When the retirement program for U.S. military service members changed at the start of 2018, about 1 million active duty members were offered a choice between two retirement plans.1 Their decisions can have a dramatic impact on their financial futures. The program is shifting away from an exclusively defined-benefit design (the “High-3” plan) to a blended arrangement that includes a defined-contribution component with a defined-benefit worth 80 percent of the current program (the Blended Retirement System [BRS]).
For most service members, the most important difference is that the new plan offers meaningful financial benefits to military personnel who serve less than 20 years. It also may encourage the habit of personal savings by members, which will enhance their retirement prospects and help them develop habits that will benefit their retirement planning in any post-military careers. These outcomes fulfill the goals in Recommendation 1 of the Congressional Military Compensation and Retirement Committee.2