Retirement System Rolls Out
How does the BRS differ from
U.S. military has made a major change to its retirement program...
active duty, Reserve, and National Guard members are eligible to choose between two retirement savings and pension options:
the new Blended Retirement System (BRS) and its predecessor, now termed the
Legacy Retirement System (LRS). Service members who have spent fewer than 12 calendar
years in uniform have until December 31, 2018 to make their decision.1,2
was the BRS introduced?
The military needed to update its
longstanding retirement system to acknowledge a reality; few service members
have military careers exceeding 20 years.1
Generally speaking, service members can
count on a pension equal to at least 50% of their base pay under the LRS,
provided they serve for at least 20 years. If they leave the military sooner, they say goodbye to that possibility.1,3
of the BRS as a combination of an old-school pension plan and a 401(k)…
It offers Uniformed Services members something
of a trade-off. They can contribute monthly to the federal government’s Thrift
Savings Plan (TSP), with the possibility of a matching contribution as large as
5% – a first for the military. In addition, they will still be eligible to
receive retired pay for life after 20 years of service – but the pension will
be 20% smaller than the one offered through the LRS.1,2
New Uniformed Services
members are automatically enrolled in the BRS...
One percent of their pay will automatically go into the program (and
into a target-date retirement savings account). A service member has the option
to contribute a greater percentage of their pay. The government will begin
matching the BRS contributions of new Uniformed Services
members once they have served for more than two years.1,3
All active-duty, National Guard and Reserve service members with less
than 12 years in the Uniformed Services as of December 31, 2017 are eligible to
opt in to the BRS; if they do not wish to enroll in the BRS, they will remain
enrolled in the LRS. All Active Component service members with more than 12
years in the military at the end of 2017 remain in the LRS.1,2
Is the LRS a better deal
for some service members?
For those who aspire to long military careers, it does seem that way.
The LRS promises an excellent pension: regular income for life and improved
over time with cost-of-living adjustments. 3
For those who want to
transition to civilian careers, the BRS is quite attractive...
While the BRS reduces inflation-adjusted retired pay that a service
member could one day receive, it also introduces a self-directed retirement
savings vehicle to the Uniformed Services – an account that service members can
take with them into civilian life. TSP assets can be rolled over into IRAs and
certain private-sector employee retirement plans; they can continue to grow and
compound, even after separation from service. The TSP also offers both a
traditional and a Roth account option.3
Service members weighing whether to opt into the BRS are being given
all of 2018 for a good reason: their decision will be final. Once the decision
is made, the choice cannot be undone, even if time remains before the December
31, 2018 deadline.2 Call us at 610-916-6393 if you have any
questions or to schedule a free consultation.
was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates.
This information has been derived from sources believed to be accurate. Please
note - investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
3 - tinyurl.com/yb26xtg7 [12/20/17]