Hats Placed on Chairs During Retirement Ceremony

Career military showing heightened interest in new retirement benefit

| February 8, 2017

Support for the military’s Blended Retirement System is strengthening among America’s career service members, with two out of five families now expressing a desire to opt in to the new plan.

The latest results of the First Command Financial Behaviors Index® reveal that 44 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) say they want to opt in to the new system, which goes into effect on Jan. 1, 2018. That’s up from just 8 percent in August.

The Blended Retirement System features a 20 percent reduction in current guaranteed retirement pay generated by the old traditional pension in exchange for a variety of new benefits that include automatic and matching Thrift Savings Plan contributions, a mid-career continuation pay bonus and options to receive a portion of the reduced pension as a lump sum. Service members who enter the military on or after Jan. 1, 2018, will be automatically enrolled in the new system. The new plan is also available to many current service members, specifically those who will have less than 12 years of service as of Dec. 31, 2017. They can choose to either stay with the old retirement system or opt in to the new one.

Proponents say the Blended Retirement System will offer greater financial flexibility and pave the way for a higher percentage of service members to leave the military with at least some retirement savings. But it’s not a reasonable trade for the many current service members who are already guaranteed lifetime financial security under the traditional military pension, according to Scott Spiker, CEO of First Command Financial Services, Inc.

“While the cash contributions and other benefits may seem appealing on the surface, this new system is no reward for current service members who expect to serve out their career and earn the traditional retirement benefit,” Spiker said. “There are no new dollars. The bonuses and contributions are being paid for through a 20 percent cut in the size of monthly pension checks, which today begin arriving immediately upon retirement and grow in size through annual cost of living adjustments that continue for the life of the retiree. In essence, the long-term financial security of our service member families will be built on a cash buy-out. The guarantees and lifetime financial security offered by the traditional military pension makes it a powerful choice for the vast majority of current service members.”

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