The New Blended Retirement System: What You Need to Know

The Pentagon has announced a new blended retirement system for everyone working within the armed forces on active duty that will come into effect fully in January 2018. Members who enlist on or after January 2018 will be automatically enrolled in the new system. Military members who have less than 12 years of service are offered the new system as an opt-in option—they can opt into the new system or stay with the current one depending on which they prefer. Members who have been on active duty for more than 12 years will remain enrolled in the previous system.

 

What’s in the new system: The lowdown

The new system comes with some changes, as articulated by the three minute video released by the Pentagon as an introduction or primer. The blended system offers, for the first time, a retirement account similar to that offered in the private sector. The Government will almost match whatever amount members put into their accounts; for instance, if someone were to make a 5% deposit, the government will match it with 4% and an added 1% in added contributions.

The best part? Members don’t have to serve the full 20 years in order to receive any retirement benefits. This ensures that people who have spent a substantial time serving their country, like a decade or more, will still receive benefits if they choose to leave. Retirement benefits kick in, under the blended system, as early as two years. Of course, in order to accommodate this restructuring, the annuity available to service members has gone to 2% from 2.5%, but this new system offers more control and flexibility to members over their own financial future.

The blended system has problems too

As with any other system, the new blended system does come with associated glitches that the Pentagon is trying to fix as soon as possible. A lump-sum payout option still remains mired in controversy as the Pentagon is unable to resolve the logistics of the issue. The American Academy of Actuaries even warned the Pentagon that if this issue was not resolved quickly, it would short-change enlisted personnel.

The Pentagon is attempting to resolve this while simultaneously preparing and releasing modules that will help educate service members about the new blended retirement system and help them make educated and informed choices about their futures.

The new plan hopes to offer personnel benefits that would enable the country to develop and maintain a “modern military”. Currently, upper level officers are being thoroughly informed about the new system to help them answer any questions that may come to them, while educational materials specifically meant for the members that have the ability to opt in are being developed in time for a release date tentatively in December.

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