The military will be rolling out a new retirement system on January 1, 2018 This retirement system will be known as the "Blended Retirement System" since it will be blending a "Defined Benefit System" like the one that currently exists, with a "Defined Contribution System" that is used in most private sector jobs.
The Defined Benefit System gives you a set amount of your salary when you retire, a percentage of the average of your three year's highest salary, but you must remain on active duty for a minimum number of years to get any retirement benefit.
The Defined Contribution System is available even if you don't complete the minimum number of years required for retirement, it can also be transferred to another retirement plan if you get a different job.You must contribute your own money to the Defined Contribution System.
Under the Blended Retirement System you will see a smaller Defined Benefit amount, but a larger Defined Contribution amount than the current system. This is due to the new government contributions to the Thrift Savings Plan, a government run 401(k) account.
The Blended Retirement System also gives members a bonus halfway through their career, and allows military members to take a lump sum retirement payout when they retire.
Eligibility for the New Blended Retirement System
If you joined the service
- Before January 1, 2006 you'll be grandfathered and remain in today's current retirement system
- After December 31, 2005 but before January 1, 2018 you'll have the choice to enroll in the Blended Retirement System or remain in today's current retirement system.
- After December 31, 2017 you'll be automatically enrolled in the Blended Retirement System.
If you are currently on active duty, you are probably either eligible for the High 36 retirement system or the REDUX retirement system. The only difference between them is the bonus. Currently, if you choose to receive the bonus at year 15 your retirement pay multiplier (the amount your high-3 base pay is multiplied by to determine your retirement pay) is reduced. See the table below for more information.
Differences Between Military Retirement Systems
| Minimum Retirement | Percentage of Base Pay | Bonus | TSP | Matching TSP | Lump Sum Payout | |
|---|---|---|---|---|---|---|
| High 36 | 20 years | 2.5% for each year of service | None | Yes | No | No |
| REDUX | 20 years | Same as High 36 with reduction of one percentage point for each year short of 30 years of service | $30,000 at 15 years (with a 5 year extension or reenlistment) | Yes | No | No |
| Blended Retirement System | 20 years | 2.0% for each year of service |
2.5 months base pay at 12 years with a 4 year extension or reenlistment (1/2 month base pay for reservists) |
Yes | Yes (see table below) | 25% or 50% payable lump sum upon retirement (your monthly retirement will be discounted until reaching age 67- or 60 for reservists) |
Looking at the table above, you can see that if you retire at 20 years under the High 36 system, you would get 50% of your base pay; If you take the $30,000 bonus under the REDUX program you would get 40% of your base pay; and under the Blended Retirement System you also would get 40% of your base pay. For an E-7 with 20 years that would be around $2,250/month under the High 36, $1,800/month under the REDUX, or Blended Retirement Systems. See our Military Retirement Page for more details.
For an E-6 with 12 years the Blended Retirement System Bonus would be around $10,000.
Thrift Savings Plan Under the Blended Retirement System
The Blended Retirement System incorporates Government Matching Contributions to your TSP. If you contribute money to your TSP the government will contribute at least the same amount.
New members will be automatically enrolled to contribute 3% of their base pay to the TSP, but they can change it later. The government will contribute 1% of every member's base pay, to their TSP accounts, even if you decide to contribute nothing. After two years the government will contribute an additional "Government Matching Contribution"to the amount your TSP account. Government contributions end on your 26th year.
See the table below for more information.
| You Contribute | Government Auto Contribution |
Government Matching Contribution |
Total |
|---|---|---|---|
| 0% | 1% | 0% | 1% |
| 1% | 1% | 1% | 3% |
| 2% | 1% | 2% | 5% |
| 3% | 1% | 3% | 5% |
| 4% | 1% | 3.5% | 8.5% |
| 5% | 1% | 4% | 10% |
For an E-5 with 8 years active duty, 1% of your base pay would be around $30/month. If you contribute the maximum amount, you would be paying $150/month to your TSP, the government would contribute another $150, at the end of the year you would have over $3,600 in your TSP! At the end of 10 years you could easily have over $50,000, or $150,000 after 20 years taking into consideration contributions and interest earnings.
Any money in your TSP will be available to you when you leave the military, you don't have to remain in for 20 years to access it. You can leave the money in the plan, transfer it to another plan (or retirement account), or withdraw it (tax penalties may apply).
