Securing Your Future: A Guide to the Blended Retirement System and Basic Needs Allowance

Transitioning into military service is a significant life change, filled with both pride and uncertainty. While the focus is often on serving your country, navigating the complexities of military benefits can feel overwhelming, especially when it comes to your financial future.

Understanding the Blended Retirement System (BRS) and the Basic Needs Allowance (BNA) is crucial for ensuring the well-being of you and your family.

This guide will provide you with the essential information and resources to make informed decisions about your financial security, empowering you to plan for a brighter future.

The Blended Retirement System: Your Financial Roadmap

In 2018, the US military introduced the BRS, a significant reform in military retirement benefits that merges traditional pension payments with features from modern retirement savings plans. It impacts all service members who joined the military after 2018, with those serving before this date remaining under the legacy pension plan.

The BRS integrates the traditional lifelong monthly retirement pay with contributions to a Thrift Savings Plan (TSP), similar to a private-sector 401(k). This approach provides benefits even to those who do not complete the requisite 20 years of service traditionally required to qualify for a military pension.

Notably, over 400,000 of the 1.6 million eligible troops opted into the BRS in its inaugural year, highlighting its broad acceptance.

Retirement Pay Adjustments

Under the BRS, retirement pay is calculated based on 40 percent of the average of the highest 36 months of active duty pay after 20 years of service, with an additional two percent for each subsequent year.

This represents a reduction from the 50 percent provided by the legacy system, but it includes an annual cost-of-living adjustment to mitigate inflation impacts.

Thrift Savings Plan (TSP) Contributions

The TSP under the BRS features automatic and matching contributions.

Starting at 60 days of service, three percent of basic pay is automatically deducted and invested in the TSP, with a one percent match from the Department of Defense (DoD), which could potentially increase to a five percent match.

Service members are encouraged to contribute at least five percent to maximize this benefit. More importantly, the DoD’s contributions are only accessible after two years of service, encouraging longer-term savings.

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Continuation Pay as an Incentive

At the 12-year mark, service members become eligible for continuation pay, a one-time incentive requiring a further four-year service commitment.

The amount varies by branch and can be substantial—for instance, active duty Marines may receive up to five times their monthly basic pay. This pay is taxable, and recipients can opt to receive it in lump sums or spread over four years to potentially lessen the tax liability.

Here’s a breakdown of continuation pay for active duty, Guard, and Reserve troops in each service in 2024:

Air Force and Space Force

Active duty: 2.5 times their monthly basic pay on the first day of their 12th year of service.
Reserve and Air National Guard: Half of their monthly pay.

Navy

Active duty: 2.5 times their monthly basic pay on the first day of their 12th year of service.
Reserve: Half of their monthly pay.

Marine Corps

Active duty: 5 times their monthly basic pay.
Reserve: A full month’s pay.

Army

Active duty: 2.5 to 13 times their monthly basic pay.
Reserve: 0.5 to six times their monthly basic pay.

Lump Sum Retirement Option

The BRS also offers a lump sum payment option at retirement.

Retirees can choose to receive either 25 percent or 50 percent of their projected retirement payments in a lump sum upfront, discounted by a rate set annually (6.26 percent in 2024).

This option provides flexibility for managing retirement finances, although it reduces regular monthly payments until reaching the entire Social Security retirement age, at which point they revert to the full amount.

US Army — *Soldiers assigned to 2nd Armored Brigade Combat Team, 3rd Infantry Division, assemble in formation at Fort Stewart, Georgia, May 27, 2024. (Image source: DVIDS)*

The Strategic Benefits of the BRS

The BRS represents a modern approach to military retirement, offering more flexibility and benefits to a broader group of service members than the previous system.

It acknowledges the reality that not all service members stay for a full career in the military but still provides a pathway to retirement savings.

Moreover, the integration of features like the TSP and continuation pay aligns military benefits more closely with civilian retirement planning practices.

To delve deeper into the Blended Retirement System, several resources are available. The Defense Finance and Accounting Service (DFAS) website offers comprehensive information, while units typically provide BRS training for their members.

The DoD also has an online BRS calculator that allows you to estimate your potential retirement pay under the system.

Basic Needs Allowance: A Safety Net for Low-Income Families

The BNA, available since 2023, acts as a safety net for low-income military families with dependents. It provides a monthly allowance to those whose total family income falls below 150 percent of the federal poverty guidelines set annually by the US government. This threshold is adjusted for inflation and changes in economic conditions, reflecting the current cost of living.

While housing allowances may disqualify some members, it’s crucial to be aware of this benefit and apply if you believe you qualify.

Application and Screening Process

Service officials proactively screen military personnel to identify potential beneficiaries of the BNA. Those identified as potentially eligible are notified and required to undergo a detailed income verification process. This final screening confirms whether their total family income indeed falls below the necessary threshold, thereby qualifying them for the allowance.

Service members who have not been automatically screened but believe they may qualify can initiate the process themselves.

They are encouraged to contact their designated financial counselors, who can provide guidance on the application process and assist with the necessary paperwork and income verification.

147TH SECURITY FORCES SQUADRON — *Members of the 147th Security Forces Squadron participate in their final training exercise, May 28, 2024. (Image source: DVIDS)*

Maximizing Your Benefits: A Proactive Approach

Understanding the Blended Retirement System and Basic Needs Allowance empowers you to make informed decisions about your financial well-being. Here are some proactive steps you can take:

Get Informed: Familiarize yourself with the details of both BRS and BNA. Utilize resources like the DoD website and your financial counselor.
Contribute to Your TSP: Take advantage of the government matching contributions by contributing at least five percent to your TSP.
Consider Continuation Pay: If you’re eligible and plan to stay in service, continuation pay can provide a significant financial boost.
Plan for Your Future: Utilize financial planning tools and seek guidance from your financial counselor to create a personalized roadmap for your financial security.

Whether it’s planning for retirement or ensuring immediate financial stability, the strategic use of these benefits is vital to a successful transition and continued service in the military.

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Securing Your Future: A Guide to the Blended Retirement System and Basic Needs Allowance