YouTube Episode 0021 – What Other Effects Will the Blended Retirement System Have?

https://youtu.be/tnnp5hZ4KMI

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

The Thrift Savings Plan Under the Blended Retirement System


Related Podcast Episodes
:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

The Thrift Savings Plan Under the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

The Thrift Savings Plan Under the Blended Retirement System


The Thrift Savings Plan Under the Blended Retirement System

How will the Thrift Savings Plan change under the Blended Retirement System?  In my article, “An Introduction to the Thrift Savings Plan,” I described the basics of how TSP works.  There is a significant difference between the plan under BRS and how it works for service members right now.

 

As you have already learned, there are no matching funds for contributions you make to the plan.  Under the Blended Retirement System, this will change and a total of up to 5% of base pay will be added to the contributions you make.

 

How does this work?  Well, if you are already a serving member and have at least two years of service, you will begin receiving an automatic 1% contribution to your TSP account if you switch to BRS.  The first 3% of base pay you contribute will be matched dollar for dollar.  After that, the next 2% of money you contribute will be matched at 50¢ per dollar.  The 1% automatic contribution plus the 100% match on the first 3% of your money plus the 50% match on the next 2% of your money equals a 5% total match.

 

These matching funds have a nice effect on your total investment.  That effect is an automatic 100% return on your investment.

 

For a visual representation of what I just described, see the BRS infographic I have posted in the description below.  There is an active and reserve component version of this graphic.

 

The 1% contribution will begin immediately for service members who switch to BRS.  It will begin after sixty days for new members.  The matching funds will begin once a member reaches two years of service.

 

I mentioned in my previous article that there are two version of the TSP, traditional and Roth.  Traditional contributions are not taxed now but are taxed when you withdraw the funds and their earnings at age fifty-nine and a half.  Roth contributions are taxed now but are not taxed when you withdraw the funds and their earnings at age fifty-nine and a half.  All matching funds go into a traditional account.  Your contributions can go to either or both of the two.

 

There will be a vesting requirement in order to keep the matching funds.  Vesting simply means your ability to keep that money (by that I mean the matching funds only, not your money).  If you have at least two years of service, you will be fully vested as soon as you switch to BRS.  If you have less than two years, you will be vested once you hit the two-year mark.

 

D.J, are the matching funds based on the active duty pay scale or my drill pay?

The matching funds are based on whatever amount of money you have earned for a particular month.  If you’re on a short tour of active duty, are drilling, or on annual training, your matching funds will be based on that amount of money.  The match will not be based a full month of base pay unless you have earned that much for the month.

 

Are matching funds also added if I contribute bonuses or incentive pay to the TSP?

No, the matching funds are based on your base pay only.  Don’t let this fact prevent you from contributing those funds to the plan if that is what you wish to do.

 

If I receive the career continuation bonus, can I contribute that to the TSP?

Yes, you can contribute all or a portion of that payment to the TSP.  It is also possible to receive career pay in four annual installments.  This means if you want to contribute as much of the continuation pay as possible and you are receiving more than the $18,000 per year limit then you can break up the payments and either pay less in taxes or be able to contribute more to the TSP.

 

You can set your preferences for what percentage of base pay, bonuses, and incentive pay you would like to go to the TSP through the MyPay website or through the Coast Guard Pay Portal. You can then manage how the money is spread across the various funds within TSP at the TSP website.  There are links to all of these sites in the description below.

 

Last month, I posted an announcement for a webinar which would describe some of the workings of TSP under the BRS.  I have not found the recording of that webinar on MilitaryOneSource.  I do however have a copy of the slides they used.  I have posted them to my website and include a link in the references below.  It is called “TSP Under the Blended Retirement System.”

 

Next week, I will talk about some of the other effects of the Blended Retirement System.

 

Thanks for joining me today and, of course, thank you for your service.

 

D.J.

