This post was sponsored by USAA as part of the military personal finance bloggers #BRSBlitz education campaign.
#BRSBlitz Final Days
As we countdown the final days to the end of BRS enrollment period of 2018, it’s been a far different year than I originally expected when the BRS was first rolled out a few years ago. If you or more likely, someone you know, have been sticking their head in the sand about switching, there is only a short time left to make that decision. After 31 December 2018, you’re stuck with the legacy High Three pension system, where you only have the slim ~15% chance of cliff-vesting at 20 years of service.
The Odds Aren’t Looking Good for Most of You
Dorg Nordman over at The Military Guide posted the most up-to-date official DoD statistics about the BRS opt-ins, and I have to say I have been disappointed by the results. Less than 1 in 5 servicemembers will statistically make it to retirement … yet less than 1 in 4 of AD have enrolled … 75% of you think that you’ll be the 15% who serve at least 20 years in the military to cliff-vest for a pension. 3 out of 4 of you think that you’ll be the 1 out of 6 who will receive more money from the High Three pension plan than from the Blended Retirement System. Doing the math, 9 of 12 of you think that you’ll be the 2 out of 12. Those are what I call very poor odds indeed!
I say I’m disappointed because those opt-in numbers are well below what I was hoping and honestly, expecting to see. If 100% of active duty members with less than 6 years of service opted in (which is what I would recommend to everyone at that early stage of the career) plus about 50% of those between 6 and 10 years of service along with a small percentage of those between 10 and 12, we should be seeing more than double the current number of BRS opt-ins.
Instead, it seems only the Marines get the reality of the BRS with their opt-in rate of almost 47%. While the Marine culture is a little different than the other branches with many Marines knowing they weren’t going to make it a career, the more junior members of the other branches seem to be believing in very steep odds. As my friend Ryan Guina wrote about in Forbes earlier this month, this current generation of military has the opportunity of a lifetime. If only more were taking advantage of it!
BRS is partly about the math so everyone should use all the calculator options out there to compare results across them. It’s important to understand the numerical differences between the two plans – at least as much as you can, because BRS is more dependent on investment performance, but no one can fully predict what investment returns will actually look like over the next year or even 40. Of all the retirement savings options out there though, the TSP is among the very best and is where I have put a significant part of my own retirement savings (and even leaving it there after I’m no longer on AD).
BUT, and this is the big kicker here … the BRS is fundamentally about options and hedging your bets for the future. I was absolutely sure I was going to do a career in the military and then … life happened and things took a different turn. Choosing the BRS is not about the money. Seriously, go read this article. It’s one of the absolute best ones out there on the BRS.
BRS Calculator Reviews
Here are the major things to consider when comparing each calculator result against one another.
USAA BRS Calculator
The thing I like best about the USAA BRS calculator is its simplicity and straightforwardness. I also like the fact that it doesn’t overpromise with returns using a somewhat conservative 7% return rate. One of the major advantages of the USAA calculator is the fact that it also allows you to clearly see what the DoD contributions and matching over the years adds up to as compared to the total with your personal contributions in as well. As compared to the official DoD BRS calculator which makes breaking out the government vs. personal contributions, the USAA calculator is a great first stop that everyone should use.
Also, you don’t have to be an USAA member to use their educational information and the BRS Calculator. USAA provides these tools to everyone, for free with no catch or obligations on your part.
Department of Defense BRS Calculator
The Department of Defense BRS calculator is the official calculator that allows you to have some more inputs with things like expected rates of investment returns, whether to reinvest your continuation pay bonus (YES!), expected promotion timeline, how long you expect to live (for most of you I would recommend into your late 90s), and a more precise timeline of when you expect to seperate or retire.
Problems with the official calculator have been well documented elsewhere, but my big problems boil down to one thing that isn’t the calculators fault and one that is. The first is the terrible lump sum options which I’ve written about before and is the fault of Congress. Bottom line: don’t consider it when using this calculator. Hopefully Congress will change its mind and get rid of this option before it’s even able to be taken.
The second problem with the official BRS calculator is that it doesn’t show the value of TSP contributions made by service members who remain under the legacy retirement system, because “The TSP is not part of the Legacy Retirement System.” That’s the reason you should also use the USAA calculator to see just the DoD contributions.
