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The Blended Retirement System (BRS) represents the most significant evolution in military compensation since World War II, fundamentally reshaping how the U.S. armed forces provide for service members' long-term financial security. Implemented on January 1, 2018, the BRS is a modern, hybrid retirement plan that moves away from the previous all-or-nothing pension model.
This system "blends" two powerful components: a traditional lifetime pension for career service members (a defined benefit) and a government-sponsored retirement savings account, the Thrift Savings Plan (TSP), which is similar to a civilian 401(k). This structure was deliberately designed to offer a portable retirement benefit to a larger portion of the force, acknowledging that not all who serve will complete a 20-year career.
This shift carries a profound implication: the BRS demands active and informed participation from every service member to unlock its full potential. The value of one's retirement is now directly linked to personal savings habits, investment decisions, and strategic choices made at key career milestones. This places a premium on financial literacy, transforming it from a helpful skill into an essential component of a successful military career and a secure financial future.
Understanding the four pillars of this system is the first step toward taking control and building lasting wealth:
Eligibility for the Blended Retirement System is determined by a service member's Date of Initial Entry into Military Service (DIEMS). This date creates two distinct populations within the armed forces, each with a different retirement framework.
Automatic Enrollment for New Service Members
Any service member with a DIEMS on or after January 1, 2018, is automatically enrolled in the Blended Retirement System. For this group, the BRS is the only retirement plan available. This automatic enrollment ensures that all new personnel begin their careers with a retirement savings vehicle already in place.
Opt-In Window for Grandfathered Members
Service members who entered service on or before December 31, 2017, were grandfathered into their legacy retirement system, typically the High-36 plan. However, a specific subset of this group—active-duty members with fewer than 12 years of service and Reserve Component members with fewer than 4,320 retirement points as of December 31, 2017—were given a one-time opportunity to switch to the BRS.
This opt-in window was open from January 1, 2018, through December 31, 2018. The decision to opt in was irrevocable; once made, a service member could not revert to the legacy system.
A New Leadership Dynamic
This bifurcation created a unique dynamic within the force, as military units are now composed of members under both the BRS and the legacy system. This presents a leadership challenge, as senior leaders grandfathered under the High-36 plan may not have personal experience with the BRS.
Effective mentorship in this environment requires leaders to understand the nuances of both systems. This knowledge is critical to provide relevant financial guidance to their junior service members, for whom active TSP participation is a structural necessity for a secure retirement.
The cornerstone of retirement for those who make the military a full career remains the defined benefit pension—a guaranteed monthly annuity paid for life. While the BRS preserves this vital component, it modifies the calculation compared to the legacy system.
Calculating Your High-36 Annuity
The BRS pension is calculated using the "High-36" method, which is based on the average of a service member's highest 36 months of basic pay, typically from the final three years of service. The formula is as follows:(Years of Service)×(2.0%)×(Average of Highest 36 Months of Basic Pay) For example, an E-7 retiring after 20 years with a high-36 average basic pay of $5,000 would receive a monthly pension of $2,000 (20×0.02×$5,000). This amounts to an annual pension of $24,000, which is protected from inflation by an annual Cost of Living Adjustment (COLA). For Guard and Reserve members, "years of service" are calculated by dividing total retirement points by 360.
The 20-Year Cliff Vesting Rule
A critical feature of the defined benefit pension is its "cliff vesting" nature. Service members must complete a minimum of 20 qualifying years of service to become eligible for this lifetime monthly payment. If a member separates before reaching the 20-year mark, they receive no portion of this pension. For active-duty retirees, these payments begin immediately upon retirement. For Guard and Reserve retirees, pension payments typically commence at age 60, though this age can be reduced for those with qualifying periods of active service.
BRS vs. Legacy Pension: The Multiplier Matters
The most significant difference between the BRS pension and the legacy High-36 pension is the multiplier. The BRS uses a 2.0% multiplier for each year of service, whereas the legacy system uses a 2.5% multiplier.
This 0.5% difference has a substantial impact. A 20-year retiree under BRS receives a pension equal to 40% of their high-36 basic pay (20×2.0%). In contrast, a 20-year legacy retiree receives a pension equal to 50% of their high-36 basic pay (20×2.5%). This amounts to a 20% reduction in the defined benefit portion of the retirement plan.
This reduction was a deliberate trade-off. The cost savings were repurposed to fund the TSP benefits for the entire force, including the 85% of members who serve honorably but for less than 20 years. The BRS is designed with the expectation that a diligent service member will use the TSP to more than compensate for the smaller pension.
The Thrift Savings Plan (TSP) is the second pillar of the BRS and its most flexible component. It is a defined contribution plan, similar to a 401(k), that allows service members to build a portable retirement fund with significant government contributions.