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
RS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan


Podcast Episode 0018 – The Thrift Savings Plan Under the Blended Retirement System

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
RS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2


YouTube Episode 0020 – The Thrift Savings Plan Under the Blended Retirement System

https://youtu.be/aIfkfxk_C9E

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
RS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)
TSP Under the Blended Retirement System
Global Pay Self Service (Coast Guard)
MyPay
Thrift Savings Plan Website

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan
Let’s Talk About the Funds in the Thrift Savings Plan – Part 1
Let’s Talk About the Funds in the Thrift Savings Plan – Part 2

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System
Career Continuation Pay Under the Blended Retirement Plan
An Introduction to the Thrift Savings Plan


Career Continuation Pay Under the Blended Retirement System

This week I will describe the facts and dispel some myths about the Blended Retirement System’s career continuation pay.  While it is relatively simple, there are some misunderstandings about it

 

Let’s start with the facts.  The career pay will be offered to people between their eighth and twelfth year of service if they agree to serve at least three more years. The amount of the pay will be based on the status of the person, specifically whether he is active duty or a reservist.  Each branch of service will be able to develop their own policies regarding the amount of pay to offer and who will be offered what amount.

 

Active-duty members will be offered a minimum of 2.5 months of base pay up to a maximum of 13 months of base pay.  The amount of base pay will be based upon the member’s current pay grade and current years of service. Active Guard / Reserve members will be counted as active duty.

 

Reserve component members will be offered a minimum of 0.5 months of base pay up to a maximum of 6 months of base pay.  Remember, though, that although a reservist is eligible to with to the BRS if he has less than 4,320 retirement points, he will not be eligible for the continuation pay if he has more than 12 years of service for pay.

 

Here is some more good news about continuation pay.  It will be treated as a bonus so, if you are receiving VA compensation, there will be no offset as a result of the VA payments.  Career pay also does not preclude you from receiving other types of extension bonuses.  You potentially can get both and serve out the terms of each extension concurrently.  That simply means more money in your pocket.

 

Now, a word of warning, don’t think of switching to the Blended Retirement System as a simple money grab.  It is possible to be eligible to convert to the BRS and not be eligible for continuation pay.  While eligibility to switch is based on your retirement points, eligibility for continuation pay is based on your actual years of service.  For example, if you have 2,000 retirement points and fourteen years of service, you are eligible to make the switch, but you will not be eligible for continuation pay.

 

For those who are eligible for continuation pay, I do see an implied task (we’re all familiar with that term, I think) in this type of pay.

 

**Warning! Opinion forthcoming!**

 

The career continuation pay was created as part of the Blended Retirement System.  I believe the implied task here is the invest the career pay into the Thrift Savings Plan and use it as a way to spike the total value of your investment and the ability of the plan to earn more for you.  Obviously, every member will have to make that decision individually and some people will choose not to invest it or otherwise use it to improve their lives in retirement.  Look for the guy driving a new motorcycle or sports car and you’ll know what happened to his career pay.

 

Next week, I will talk about how the Thrift Savings Plan will work for members under the Blended Retirement System.

 

Thanks for joining me today and, of course, thank you for your service.

 

D.J.

 

Update:

Career pay will be offered to those who convert and are at the twelve-year mark at the lowest rate mentioned above.  Active duty personnel will be offered 2.5 months of base pay and reservists will be offered 0.5 months of base pay.  The other rates will be offered to new personnel who join the military after 1 January 2018.

Here is a simple (but still in development) BRS calculator.  It’s pretty good and should be useful in helping you make a decision.

http://militarypay.defense.gov/Calculators/BRS/

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System


Podcast Episode 0017 – Career Continuation Pay Under the Blended Retirement System

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

 


YouTube Episode 0019 – Career Continuation Pay Under the Blended Retirement System

https://youtu.be/pBAtyHE5yrk

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)

Related YouTube Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

Related Podcast Episodes:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
What Will the Blended Retirement System Do to My Pension?
Myths About the Blended Retirement System

 


What will the Blended Retirement System Do to My Pension?

As I said in my last article, “Myths About the Blended Retirement System,” there is a lot of misinformation about the new retirement plan.  This week, I will describe how the military pension will actually work under BRS.

