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Retirement Benefits for Service Members (BRS)

Our service members risk it all to protect this great country. Unfortunately, their compensation and benefits don’t always reflect the sacrifice.

Still, it is nice to know service members have retirement benefits to fall back on. Annual changes impact service members and their families.

This article takes a closer look at the revised rules that all military families should know about.

What Changes Should You Expect?

The blended retirement system (BRS) was set up in 2018 to phase out the old legacy pension plan. This new system borrows some elements from the old legacy system and combines it with benefits civilians get through their 401(K).

Here are the significant changes everyone should know about.

Retirement Pay

Under the old legacy system, service members are eligible for lifetime monthly retirement pay. However, only those who have served for 20 years or more are eligible. Thanks to the revised rules, veterans will get a 1.3% bump on their monthly benefits. This is a drop from the 2020’s increase of 1.6%.

One of the most significant selling points of the BRS is that you get benefits even if you don’t serve for 20 years. Under the new regulations, service members who retire from active duty get 40% of the average 36 months of their highest pay while serving. Although this option offers more security, it is less than what veterans get under the legacy system.

Continuation Pay

Continuation pay is only available to service members enrolled under the BRS. This is a one-time bonus paid to service members on their twelfth year of service. However, you must commit to extending your contract by another four years to be eligible. 

Caution pay is two and half times a service member’s basic pay. This bonus is payable on the first day of your 12th year. Those in reserve and National Guard get half of the basic salary while the army reserve and guard get four times as continuation pay.

You should know that this amount is taxable. The taxes are a little higher if you get it as a lump sum. To ease the tax burden, service members have the option of spreading it over four years. What you do with it is up to you. But there are other options on the table, such as contributing part of it to your thrift saving plan (TSP). 

Thrift Saving Plan

The thrift saving plan is the equivalent of a 401(K) in the private sector. After leaving the military, you will no longer be able to make contributions to your saving plan. Fortunately, you can still keep your money in the Thrift saving plan if the balance is above $200. 

Although the TSP has been available for years, there was no government matching. That means all the money in your account is only your own. In the 2021 changes, the DoD will match whatever you put in. However, you must contribute a minimum of 5% of your basic pay to get the complete matching.

Up-front Lump sum retirement pay

Retirees below the retirement age under the new BRS pension plan can request an up-front lump-sum payment. The social security retirement age for most people is 67 years. This amount comes out of your total retirement pay. 

If you choose this route, you get 25% or 50% of your retirement package upfront. However, your retirement checks will be reduced by a similar percentage. You should also know the amount will be reduced by a preset percentage. The current rate is about 6.75%.

Bottom Line

It is nice to know that service members have a retirement benefit once they hang their uniforms. However, the key to maximizing your benefits is keeping up with the changes. Hopefully, this article answered all questions you may have about your retirement benefits.

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