Lump Sum? Thrift Savings Plan? Confused already?
With about 11 months to go until the rollout of the Pentagon's new Blended Retirement System for service members, the Defense Department is launching a series of training measures and tools to help troops understand the system and make informed decisions.
These tools are especially relevant for troops who will have to make a choice between opting into the new retirement system or remaining with the legacy one, including anyone on active duty as of Dec. 31, 2017, with fewer than 12 years of service, and members of the National Guard and Reserve who have accrued fewer than 4,320 retirement points.
For these service members at the nexus of the two systems, the Pentagon is rolling out an online calculator that will allow them to compare their retirement options side-by-side and make an informed decision, Acting Under Secretary of Defense for Personnel and Readiness Anthony Kurta told reporters Wednesday.
"It's an official DoD calculator. So we've gone and created all of the calculations and verified that all of the material presented from the calculator is accurate," Kurta said. "It's a very comprehensive tool, and our service members can be confident in using that tool that compares the two retirement systems, that they are getting the correct information."
The calculator, he said, will allow troops to enter information about their careers and career paths and future goals for "an individual solution and an individual calculation" to help them make their choice.
The tool is in the final stages of being programmed, he said, and will be made available in the next few weeks.
The new Blended Retirement System is designed to allow troops at every rank to save for the future, rather than simply awarding pensions to those who retire after the 20-year mark.
It introduces a Thrift Savings Plan, similar to a 401(k), that gives service members the option to save up to five percent of their paycheck, which the government will match.
Those who do make it to the 20-year retirement threshold will be able to choose either a lump-sum payment of 50 or 25 percent of pension benefits and a smaller pension check, or a traditional pension arrangement.
All troops entering the military after the start of 2018 will be part of the new system. But for those choosing between the two, the military is requiring tailor-made financial training as a prerequisite for the BRS. To opt in, troops must show a certificate of completion of the new training curriculum, which was launched this week.
"Obviously, the services have very robust financial education, but we realized we needed an accompanying financial education plan that focused specifically on the blended retirement system and, in particular as we're talking about today, targeted toward those who are going to opt in or have the ability to opt into the new system," Kurta said.
The courses are available on the military training site Joint Knowledge Online, and are also featured on Military OneSource, allowing military family members and reservists to access the materials without government ID card access.
To further help with the decision process, Pentagon financial readiness director Wayne Boswell said the Defense Department has been training hundreds of counselors and working with community "stakeholders," such as banks and credit unions in military communities, to brief them on the retirement system and how to assist service members.
As the retirement rollout nears, the officials said they will use feedback from service members taking the course to improve education. An accessions course will be launched in January 2018 to coincide with the retirement rollout.
"I don't think it's an exaggeration to say it's one of the most significant changes to military pay and benefits that we've had over the past 70 years," Kurta said.