Your Military Blended Retirement System: It’s Not About The Money.
[Full disclosure: On this post, I’m not about the money either. I’m not paid to write this, it’s not sponsored by anyone, and I’m not earning revenue from the links.]
Our group of military personal-finance bloggers is sending out a #BRSBlitz about the opt-in decision. You may have seen some of these links on my social media before, and they’re included in the “Related articles” section at the end of this post.
If you’re just joining the BRS discussion:
For those BRS-eligible servicemembers who’ve been
underwater on a submarine without bandwidth for the last two years, you have less than two months to opt in. After 31 December 2018, you’re stuck with the legacy High Three pension system, where you have a 15% chance of cliff-vesting at 20 years of service.
If you don’t know whether you’re eligible, or if you haven’t run the DoD BRS calculator or USAA’s BRS Military Retirement Comparison Tool yet, or if you haven’t heard about all the tricky BRS features that DoD won’t explain, then scroll down to the bottom of this post to read the related links. We’ll wait here!
While we’re waiting, let me share that perhaps we’re all getting tired of talking about this. A few of you have been watching the “retirement modernization” process since early 2014. Some of you more senior people have had to spend a lot of your leadership time talking with your troops about the BRS decision. (I sure hope you’ve spent the time!) Many of you financial counselors, coaches, and advisors are getting a little worn out by the repetition.
The opt-in window’s been open for nearly a year. If you choose not to decide, you still have made a choice.
Adulting so hard with the BRS
I’m skeptical that I’ll change anybody’s opinions today, but I feel obligated to make the effort one last time. I’ll share three frequent (anonymous) reader comments with you and then we’ll debunk some other BRS urban legends.
First, if you truly believe that “Any good idea from the gubmint is a bad idea for me!” then you deserve to live with that analysis. The BRS does make life easier (and cheaper) for DoD’s actuaries, and this time DoD is sharing the savings with you.
The BRS is (at worst) revenue-neutral with the legacy High Three pension system for lifetime pension income– if you even get a pension– but you have far more flexibility with the BRS. DoD is all about retention. This time they’ve found a way to cut taxpayer expenses while motivating those who want to do a couple of obligations without having to gut it out to 20.
Second, please contact me if you’re worried that your company commander is going to see “BRS” on your Leave & Earnings Statement and decide that you’re an unmotivated slacker who’s leaving the military. Maybe people who opt-in to the BRS are also more likely to be internally motivated, not just hanging around hoping to get to 20.
Third, I’ve read complaints about the military’s miserable financial literacy: poor BRS training (or no training at all), and senior leaders who don’t care about the BRS.
Hey, this is your paycheck, your career– and your life. Don’t wait on your chain of command. I’m educating servicemembers & families about financial literacy every day, and I’m happy to help you too. Read the posts below, watch the video links down there, and reach out to me.
The BRS is a stellar opportunity to start adulting in your personal financial life. Here’s a thought: “What if the U.S. military already teaches its servicemembers more about personal finance than any corporation in the world?” (Ask your civilian friends about their 401(k) match.) Even if your chain of command hasn’t explained the BRS to you, or you haven’t learned the details, or if you don’t know how to figure out your decision, then you still owe it to yourself (and your family) to ask us questions and take charge of your options.
I’m glad you’re reading this post. Keep educating yourself, because nobody cares about your finances as much as you do. If you hear someone complaining about the training then please send them this post.
BRS is about career flexibility, not the money.
Let’s come at the BRS decision from a different angle: this time I’ll avoid talking about the numbers and the probabilities. You can get the math from the related links at the bottom of this post.
If you’ve been reading this site for a while, then you know that humans base their personal financial choices on two different heuristic algorithms:
1. Logical math, which many bloggers (like me!) love to focus on, and…
2. Feelings. Researchers call this “behavioral economics” or “behavioral financial psychology”.
You’ve probably heard all about the math of the BRS. (I’ve learned this from reading many many Facebook threads about BRS calculators & spreadsheets. You can see those links down below.) Instead, let’s focus on the behavioral financial psychology.
