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The Blended Retirement System (BRS) is a new retirement system for members of the uniformed services. It was created in 2016 and went into effect on January 1, 2018. The BRS blends the traditional legacy retirement pension, also known as a defined benefit, with government payments made into your individual Thrift Savings Plan (TSP), also known as a defined contribution.
Under the BRS, service members who complete 20 years of service will receive a pension for life. The pension payments will continue for the rest of the retiree's life, even if they live longer than 20 years after retirement. However, the pension payments will not increase if the retiree's base pay increases after they retire. The pension amount is calculated based on a formula that takes into account your years of service, the average of your highest 36 months of basic pay, and a multiplier of 2%. So, for example, if your average highest 36 months of basic pay is $3,000 and you have served for 20 years, your annual pension would be $3,000 x 20 years x 2% = $1,200 per year.
However, it's important to note that the BRS pension amount is lower than the pension amount under the previous system, known as the High-3 system. The High-3 system had a higher multiplier of 2.5% instead of 2%. This means that under the previous system, the pension amount would have been higher for the same years of service and base pay.
It is important to note that the BRS pension is not the only source of income for retirees after 20 years of service. Retirees can also draw on their Thrift Savings Plan (TSP) accounts, Social Security benefits, and any other retirement savings they have accumulated.
The amount of the monthly pension payment is calculated based on a formula that takes into account the retiree's years of service, the average of their highest 36 months of basic pay, and a multiplier of 2%. For example, if a retiree has served for 20 years and their average highest 36 months of basic pay is $3,000, their monthly pension payment would be $3,000 x 20 years x 2% = $1,200 per month.
The pension payments will continue for the rest of the retiree's life, even if they live longer than 20 years after retirement. However, the pension payments will not increase if the retiree's base pay increases after they retire.
It is important to note that the BRS pension is not the only source of income for retirees. Retirees can also draw on their Thrift Savings Plan (TSP) accounts, Social Security benefits, and any other retirement savings they have accumulated.
The reason for the lower multiplier in the BRS is because it was designed to incorporate another benefit called the Thrift Savings Plan (TSP). The TSP is like a savings account for retirement that allows you to contribute a portion of your paycheck, and the government may match some of your contributions. This matching is essentially free money that helps grow your retirement savings.
By reducing the pension multiplier, the BRS aims to encourage military members to contribute to their TSP accounts and take advantage of the government's matching contributions. This way, service members can build a larger nest egg for retirement, even if the pension amount itself is slightly lower compared to the previous system.
In addition to the pension, the BRS also includes a number of other benefits, such as:
A 1% automatic government contribution to your TSP account
A matching contribution from the government of up to 5% of your contributions
The ability to withdraw your contributions from your TSP account tax-free after age 59½
The BRS is a complex system, and there are a lot of factors to consider when deciding whether or not to opt into it. However, if you are a military member who is thinking about retirement, it is important to understand the benefits and drawbacks of both the BRS and the High-3 system so that you can make the best decision for your financial future. ITLrdjjee-E |