Other Detailed BRS Calculators
There are also some very detailed BRS calculators over at Redeployment Wealth Strategies (Excel-based calculator) for those who are looking to really get into the weeds, and The Military Guide has an equally nitty-gritty Google sheets calculator for those that want to really examine underlying assumptions that the DoD and USAA BRS calculators do not.
Here’s the Bottom Line
For all the procrastinators out there, this is it with the final week to make the decision before 31 December. If you or someone you know that’s been putting it off, the final days remain.
The BRS is clearly the best choice for every person who ends up leaving the military before earning a military retirement because otherwise they leave with no DoD retirement benefit!
For those of you that are considering the possibility of making it a career, just keep in mind that just like in my situation no one can predict at 2, or 8, or even 12 years whether they’ll make it to a military retirement. According to the Rand Institute, even after 12 years of service, an service member has a 15-19% chance of separating before retirement. If you think back or ask around for people who have been around awhile, we can remember those who were separated from the service at 15 years, 17 years, even 19 years (yes, that’s rare but it still can happen!).
Medical separations, family situations, and countless other variables stand between you and retirement! Sticking with the legacy system is a gamble that might pay off in slightly larger retirement paychecks, but at the risk that you’ll walk away with nothing.
At the risk of being overly bold, here are my blanket recommendations:
- If you have 6 or less years of service, you should definitely enroll in BRS! The math and the lifestyle choices all work for you in this choice. If you don’t believe me, go read more of the links at the bottom of this article.
- If you have between 6 and 12 years of service, you should consider an honest assessment of the following things:
- How do you and your family consider military life? Is it something you and/or they tolerate or is it filled with excitement and purpose? Imagine a “worst-case” scenario that you could reasonably face and how that might change the career calculus.
- How have you historically ranked against your peers for promotion, awards, advancement, opportunities, etc.? Are you in the upper tier of peer rankings or is there a good chance you might not make a promotion at some point?
- How is your physical fitness and health? Has military service impacted them in any way that causes even a sliver of doubt about whether those impacts will increase in the future?
- Are you passionate or excited about something outside of the military? Could you see yourself doing that and providing for you and/or your family in a better or the same way as your current lifestyle?
- If any of the above rang true for you, then you should strongly consider opting into the BRS. The next three questions may further help flesh that out as well. Remember, the military isn’t the only or even the most important thing in your life.
Life is short and time with those you love is precious
I’ve long been a proponent of using George Kinder’s three life planning questions to help people identify what is really important to them and I’ve reaped their benefits personally as well (for those that know my story).
- Question #1: Imagine you are financially secure, that you have enough money to take care of your needs, now and in the future. The question is…how would you live your life? What would you do with your money? Would you change anything? Let yourself go. Don’t hold back on your dreams. Describe a life that is complete and richly yours.
- Question #2: This time you visit your doctor who tells you that you have 5-10 years to live. The good part is that you won’t ever feel sick. The bad news is that you will have no notice of the moment of your death. What will you do in the time you have remaining to live? Will it change your life and how will you do it? (Note that this question does not assume unlimited funds.)
- Question #3: Finally, imagine your doctor shocks you with the news that you only have one day left to live. Concentrate on the feelings you have as you confront your very real mortality. Ask yourself:
- What dreams will be left unfulfilled?
- What do I wish I had finished or had been?
- What do I wish I had done?
- What did I miss?
If you can truly be honest in that self-assessment, or perhaps with the help of a spouse or someone who knows and cares about you, maybe you can now think about the BRS in a different light than before.
Call to Action
For most readers of this post, I suspect you have already done the due diligence, but you probably also know several people have who have not or have just procrastinated until now. Share this and other articles with them in these, the final days of BRS opt-in. Help set your peers up for success!
If you’re ready to opt-in to the BRS, log into MyPay now and click here for step-by-step instructions: How To Opt-In To The Blended Retirement System
TICK TOCK …
Tricky Details Of The Military Blended Retirement System (What DoD Won’t Tell You!)
Many Sample Runs Of The DoD BRS Calculator (so that you don’t have to)