While we’re talking about our feelings, let me debunk some BRS urban legends.
BRS urban legends
Here’s the worst one:
“We’re goin’ for 20!”
I’m amazed by the number of people who say “Ooh yeah, I’m doing 20” as if that’s only based on your internal locus of control. Or even worse, “Oh yes, my spouse needs to go to 20” as though the servicemember doesn’t have a vote.
If you have less than ten years of service then… and I say this as a geezer who’s been there… you have no idea. Even if you have less than 14 years of service then you should still be cautious about those bold proclamations.
Life happens. You can’t avoid injuries, illness, family crises, or your evolving priorities. A career is not just motivation and resilience, and it’s certainly not simple persistence.
The best advice I can offer is to take the military one tour at a time. Stay on active duty as long as it’s challenging & fulfilling. (This is not always the same as “happy”.) When the fun stops (and there will be no doubt when the fun stops) then consider leaving active duty for the Reserves or National Guard. If that’s not the work/life balance you expect then go full civilian.
Here are a few considerations:
By the time you have 10 years of service, many of us have started families. As your kids grow older, you probably want to spend more time with them. Yet as you get more senior in your career, you’ll only be asked to spend more time away from your family. It might be the usual deployment routine, but it’s especially likely to be long hours of managing operations and training. If there’s any family separation worse than deployment, it’s the separation of being in garrison by working a 60-hour week. Is it really worth gutting it out to 20 for a pension?
If you start that second decade of your career, I hope your promotions are starting to pay off. Yet an unfortunate side effect of that seniority is that there are fewer billets for you. (Ask your senior enlisted… or your XO.) As you get up into the pointy end of that seniority pyramid, the choices get very limited. (We call that “breaking out” or “chance to excel”.) This means more difficult decisions for you and your family– and probably more separation. Even if you’re childless or single, it still means that you might be asked to go to places you’d rather avoid. Is it still worth gutting it out to 20 for that pension?
If you’re taking the military one tour at a time then maybe it makes sense to have a high savings rate. When you’ve saved and invested for your own financial stability then you don’t have to feel trapped by car payments or mortgages or a big bonus program. You also don’t have to feel trapped by a pension, because the BRS puts more money in your TSP that you can take with you whenever you leave the service.
Here’s another urban legend:
“Nah, we’ve already obligated for three more years, we’re staying with High Three.”
Um, you might have overlooked a different bonus. The BRS legislation includes a Continuation Pay bonus, and it’s designed to run concurrently with other bonus programs. (It’s concurrent as long as the other bonus program does not specifically say “consecutive”.)
Even if you’re signed up for a re-enlistment bonus or a retention bonus, you still get to sign up for the Continuation Pay bonus.
A note of warning here: unlike the BRS “less than 12 years of service and a year to opt in” qualifier, you have to sign up for the CP bonus before you hit 12 years of service. If you’ve gone over 12 during 2018 then you’re no longer eligible for the CP even if you do decide to opt in to the BRS.
If you can opt in to the BRS and you still have less than 12 years of service, then you can read all the legislative details of the Blended Retirement System Continuation Pay bonus here. (Paragraph 8.)
Your service also has their own Continuation Pay instruction, and they just might be paying more than 2.5 months of base pay. Rates should be updated soon for 2019.
Either way, if you’re obligated for a few more years, then it still makes sense to take the BRS and the CP.
Let’s explore a third urban legend:
“After 11 years of service, we have the life experience to understand where we’re going.”
Yeah, we have a plan.
I’m 58 years old. I remember expressing those sentiments at age 32, and now I understand why so many retirees smirked when I said things like that.
It’s easy to believe that every year gets you a year closer to the pension– and that it makes you more experienced and able to handle any bad stuff. Every year you’re five percentage points more likely to retire, and at 11 years you’re 55% likely to retire. Suddenly at 20 years, you’re 100%!
