When does a retirement plan stop being “new”?
There’s no clear dividing line, but at least one major media outlet still considers the Blended Retirement System (BRS), which took effect Jan. 1, 2018, across the Defense Department, a “new retirement option,” even though servicemembers no longer have much of an option.
But just because you’ve made your selection doesn’t mean you’ve done all the prep work you’ll need to maximize your earnings under the BRS. MOAA Premium and Life members can reach out to financial experts and receive an assist on their personal financial path; learn more about joining MOAA here.
In the meantime, here are five basic bits of BRS guidance:
1. Stay informed. Unlike the legacy system, figures and policies connected to the BRS will change over time. Two big examples: The rate of, eligibility for, and timing of your mid-career continuation pay; and the amount of discount applied for servicemembers who choose to take their BRS payout in a lump sum. Bookmark DoD’s BRS webpage and monitor service messages to keep up to date.
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2. Don’t delay. As with any retirement planning, things get easier the earlier you start paying attention. Don’t put off trying to maximize your Thrift Savings Plan (TSP) match, and don’t put off doing your homework on the BRS in total.
3. About that match ... You must contribute 5% of your pay to the TSP to get the maximum DoD match. Anything less is giving up a key portion of the BRS benefit– and reduces the earnings available to fund your retirement. It’s worth doing the financial math to make this happen as soon as practical.
4. About that lump sum … Along with the discount outlined above, remember: Taking all or some of your retirement payout early also prevents you from earning the returns you could earn if that money were invested over the next several decades.
5. TSP 101. Get to know this plan – you’ll be using it while you’re in uniform, and you’ll have the option to continue to do so after leaving service (along with the chance to roll the money into other retirement funds, or withdraw it early – and pay a penalty). MOAA’s experts have some guidance available on the topic, and you can learn much more about the plan at TSP.gov.