The United States Armed Forces offers one of the best retirement plans there is. For the last five years newly enlisted service members will be able to have their Thrift Savings Plan (TSP) contributions matched by the Department of Defense (DoD), ensuring that they are financially assisted even if they get discharged in less than 20 years. Below, we will discuss how the military’s retirement system works in 2023 and beyond. If you are looking to confirm an individual’s military status, you can check out this link: https://www.servicememberscivilreliefact.com/verify-military-service/
The 4 Different Military Retirement Systems
Before we get into the current retirement plan, it is important to understand that the system you get registered for depends on when you entered the military. You will also only be able to fully enjoy any one of these retirement plans if you are able to serve for at least 20 straight years.
1. Final Pay
If you enlisted in the service before September 8, 1980, the retirement plan you enjoy is the Final Pay system. You can compute for your pay by multiplying your last monthly base pay by 2.5% and the number of years of rendered service. Under this retirement plan, it is ideal to stay in the military for at least 40 years so that you can get at least 100% of your base pay in 2023.
2. High-36
This applies to you if your initial join date falls from September 8, 1980 to December 31, 2017. As this retirement plan is called, this is similar to the Final Pay system except that instead of using your monthly pay on your last day as the basis for computation, it gets the average of your highest 36 months of basic pay. This was an improvement on the Final Pay system in that it takes into account all the months you worked hardest.
3. Redux
Between July 31, 1986 to January 1, 2018, service members had the option to enroll into the Redux plan. Under this system, you can get a lump sum payment of $30,000 (Career Status Bonus) on your 15th year but this will oblige you to guarantee 5 more years of service to complete the 20-year retirement requirement. The benefit that you will receive after discharge will also depend on your age every time you receive it.
Before 62 years of age, you multiply your years of service by 2.5% but subtract 1% for each year less than 30, and then you multiply this to the average of your highest 36 months of pay. Once you become 62 years old, you simply compute the High-36 equivalent, without the need to subtract 1% for each year of service less than 30.
4. The Blended Retirement System (BRS)
The BRS is the newest retirement system used by the military. It only applies to those who entered the Armed Forces starting January 1, 2018 and those who were previously registered for the legacy retirement systems but opted to switch to this new plan. This was considered a major change and a great improvement on the military retirement system because instead of only giving assistance to those who complete a full 20 years of service, it also gives aid to those who leave the military before two decades.
According to the DoD, about 81% of armed service members get discharged before they serve for 20 years. This means that under the new BRS, more members of our military forces will become more financially assured by the time they separate from the Army.
Under BRS, the federal government guarantees a 1% contribution to a service member’s TSP. In addition to that, they match the member’s personal contribution to the TSP by up to 4 percent beginning their second year of uniformed service through their 26th year in the military as of 2023.
