Hey Military Spouse: This is Why You Need to Understand the Blended Retirement System
Hey Military Spouse, you’ve probably heard some buzz over the past few months about the new military retirement system aka the Blended Retirement System aka the BRS. If your servicemember has fewer than 12 years of service as of 1 January 2018, they will get to choose whether they want to stay with the current “High Three” system (20 years=pension) or opt-in to the new BRS.
Maybe you have absolutely no idea what I’m talking about. In that case, please, please, please, hear me out!
Yes, your spouse will ultimately go online and check the box to opt into the BRS or do nothing to stay grandfathered into the High Three system. However, choosing to opt-in or stay with the current system should be a decision that you and your spouse make together. Let me tell you why.
My, Your, Our Future
Making the choice to opt-in to the BRS or stay with the current plan is a big decision, and it should be a joint decision. Ya’ll talk about what you want to eat every night for dinner, shouldn’t you at least have a conversation about a decision that’s going to affect you for years down the road and into retirement? Regardless of the fact that the money that funds this future retirement benefit might not come from your employment or your paycheck, it’s still going to affect your joint retirement.
According to the recent Blue Star Families 2017 Military Family Lifestyle Survey 53% of military spouses who responded are not earning an income. Even though a majority of military spouses may not be earning income, they are more than likely to be the ones budgeting, spending, and saving for their family.
If that’s true in your household, shouldn’t you understand the BRS? How would you want to adjust TSP contributions if your servicemember opts in? You don’t want to miss out on the maximum DoD TSP match, right? What would you do with the continuation pay? Hint: even if they choose not to opt-in, it’s still a good idea to review their TSP contributions as a team.
20 Years or Bust?
The retirement pension carrot that is dangled in front of your family is attractive and tasty. Who wouldn’t want to stay in for at least 20 years? Well, it turns out, a lot of people. On average (the rates are different for enlisted versus officers) only 17% of servicemembers will make it to retirement. So Look around at your spouse and their five best battle buddies. Statistically, only one out of those six will retire.
As a couple, talk about if you both want to stay the course for those 20 years. If you do, great. However, how likely is it that your servicemember will get to 20 years even if they want to? Together, take a hard and honest look at their career viability. What do the promotion rates look like for their MOS. Are they competitive among their peers? Can your family continue to handle the frequent deployments and high-tempo life? As a military spouse, are you prepared to stay in for 20? Are you ready for all the future moves, changing schools, deployments, remote assignments, interrupting your own career?
The BRS vs. the High Three is beginning to look like this year’s battle royal. Are you Team BRS or Team High Three Legacy? It’s an important decision to make and there is money involved, so of course, people are getting passionate about it. Unfortunately, this decision doesn’t have a one size fits all answer. You’re going to hear talk from both ends of the spectrum.
Team High Three might tell you that the government is trying to rip us off with the Blended Retirement System. A smaller pension multiplier means a smaller pension check at retirement. Team BRS might tell you that your chances of making it to 20 years are slim. Do you really want to put all your retirement eggs in the same basket? These comments are obviously extreme, but the point is, don’t let someone else’s opinion make your decision for you.
Do You Understand the Differences Between the Two Systems?
Whether you think you are Team High Three or Team BRS, do you and your family a favor and educate yourself on the differences between each system. Your family’s situation is unique and I can’t tell you in this blog post which retirement system you should choose. However, you should understand the benefits your servicemember and you could receive under the current system versus the new system. The Blue Star Family 2017 Military Family Lifestyle Survey found that 53% of servicemembers eligible for new blended retirement benefit say they don’t understand it. Yikes. Let’s fix that.
- Don’t rely solely on the information your spouse brings home from their one hour class on BRS. You can actually take BRS training on your own through Joint Knowledge Online (JKO) here. You don’t even need a CAC. I took the Opt-In training a few months ago and learned a ton.
- Don’t rely on office gossip about the BRS. Do your own homework and form your own opinion. This link to Kate Horrel’s site will take you to over 30 links on the BRS from official sources as well as from some of my favorite military personal finance bloggers.
- Take just ten minutes and use the BRS Comparison Calculator and figure out which system will financially work in your family’s favor.
- Remember that this is an emotional decision just as much as it is a financial decision. It’s easy to use the calculator to see which system will work financially in your favor. However, It’s much more difficult to figure out if a servicemember not only wants to stay for 20 years but will make it to 20 years.
You have a Year to Decide (Kinda…)
The bottom line is that if your spouse is eligible to opt into the BRS on 1 January 2018, they actually have an entire year to make their decision. That takes some of the pressure off, BUT (and it’s a really big one) if you decide to delay your decision to opt-in, you’re actually losing out on money. If your spouse delays their decision to opt-in because they haven’t made a decision, don’t know how to opt-in, or just due to sheer forgetfulness, they will be missing out on the 1% auto-contribution AND possibly up to a 4% match. In my opinion, make your decision before 1 January 2018!