PORTLAND AIR NATIONAL GUARD BASE, Ore. -- 1. You can stick with the legacy pension plan
All members serving as of December 31, 2017, are grandfathered under the legacy retirement system. No one currently-serving will be automatically switched to the Blended Retirement System (BRS). Though they are grandfathered under the legacy retirement system, Active Component Service members with fewer than 12 years since their Pay Entry Base Date, and Reserve Component Service members who have accrued fewer than 4,320 retirement points as of December 31, 2017, will have the option to opt into the new system.
2. Once you choose a plan, it's final
The decision period for choosing either the long-standing “High-3” retirement plan or the new Blended Retirement System will span the calendar year of 2018. Indecisive about your future? You'll want to do your research into the best retirement plan option to fit your unique situation, accumulated retirement points, your life goals and timelines. Service members who use the Defense Finance and Accounting Service (DFAS) can use MyPay to opt into the new Blended Retirement System during the 2018 window.
3. Balancing risk and reward
If you're considering the blended retirement system, your savings for retirement and matching funds will be invested in the Thrift Savings Plan (TSP), the military version of the civilian 401(k). Although administrative expenses for TSP funds are low (good), your nest egg will largely be exposed to the fluctuations of the stock and bond markets, depending on the fund options you select. In contrast, the traditional "High-3" plan is not directly invested in the market and is therefore lower risk. The success of the new Blended Retirement System is based on the premise that you will contribute a portion of your pay each month, with the DoD matching your contribution up to 4%. The existing “High-3” system doesn’t require any monthly salary contribution from the service member.
4. Stay for 20 or leave earlier?
According to the DoD, approximately 81 percent of members who join the military leave with no retirement benefit. The simple fact is that most service members fail to complete the 20-year commitment requirement for the existing "High-3" pension plan. Under the Blended Retirement System, about 85 percent of service members are expected to receive a retirement benefit. With the blended plan, the savings component and DoD matching funds follow the member post-military service once the short vesting period requirement is fulfilled. Complete the 20-year service commitment with the new plan and members will receive a pension on top of the savings portion.
5. Use the calculator
The Department of Defense created a calculator to help you choose between the BRS and the "High-3" retirement plans. It's pretty good, especially for individuals who like seeing charts and graphs in addition to raw numbers. It is recommended to prepare a few items before using the calculator, so that you have all of the information needed to get started. You should have your Pay Entry Base Date (also known as Pay Date or Pay Entry Basic Date), which can be found on your Leave and Earnings Statement (LES). For National Guard and Reserve members, you should have your current number of retirement points, know how many of those points were obtained while on active duty and the number of qualifying years you've earned to date. Here's a link to the calculator: http://militarypay.defense.gov/Calculators/BRS/
You can learn more about the Blended Retirement System at: http://militarypay.defense.gov/BlendedRetirement/
Service members stationed at Portland Air National Guard Base can meet with Andrew Lewis, CFP to discuss the Blended Retirement System option and other personal financial goals for retirement before making a decision. Mr. Lewis can be contacted at 503-459-6446 or pfc1.or.ng@zeiders.com