Automatic Government Contributions (The "Free 1%")
A foundational feature of the BRS is the Service Automatic Contribution. After 60 days of service, the Department of Defense (DoD) automatically contributes an amount equal to 1% of a service member's basic pay into their TSP account. This contribution is made regardless of whether the member invests their own money.
Matching Government Contributions (Up to 4% More)
The most powerful incentive is the Service Matching Contribution. The DoD will match a service member's personal contributions up to an additional 4% of their basic pay. The matching formula works as follows:
To receive the maximum match, a service member must contribute at least 5% of their own basic pay. This triggers the full 4% match, which, when combined with the 1% automatic contribution, results in a total government deposit of 5%. For new members, matching contributions begin after two years of service.
Maximizing Your TSP Match
| Maximizing Your TSP Match | DoD Automatic Contribution | DoD Matching Contribution | Total DoD Contribution | Total into Your TSP |
|---|---|---|---|---|
| 0% | 1% | 0% | 0% | 1% |
| 1% | 1% | 1% | 1% | 3% |
| 2% | 1% | 2% | 2% | 5% |
| 3% | 1% | 3% | 3% | 7% |
| 4% | 1% | 3.5% | 3.5% | 8.5% |
| 5% or more | 1% | 4% | 5% | 10% or more |
Vesting: When You Gain Full Ownership
Vesting refers to having full ownership of the funds in your TSP account. A service member is always 100% vested in their own contributions and any associated earnings. They are also immediately vested in any government matching contributions. However, to become vested in the government's 1% automatic contribution and its earnings, a service member must complete two years of service. If a member separates before this, they forfeit the 1% automatic contributions, though they keep all other funds.
The Power of Portability
Perhaps the most revolutionary aspect of the BRS is the portability of the TSP. Upon separating from the military, a member's entire vested TSP balance belongs to them. This account can be left with the TSP, rolled into a new employer's 401(k), or moved to a personal Individual Retirement Account (IRA). This ensures that most individuals who serve will leave with a tangible, government-supported retirement asset.
The third pillar of the BRS is Continuation Pay (CP), a one-time, mid-career retention bonus. This direct cash payment is designed to incentivize experienced service members to commit to additional service.
Purpose, Eligibility, and Timing
Continuation Pay serves as a financial bridge, encouraging members to continue toward the 20-year mark for a pension. Eligibility is targeted at the mid-career point.
Calculating Your Payout
The amount of Continuation Pay is calculated by applying a service-specific multiplier to the member's monthly basic pay. These multipliers are set annually by each branch and can vary based on retention needs.
For example, the Army's active-duty CP rate for Calendar Year 2025 is 2.5x monthly basic pay.
Smart Strategies for Your Continuation Pay
Receiving a significant cash bonus presents a strategic opportunity. This bonus is a key part of the BRS compensation package and should be managed wisely.
Accepting Continuation Pay is a significant career choice. Failing to complete the required service may result in the recoupment of a portion of the bonus.
The final pillar of the BRS is the lump-sum option, an irrevocable choice available only to those who complete a 20-year career. This feature allows a retiree to receive a portion of their pension upfront in cash, but it comes at a significant long-term cost.
The Mechanics of the Trade-Off
At retirement, a BRS-eligible member can elect to receive a lump-sum payment of either 25% or 50% of the value of their future pension payments. In exchange, their monthly pension checks are reduced by a corresponding 25% or 50%.
This reduction remains in effect until the retiree reaches full Social Security retirement age (currently 67), at which point the pension is restored to its full amount. The lump sum is also fully taxable as ordinary income.
The Hidden Cost: The DoD Discount Rate
The most critical aspect of the lump-sum option is that it is not a simple advance. The amount is calculated based on the discounted present value of the forfeited future payments, using a personal discount rate set by the DoD.
Because of this discounting, the cash amount a retiree receives is substantially less than the total dollar amount of the pension payments they give up.
The Lump-Sum Value Proposition: An Illustrative Example
| Scenario | Upfront Lump Sum Received | Monthly Pension (to age 67) | Total Value Forfeited Over Time |
|---|---|---|---|
| No Lump Sum | $0 | $3,679 | $0 |
| 25% Lump Sum | $147,026 | $2,759 (Reduced by $920/mo) | $270,662 |
| 50% Lump Sum | $294,051 | $1,839 (Reduced by $1,840/mo) | $541,325 |
Evaluating the Lump Sum: When Could It Be Viable?
Given the unfavorable math, the lump-sum option is not a wealth-building tool. Financial experts almost universally advise against it. A guaranteed, inflation-protected stream of income for life is an incredibly valuable asset.
