At what point does the new Blended Retirement System become advantageous for current service members to opt into it?

2016-09-07T19:50:34-04:00

Response by Maj Private RallyPoint Member made Sep 7 at 2016 8:01 PM

2016-09-07T20:01:36-04:00

I crunched the numbers, and as long as I don't kick the bucket before 65, I'll be personally better off sticking with the current system. In other words, I do not plan to opt into the BRS. Has anyone else figured out that it will benefit them to opt in? Of course members who join after 1 January 2018 won't have the option. That's the plan they'll get. This question is primarily for current active and reserve service members.

Here's my $0.02:
It's good they're finally offering the military members a TSP match that federal civilians have had for years. Also, that clearly helps military who don't serve until retirement as long as they serve 2 years to become fully vested.

So if I'm reading the official literature correctly (which is a big IF because it's fairly confusing), then basically retirement pensions are reduced by 20% as part of the BRS. So if you serve 20 years, instead of getting 50% of base pay for life, you get 40% of base pay for life. As a Reservist whose active service time is capped at 20 years, I don't have enough active time left to make up that difference with TSP contributions by the DoD (again, unless I were planning on passing before I turn 65). However, it's certainly possible that other service members could more than make up the difference provided they maximize their TSP contributions, AND if they earn a consistent 10-12% average return on their TSP (hasn't happened consistently since 2001).

It should definitely save the DoD money on the back end by reducing retirees' pensions (anyone in the current system is grandfathered unless they choose to opt in), but remains to be seen how much it costs them on the front end with members who do max their TSP, but don't stay until retirement. Previously, those members didn't cost the DoD anything in the TSP. Now they might. What are your thoughts?

Response by SFC Private RallyPoint Member made Sep 8 at 2016 5:55 AM

2016-09-08T05:55:23-04:00

If you stay in for 20 the answer is NEVER. This is only beneficial for Soldiers who will do the minimum. Basically, enlisted who want to learn a trade or earn money for college and for the officer who wants to pay back school loans. Anyone who wants to do a full 20 is screwed under the new system. But I seriously hope this doesn't turn into a "If you like your doctor, you can keep your doctor." I like my "high-3" and want to keep it. Honestly, "high-3" was a main reason to stay in. I can get out and get a job making three times what I make now but I would miss out on a lifetime of retirement. The new generation will enlist at 18, work until 38 (20 years) then go work somewhere until they are 58 (another 20) and wait another seven years until 65 to get the benefits. What a scam.

Regarding the TSP. It has an average ROI of about 8-10%. I invest thru Edward Jones and over the last 14 years my ROI is sitting at 28%. Always a better option than letting the government tell you where to invest.

Response by SGT David T. made Sep 8 at 2016 8:08 AM

2016-09-08T08:08:09-04:00

The new system is very similar to the civil service version. The answer to your question is it all depends. The main thing is how long the SM has been in. If they are very early in their career, it is advantageous because more money gets dumped into the TSP portion. If you are on the back end of your career, it probably isn't advantageous as there wont be as much. This is not to say that the TSP is the best option out there. There are better investments for sure, but the TSP is a pretty low maintenance thing for the most part. Sure, you can make more if you manage investments responsibly and closely, but TSP in a way is designed to be fire and forget.

Response by LTC Stephen B. made Sep 8 at 2016 8:29 AM

2016-09-08T08:29:06-04:00

It will vary depending on your personal situation. It will also vary depending on whether you are active duty (AC/AGR) or regular/traditional/M-Day reserve/Guard member. You will need to make your own assumptions regarding future returns and interest rates, along with your personal life expectancy.

For new enlistees, if you set aside enough to get the full match in a very basic/conservative TSP mutual fund, you will CRUSH the current 2.5% retirement. The key is being disciplined enough to start early and stay in TSP.

That being said, the further along you are in your career, the less time/opportunity you will have for TSP to make up for the lower multiplier. There is a "continuation pay" (CP) that will most likely be offered to everybody at or about the 12 year mark but again, you would have to be disciplined enough to invest it rather than spend it. Details are out on the timing and amount for CP, so DON'T LET ANYONE tell you they've "done the math" because not all the calculations are possible.

Same with taking a partial lump-sum retirement payment - the discount rates have not been set, nor has the impact to disability pay (could be a game changer). If you stay in the old system, lump-sum is off the table.

DoD will be putting out a calculator late December or early January, once the final policy details are approved. You will then be able see if it makes sense for you.

Currently there is a leader briefing for NCOs/Officers to get up to speed and be able to provide basic info to their troops. It is on JKO, course number J3OP-US1330.
Edit

Response by LTC Stephen B. made Sep 14 at 2016 11:52 AM

2016-09-14T11:52:26-04:00

One thing many aren't thinking of, and one I only recently brought up on another thread on the retirement system, is the TSP is yours. You don't have to buy back 55% for your spouse in a survivor benefit program, 100% is available to leave to your spouse, your children, another dependent or anyone else of your choice. Each individual would have a subjective value to attach to that added freedom.

Response by LTC Stephen B. made Sep 28 at 2016 9:17 AM

2016-09-28T09:17:44-04:00

ASD M&RA will hold a webinar tomorrow, with Q&A on facebook:

https://www.facebook.com/asdmra/events

Assistant Secretary of Defense - Manpower & Reserve Affairs Todd A. Weiler - Events | Facebook

Assistant Secretary of Defense - Manpower & Reserve Affairs Todd A. Weiler, Washington, DC. 7,070 likes · 592 talking about this. Welcome to the official...

Response by LTC Stephen B. made Oct 17 at 2016 4:19 PM

2016-10-17T16:19:48-04:00

New Personal Financial Counselor course for Blended Retirement just released on JKO (CAC access required)

https://jkodirect.jten.mil/Atlas2/page/coi/externalCourseAccess.jsf?v= [login to see] 93&course_prefix=J3O&course_number=P-US1331

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