Deadline approaching for military to switch retirement plans

The start of 2019 could bring some major changes to the retirement plans of more than a million U.S. military service members.

USAA, a financial planning service and insurance company, is urging the 1.6 million eligible military members to evaluate their retirement plans and the new Blended Retirement System, or BRS.

Those who are eligible include service members with less than twelve years of service and most Guard and Reserve members.

Under the current plan, those who have served more than 20 years qualify for retirement benefits in the form of a pension, with monthly checks for the rest of a retiree’s life.

J.J. Montanaro, a USAA adviser, said under the BRS plan service members don’t have to serve two decades to get benefits and a form of pension.

The pension under BRS is less, but there are additional benefits.

“For the first time, military service members who contribute to the thrift savings plan, which is the government’s version of the 401K, will get matching and automatic contributions from the government,” Montanaro said.

Other benefits include options for a mid-career bonus or a lump sum at retirement.

More than 1.6 million service members are eligible to stay with the current system or transition to BRS.

The deadline to switch is December 31.

“The biggest thing for our members in El Paso to remember is that most people that serve in the military under the blended retirement system are going to leave with some benefits because less than twenty percent of those that enter service actually serve long enough to qualify for retirement benefits,” Montanaro said.

The Department of Defense (DOD) estimates close to ninety percent of service members will have retirement benefits under BRS.

Montanaro said not everyone benefits by switching to BRS.

“If you know that you’re not going to serve twenty years and you are pretty intent on getting out when this enlistment is up then it probably makes sense to opt in the BRS,” he said.

Those who are further along in their military career and committed to serve twenty years then it is worth staying with the current retirement plan.

The DOD estimates less than twenty percent of those eligible to opt in to BRS have actually done it.

“There is probably a lot more folks out there that might benefit from opting in to BRS that haven’t taken that positive action,” Montanaro said.

Any service member who enrolled in 2018 is automatically covered under the BRS plan.

For current service members, it is a one-time decision that could impact the rest of their lives.

After the December 31 deadline, service members will not be able to switch plans.