 

We’re all familiar with how the pension works on the active duty side of things.  It’s a relatively simple formula.  It is:

 

(Years of Service X 2.5%) X (average of last three years of base pay) = Retired Pay

 

Under the current plan, an active duty service member with twenty years of service and an average monthly pay of $5,000 will receive 50%, or $2,500 per month in retired pay.

 

Unlike the myth that the monthly pension will go away, it will actually only be reduced by twenty percent.  This means the new formula would be:

 

(Years of Service X 2%) X (average of last three years of base pay) = Retired Pay

 

Under the new plan, an active duty service member with twenty years of service and an average monthly pay of $5,000 will receive 40%, or $2,000 per month in retired pay.  That’s still a reasonable amount of pay especially in these days of companies rarely providing pensions upon retirement anymore.

 

On the reserve component side of things, the math is relatively the same, as well.  I have articles specifically showing you how to get a rough idea of your monthly pay, but it never hurts to recap.  I’ll even add a little more detail.

 

The current plan is based on retirement points and the average of the last three years of base pay.  The formula to estimate your retired pay is:

 

(Points ÷ 14,400) X (average of last three years of base pay) = Retired Pay

 

Under the current plan, a service member with twenty years of service, 2,500 retirement points, and an average monthly pay of $5,000 will have the following as his retirement formula:

 

(2,500 ÷ 14,400) X $5,000 = $868.05 per month.

 

When we drop the cents, we get $868 per month.  This is not bad for a part-time job.  How many part-time jobs offer a pension and, as an added bonus, health care benefits?

 

The new plan is also based on retirement points and the average of the last three years of base pay.  The formula to estimate your retired pay is:

 

(Points ÷ 18,000) X (average of last three years of base pay) = Retired Pay

 

Under the new plan, a service member with twenty years of service, 2,500 retirement points, and an average monthly pay of $5,000 will have the following as his retirement formula:

 

(2,500 ÷ 18,000) X $5,000 = $694.44 per month.

 

When we drop the cents, we get $694 per month.

 

Don’t let this reduction in the monthly retirement pay get you down.  As I said in “What is the Blended Retirement System?” there are other factors which make up for this reduction.  Two of those factors are the payment of a career continuation bonus and the matching funds to the Thrift Savings Plan.

 

I hope that description makes sense.  Please post any comments you may have to the comments section below.

 

Next week, I will talk about career continuation pay, eligibility for it, and give some estimates on how much it could be.  If you use this payment properly, it can help make up for part of the reduction in the monthly pay.  It might even produce more money for you based on market conditions.

 

Thanks for joining me today and, of course, thank you for your service.

 

D.J.

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)

Related YouTube Episodes:
What is the Blended Retirement System?


Myths About the Blended Retirement System

Related Podcast Episodes:
What is the Blended Retirement System?
Myths About the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
Myths About the Blended Retirement System


Podcast Episode 0016 – What will the Blended Retirement System Do To My Pension?

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)

Related YouTube Episodes:
What is the Blended Retirement System?


Myths About the Blended Retirement System

Related Podcast Episodes:
What is the Blended Retirement System?
Myths About the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
Myths About the Blended Retirement System


YouTube Episode 0018 – What will the Blended Retirement System Do To My Pension?

https://youtu.be/MqZRMNH5bQI

 

References:
The Uniformed Services Blended Retirement System
DOD Implementation of the Blended Retirement System
BRS Implementation Timeline
Are You Opt-In Ready?
BRS Infographic – Active Component
BRS Infographic – Reserve Component
Value of a Retirement Point Chart for 2017 (Legacy System)
Value of a Retirement Point Chart for 2017 (Blended Retirement System)

Related YouTube Episodes:
What is the Blended Retirement System?
Myths About the Blended Retirement System

Related Podcast Episodes:
What is the Blended Retirement System?
Myths About the Blended Retirement System

Related Articles:
What is the Blended Retirement System?
Myths About the Blended Retirement System