended Retirement System is a monthly annuity, similar to the 20-year retirement system now in place. Members who retire will still get their monthly annuity pay but at a reduced amount. The annuity's formula is 2 percent times years served times the "high 3" or the average of the highest 36 months of basic pay received. The Blended Retirement System annuity is close to the legacy retirement formula, which uses 2.5 percent as the multiplier. Find out more about the calculations behind the annuity-based payment.
Q: If I'm in the blended system and retire after 20 years, will I still get an annuity? add
A: Yes, for those who retire after at least 20 years of service, the retirement remains predominantly a defined benefit in which you will get monthly retired pay. Instead of being calculated at 2.5 percent times the average of your highest 36 months of basic pay, (or your last month of basic pay, if you are under the older, final-pay system), your monthly retired pay will be calculated with a 2 percent multiplier.
Q: Where can I learn more about the Blended Retirement System? add
Q: What should service members who enlisted after 2006 but before Jan. 1, 2018 know about the Blended Retirement System? add
A: While all service members now enjoy access to the Thrift Savings Plan, those who stay with the legacy retirement system do not receive automatic or matching contributions by the Department of Defense. And, while their annuity payments will generally be larger than those calculated under the Blended Retirement System, those in the legacy system must serve for at least 20 years to receive a retirement benefit, or they risk receiving nothing when they leave.
Q: How do changes in the retirement system benefit the Department of Defense? add
A: Many more service members will be started earlier in their long-term retirement savings. From a readiness point of view, the department now has a 401(k)-like component to the retirement system, which increases our appeal to potential recruits.
Do you have questions about retirement? Contact Military OneSource at 800-342-9647 or start a live chat to schedule an appointment with a financial counselor. OCONUS/International? Click here for calling options.
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