Agencies Reveal More Info on Military Blended Retirement Plan

Federal agencies released new information this week to help current military service members decide whether to opt into the new blended retirement program, which is slated to come online next year.

Service members with fewer than 12 years in the military by the end of this year must choose by the end of 2018 whether to stay with the current military retirement system, or move into the blended system. Officials with the Thrift Savings Plan, the government’s 401(k)-style retirement plan for federal employees, posted a fact sheet and video explaining the new system.

Under the new system, new troops would automatically be enrolled in the TSP and receive a matching contribution from the government—between 1 and 5 percent of their salaries, depending on what they choose to contribute themselves. The default is 3 percent of their paychecks, and the TSP account will begin 60 days into their service.

Those who stay in the military for 20 years, entitling them to a retirement pension, would receive a less generous calculation for their annuity.

TSP’s fact sheet spells out how the current military retirement system works, as well as how changing to the blended system would affect one’s defined benefit payments after 20 years of service. The two biggest factors in deciding between the systems, officials said, are whether a service member plans to stay a full 20 years to qualify for the defined benefit portion of the blended option, and how long one would be able to contribute through the TSP.

“How many years of making contributions and receiving service contributions will I have before retirement?” TSP officials wrote. “Is it likely that these contributions and their earnings—along with any benefit I might get from continuation pay or the lump sum option—will ultimately outweigh the amount I’d be giving up as a result of the reduced monthly annuity?”

To help answer to those questions, the Defense Department has launched an online calculator where service members can learn whether the current retirement system or the blended system is the better option financially.

Troops can plug in their age; when they began their military service and at what pay-grade; and when they plan to retire, as well as how much they would hypothetically contribute to the TSP, and the website will lay out how much they would earn under each retirement program option for easy comparison.

“We have designed an all-in-one calculator that is intuitive to use and takes into account the unique financial situations of our active duty, National Guard and Reserve service members,” said Tony Kurta, acting undersecretary of Defense for personnel and readiness. “The calculator presents to service members the information needed to make an effective comparison. The calculator will provide service members the ability to compare estimated benefits between their current retirement plan and BRS prior to making this important decision.”

TSP officials reported last week that more than 163,000 people have already signed up online for a training course on the blended retirement system. Service members cannot opt in to the program until January 1, 2018.

CORRECTION: The original story said 163,000 had signed up for the blended retirement system, but TSP officials said that statistic refers to the number of people who have taken an online training course on the program.