The only potential scenarios where the lump sum might be considered are those involving extreme, immediate financial distress, such as preventing a home foreclosure. The decision is irrevocable and should only be made after extensive consultation with an accredited personal financial manager or counselor.
The Blended Retirement System is a powerful tool, but its power is only unlocked through deliberate action. The BRS requires engagement and consistent strategy to maximize its potential.
The Golden Rule: Always Secure the Full 5% TSP Match
This is the absolute, non-negotiable foundation of a successful BRS strategy. The DoD offers a total contribution of 5% of basic pay to any service member who contributes 5% of their own pay to the TSP. Failing to do so is equivalent to declining a 4% pay raise every year.
Intelligent TSP Investing: A Look at Lifecycle (L) Funds
Once contributions are set, the next decision is how to invest that money. For many service members, the simplest and most effective strategy is to use the Lifecycle (L) Funds are professionally designed target-date funds that automatically manage a diversified portfolio. A member simply chooses the L Fund with the target date closest to when they plan to begin withdrawing money (e.g., L 2050).
The L Fund handles all asset allocation. Early in a career, the fund is more aggressively invested for growth. As the target date approaches, it automatically becomes more conservative to preserve capital. This "set-it-and-forget-it" approach helps members avoid common behavioral mistakes, like being too conservative early on or trying to time the market.
Integrating BRS into Your Total Financial Plan
The BRS should not be viewed in isolation. It is one component of a comprehensive personal financial plan. The habits required to succeed under the BRS are the same habits that lead to overall financial well-being.
By taking this holistic approach, a service member transforms their BRS from a simple retirement account into the engine of a robust and resilient financial future.
The Blended Retirement System is a modern and powerful program that puts service members in the driver's seat of their financial future. It provides a portable retirement benefit for the vast majority of those who serve while still offering a lifetime pension for career members.
However, its advantages are not automatic. The BRS rewards—and requires—proactive engagement, disciplined saving, and informed decision-making. By contributing to the TSP, investing wisely, and making strategic choices, every service member can leverage the BRS to build substantial wealth and ensure a lifetime of financial security.
If you separate from service before becoming eligible for retirement, you will not receive the monthly pension. However, the Thrift Savings Plan (TSP) component is yours to keep. You can take your own contributions, any government matching funds, and the automatic 1% government contribution, provided you have completed two years of service to be vested.
The BRS structure is similar for the Guard and Reserve, but the pension is calculated based on retirement points and is typically not payable until age 60. TSP matching is based on your drill pay, and Continuation Pay multipliers are generally lower (0.5 to 6.0 times monthly basic pay) than for active duty.
Generally, your BRS pension and VA disability pay are separate benefits. However, by law, you cannot receive both concurrently. Your DoD pension will be offset dollar-for-dollar by the amount of your tax-free VA pay. An exception is Concurrent Retirement and Disability Pay (CRDP), which allows those with a 50% or higher rating to receive both.
Your BRS pension is considered taxable income at the federal level and in most states. Traditional TSP contributions are tax-deferred, meaning you pay taxes upon withdrawal. Roth TSP contributions are made post-tax, allowing for tax-free withdrawals in retirement. Continuation Pay is a bonus that is taxed as regular income.
Yes. While contributing 5% of your basic pay is the minimum required to receive the full government match, you can contribute up to the annual IRS elective deferral limit ($23,000 in 2024). This allows you to aggressively save for retirement beyond the foundational matching benefit of the blended retirement system.
The Survivor Benefit Plan (SBP) functions the same under the Blended Retirement System as it did with the legacy system. At retirement, you can elect to pay a premium from your monthly pension to provide a continuous, inflation-adjusted annuity for your eligible survivor, ensuring they have a protected income stream.
No. Your choice of retirement system has no impact on your eligibility for other earned benefits like the Post-9/11 GI Bill or the VA Home Loan program. These benefits are based on your length and character of service, not the specifics of your retirement plan.
Your Blended Retirement System benefits carry over seamlessly when you commission from enlisted to officer. Your TSP account continues, and your future pension will be calculated using the average of your highest 36 months of basic pay, which will likely be higher as an officer, thus increasing your potential retirement income.
You can receive free, personalized financial counseling from accredited professionals through your installation's Personal Financial Management Program (PFMP). Additionally, Military OneSource offers confidential financial counseling by phone or video to help you make informed decisions about your Blended Retirement System options.
You are always 100% vested in your own TSP contributions. To be vested in (and keep) the government's automatic 1% contribution and any associated earnings, you must complete two years of service. After two years, you are also eligible to start receiving government matching contributions, which are immediately vested.
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