Why I'm going to bite the bullet and switch to the new Blended Retirement System
By now most of us have heard about the new military retirement system that is coming down the line in 2018. For new military members after 2018, this will be mandatory. For those of us already in the military before 2018, we are being given the option to choose between the classic military pension and a new, 20% smaller pension along with a 5% TSP contribution match. This is a massive change to the military retirement system, and as with all change, has been met with fear, consternation, anger, and excitement depending on who you ask.
It is true that in the long run this will save the DoD money if you make it to 20 years and chose to only take 80% of the traditional pension in exchange for a small boost to your own retirement contributions. However, it is also well known that most military members do not make it all the way to 20 years. And what kind of pension do you get now if you leave the military before your 20 years ends: a lot of times it's a 0% pension. Many military members also don't contribute anything to their retirement savings either because they are relying on the 20 year pension, they don't think they have enough money to save for retirement, or they are not even aware there are ways they can and should be saving.
One of the goals of the new retirement system is to ensure that all military members have at least a small amount of money saved for retirement when they leave service, even if they only serve for a few years. This is a big step forward compared to nothing, so I applaud the idea of adding employer contributions to the TSP.
But then there's the real question: what if you, like me, plan to stay in for 20 years? From a financial perspective, you are possibly losing a lot of money by switching to BRS. This is true, and it is something everyone should consider. However, you should also consider that you are not guaranteed 20 years of service. If you're an officer and you never make Major, you probably won't be seeing a pension. If the Air Force decides your career field is overmanned, you might not be seeing a pension. I have decided that I would rather take the guaranteed money from BRS and risk getting less money in the long term from my pension than risk passing up free money in the hopes I might get a pension and end up with nothing. This is a highly personal decision based on your risk tolerance and your career plans. It also has a lot to do with your current time in service. Anyone who has more than 8 years in service already in 2018 should probably think about sticking to the traditional retirement system. Those with less have a hard decision to make. If you do decide to switch to BRS, make sure you are contributing to the highest match level as a bare minimum.