The Department of Defense is introducing a new system to help service members save for retirement in January 2018. Simply put, the Blended Retirement System (BRS) is a combination of the legacy retirement system (income for life) and defined contributions to the Thrift Savings Plan (TSP).

Making Cents: The Blended Retirement System: Keys to Your Decision

Depending on how long you’ve served, you may have two ports to choose from to dock your retirement savings. With the right intel you’ll know which one is best for you.

Who is affected by the change?

·       Servicemembers who join on/after January 1, 2018: Automatically enrolled in the BRS

·       Servicemembers with 12+ years of service: Will remain in the legacy system

·       Servicemembers with less than 12 years of service: Can opt into BRS or remain in legacy system

Key considerations

The legacy system will serve you best if you plan on a full military career. So if you’ve served more than 10 years and don’t plan on leaving before you’ve reached 20 years of service, you may want to stick with it.

If you plan to leave the force with fewer than 20 years of service, the BRS is a great option. It provides government benefits toward retirement through defined contributions to your TSP, as long as you serve a minimum of two years.

Timing for your decision

When it comes to making a choice, timing is everything. You’ll have the entire 2018 calendar year to decide which retirement system is best for you. But making a decision sooner than later has its upside if you’re considering the BRS.

“Those who have been in less than 12 years need to educate themselves today. Although they have the year 2018 to make that decision, the quicker they can make that decision, the better off they are,” says Kevin Driscoll, vice president of advisory services at Navy Federal Financial Group.

By making your decision early on, you’ll start taking advantage of defined contributions to your TSP under the BRS. This means you’re potentially doubling your retirement savings each pay period. The sooner you opt in, the sooner you’ll start getting those matching contributions.

Retirement Goals

What does retirement look like to you? Maybe you’re traveling, starting a small business or focusing on paying down debt. Or you might be thinking of making a big-ticket purchase, like a second retirement home. All of these things require capital. This is where your retirement savings come in.

The DoD’s retirement calculator can help you compare the legacy retirement system and the BRS. You can see your expected retirement income and when you’ll receive it, which can put your retirement game plan in perspective.

Have the retirement talk

While retirement is your time to enjoy after a dedicated military career, have the retirement conversation with your family and loved ones. You’re likely to have a different family dynamic by the time you retire than you do today. Things like your children’s college expenses, care for elderly loved ones, or even moving residences could be factors once you reach retirement. These all involve proper financial planning with family.

Your trusted financial institution is another great place to check in. Many banks and credit unions have financial planners that can help you weigh your options. Some institutions like Navy Federal even offer access to financial advisors for their members. It never hurts to have a professional on your side.

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