Critical Mistakes People are Making with the New Blended Retirement System
Earlier this week, Military Times put out this article that says Marines have switched to the new Blended Retirement System (BRS) more than any other service. While I’m not really that interested in what percentage of each service has switched, the article points out numerous errors service members are making when it comes to the BRS. Let’s take a look at them.
Mistake #1 – Not Contributing At Least 5% of Their Basic/Drill Pay
The article says:
80.4 percent of all active duty and 60.4 percent of all Reserve and Guard members who have opted into BRS this year are contributing at least 5 percent of their basic pay or drill pay to their Thrift Savings Plan (TSP).
Since the Department of Defense matches up to 5% of your basic/drill pay, that means 19.6% of active duty and 39.6% of reservists or Guard members are leaving free money on the table. You always want to “snatch the match” if there is one in your retirement plan. There didn’t used to be a match, but under the BRS there is. Getting it is equivalent to an immediate 100% investment return, which you can’t find anywhere else.
If you are in the BRS, you have to find a way to contribute a minimum of 5%.
Mistake #2 – Not Contributing Anything to the TSP
The article also states:
a little more than 1 in 10 service members who have switched to BRS aren’t putting any money into their TSP accounts
Under the BRS, the DoD automatically contributes 1% of the service member’s basic pay to the service member’s TSP, but 1% is just not going to cut it. You have to start saving early to allow the magic of compound interest to build your retirement nest egg. This is CRITICALLY IMPORTANT, which is why it is step 5 of the Military Millions Steps to Financial Security.
As said above, you have got to find a way to contribute 5% of your basic/drill pay if you are in the BRS.
Mistake #3 – Not Enrolling in the BRS
The article states:
Halfway through the year, about 13.5 percent of service members facing a choice between the new and legacy military retirement systems have opted in to the new Blended Retirement System
This number should probably be higher…a lot higher.
As also stated in the article:
Only about 19 percent of active-duty service members and 14 percent of reservists stay in the military long enough to earn retirement pay, under the legacy system.
In other words, the overwhelming majority of people in the military do not stay for 20 years. If you don’t stay for 20 years, you get no DoD-provided retirement benefit. You only get what you put in the TSP with your own money.
The only way you get any DoD retirement contributions if you get out of the military before 20 years is if you switch to the BRS. Way more people than 13% should be making this switch. You can read my thoughts on the subject in detail at the White Coat Investor.
The Bottom Line
- If you are in the BRS, you need to contribute at least 5% of your drill/basic pay.
- More people should be switching to the BRS.
If you want to sign up for it:
- Soldiers, sailors and airmen go to https://mypay.dfas.mil/mypay.aspx
- Marines go to https://mol.tfs.usmc.mil/mol
If you want to see every resource and article we’ve ever seen about the BRS, go to our BRS Resource Center.