Many questions surround the new Blended Retirement System, for which current service members can opt into and new service members will be automatically enrolled starting Jan. 1, 2018.
There’s even a mandatory opt-in course service members must take before making their decision.
But special considerations for members of the reserve component must be taken into account when deciding if the new BRS is right for you.
Reserve Component Retirement: Points = Years
Guardsmen and reservists earn points toward retirement by performing their regular duties and also for additional tasks. The military converts these points into creditable years of service, and at 20 years, you’ll qualify for one of two retirement benefit plans, which become available when you turn 60 — or possibly earlier if you served on active duty after Jan. 29, 2008.
You must earn a minimum of 50 points per retirement year in order for that year to qualify as a creditable or “good” year for retirement purposes. If you fail to earn the minimum 50 points per year, that year will not count towards retirement.
You accumulate points by belonging to a unit and participating in:
- Annual training.
- Monthly weekend drills.
- Correspondence courses.
- Funeral honors duty.
- Active-duty service.
Retired Reserve: Staying Ready Reaps Rewards
Once you’ve qualified for retirement and have decided to hang up your boots, you have two options: discharging from the service altogether or transferring to the Retired Reserves. While it may be tempting to discharge, you’re leaving money on the table if you do, says JJ Montanaro, a Certified Financial Planner™ with USAA.
That’s because transferring to the Retired Reserve will allow you to earn longevity credits and receive retirement pay based on the pay tables in effect when your retirement pay begins, not the pay when you were discharged.
“I highly encourage people to transfer their status to Retired Reserve,” says Montanaro, a retired reservist himself. “The choice you have to make is a huge one, from a financial perspective. If you choose to be discharged, your retirement pay calculation is frozen in time. You’ll miss out on 20 years of inflation along with longevity increases in pay.
“The trade-off, of course, is that you could be called back to duty if there’s a national emergency.
The new Blended Retirement System blends the traditional, 20-year cliff-vested defined benefit annuity, similar to the existing Uniformed Services’ legacy retirement systems, with a defined contribution plan that allows Service members to contribute to a Thrift Savings Plan (TSP) account with government automatic and matching contributions. This change of military retirements was a result of the Military Compensation and Retirement Modernization Commission.
When Congress passed Blended Retirement in the 2016 NDAA, they also passed into law the requirement for DoD to teach Financial Literacy to Service members and their spouse upon request. The Service Secretaries will ensure financial literacy training at key phases of a service member’s career.
The new BRS opens up retirement benefits to more members of the reserve component. As the current, or legacy, retirement system works, members must serve a total of 20 years to be eligible. Only 14 percent of reserve component members reach this milestone.
Under BRS, about 85 percent of service members will receive a government retirement benefit if they serve at least two years, even if they don’t qualify for a full retirement. There is also a lump sum option for your retirement pay.
You are eligible if you are a service member in drilling or active service, who is in a paid status on Dec. 31, 2017, and you have less than 4,320 retirement points. If you are eligible to opt-in to the Blended Retirement System, you must take the mandatory Blended Retirement opt-in training.