The first of the year marks big changes to the U.S. military’s retirement system, which has largely remained the same since World War II.
The new retirement system, known as the “Blended Retirement System” or BRS, combines two major sources of retirement income: the existing annuity provision for those who retire after 20 or more years of service, PLUS the Thrift Savings Plan (TSP). According to Military.com, the TSP is a government-run 401(k) retirement account that allows members to invest their own money in either stocks or government securities and also get a contribution to that account from their employer.
Currently, military members receive a lifetime pension that is equal to 50 percent of their base pay. To earn it, they must serve at least 20 years, but the majority don’t stay in the service that long.
The new plan, which starts on Monday, puts more of the responsibility for long-term savings on the members’ shoulders.
The pension is reduced by 20 percent and still only applies if you reach 20 years, but according to the Department of Defense, members can make up the difference using the TSP.
“It starts to cause them to learn how to contribute to their future, their own retirement,” says Vice Admiral John Bird, USAA’s senior vice president of military affairs. “It’s my strong belief they get education and start right away contributing. They won’t miss the money.”
— U.S. Army Recruiting (@USARECPAO) December 29, 2017
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