Blended Retirement System Basics

This post helps you understand the Blended Retirement System (BRS) basics.  Do you, now, or will you, supervise new enlisted military members or new officers?  Are you fluent on all the details of the new BRS that take affect starting 1 January 2018?  I suspect most of us aren’t.  Without going into all the details of the BRS, here are some things you need to know as a Supervisor or Commander.

Tell your new military members to save AT LEAST 5% of their paycheck to the Thrift Savings Plan (TSP) so they can MAX out the DOD contributions.

• Every new armed forces member will receive a DOD contribution of 1% of their salary to the TSP after 60 days of service.  This is automatic and the member will not have to do anything.
• All DOD TSP contributions belong to the member.  This means that even if they only do 60 days - 19 years, and don’t qualify for the “annuity”, they keep their DOD TSP contributions.  This is one of the key characteristics of the BRS.  Before the BRS, military members received nothing, but their own TSP contributions, if they did not complete 20 years of military service.
• If the member contributes 5% of their paycheck, they will receive an additional 4% (10% total, 1% from the automatic contribution) in DOD contributions.  This 5% DOD contribution is FREE money.

To adjust their contribution rate, they’ll need to go to MyPay (https://mypay.dfas.mil) à Traditional TSP and ROTH TSP à Change the contribution % to 5 (more is ideal).

• I’m hoping that supervisors at all levels discuss personal finances with their new members in the first 30 days of arrival at a new assignment.
• For 90% (my own opinion) of all new personnel, the ROTH TSP is the best option.  There are some exceptions of why a Traditional TSP is a better option for young personnel.  One exception is for lawyers that have massive school loans and the payments are income dependent.  A Traditional TSP lowers your Adjustable Gross Income (AGI) and lowers the payments.

Once they’ve changed their contributions to 5%, tell your new military member to go to www.tsp.gov, get a PIN, and then adjust their “portfolio allocation.”

• The “G” Fund is the default fund.  A lot of people I’ve financially helped didn’t know that their TSP contributions have all been in the G fund.  The 10-year rate of return is only 2.63% for the G fund, compared to the S Fund’s 8.13%. (https://www.tsp.gov/InvestmentFunds/FundPerformance/annualReturns.html)
• If you don’t know anything about the individual funds, then I recommend your new military member put all their money into the farthest out LifeCycle Fund.  As of 2017, the L2050 is the farthest out LifeCycle Fund.

There are other changes that they should keep track of.

• If they plan on doing 20 years or more, they need to know that the “annuity” went down from 50%, to 40% of their base pay.
• Depending on their career field, they should be on the lookout for continuation pay near their 12-year mark.
• If you supervise military members that have to face the opt-in, then I recommend you discuss with your services’ Family Readiness Center and talk to a trained BRS counselor.

Lastly, tell your new military members that saving money, staying out of debt, and investing will lead to financial success in the future.

• If you or your new military member is looking to start a financial journey, I encourage reading this article on my other website, the Financial Genome Project, at http://financialgenomeproject.net/where-to-start/.