That’s not how probability and statistics work. Life is not linear progress toward a goal. A better (yet crude) analogy for “life experience” would be blindfolding yourself, inserting earplugs, and running across a four-lane highway at midnight. Nothing bad happened. With that life experience, let’s do it hourly for 19 more times until we’ve gutted it out to 20! Good luck with rush hours.
The older I get, the less I “understand” about life. It’s not black and white. Regardless of how much we can plan for the way things should be, we’re all stumbling around blind and deaf. In over 16 years of retirement, I’ve learned that life can change in a few seconds and all those carefully-laid plans could be trashed.
But enough about me. More importantly, I get those e-mails every week asking about the best way to handle bad things happening to good people. Readers tell me that they had 16 years of service when that physical exam found a problem, or their spouse had a medical emergency and ended up in the ICU. Or one of their kids needs health/educational support which is working great at this duty station and has nothing at the other duty station. Or they failed to promote and the continuation board doesn’t look good. Or the community is drawing down and the assignment officer needs a volunteer “right now” for an unaccompanied tour.
Did you know that in the 1990s, the Pentagon actually had a stress-reduction lifestyle video for Army lieutenant colonels? (One recommendation: drink herbal tea instead of coffee.) That specific cohort was having heart attacks at a much higher rate than anywhere else in the military, let alone in the Army. These are exactly the people who have significant life experience and know where they want to go, yet the career stress of a breakout tour led to hospital stays, cardiac surgery, limited duty, disability retirements, or even funerals.
I hope none of us ever has those life experiences. I sincerely hope that the back half of your career’s life experience turns out at least as good as the first. But
when if it doesn’t, then maybe it makes sense to have the BRS flexibility. Instead of finishing 11 years with no pension, the BRS at least puts more matching contributions in your Thrift Savings Plan.
Everyone retires eventually.
Here’s a question for a civilian:
“Would you work for a corporation that cliff-vests their defined-benefit pension at 20 years?”
Would you do that after you left the military, or would you consider working for any of the other thousands of corporations that offer better deferred compensation plans?
That’s the insight into why the military is getting rid of the High Three pension plan. It’s all about retention. (It’s also about DoD’s actuaries cutting expenses in pension accrual accounts, but SECDEF is a lot more concerned about retention than about actuaries.) Don’t make a big bet on High Three cliff-vesting at 20 when the downside risk is getting zero.
It’s not about the money– it’s about having options. Take the flexibility of the Blended Retirement System.
While you’re at it, save and invest as much as you can for your own financial independence. You never know when you’re going to need that emergency fund, or that transition fund, or even a few years out of the workforce.
It’s not about the money. It’s about having choices.
Call to action:
Please browse the links below, and contact any of us bloggers if you have more questions. If you want to use e-mail then I’m NordsNords at Gmail.
If you’re ready to log into MyPay now and get it done, then click here:
Otherwise please read the related posts down below!
The Military Guide to Financial Independence and Retirement Price: By Doug Nordman: This book provides servicemembers, veterans, and their families with a critical roadmap for becoming financially independent.
USAA’s Military Retirement Comparison Tool And The Blended Retirement System
Military Spouses: What You Should Know About The New Blended Retirement System
How to Maximize the BRS If You Decide to Opt-In
DoD’s FAQ Page About The Blended Retirement System
Tricky Details Of The Military Blended Retirement System (What DoD Won’t Tell You!)
The announcements of your service’s Continuation Pay rates
32 Other Posts About The Blended Retirement System By Military Bloggers
Many Sample Runs Of The DoD BRS Calculator (so that you don’t have to)
“Should I Opt-In To The Military’s Blended Retirement System?”
9 Things To Consider Before You Choose The Military’s New Blended Retirement System
Thrift Savings Plan: Q&A About Opting Into The Blended Retirement System