Community News
Atlanta Police Department’s
Mounted Patrol Roundup
Bartow County Fire Department
Assists in South Georgia Hurricane
Relief Efforts
18 | November 2018 | Real Hero Report
Getting Ready for the New
Military Retirement
Many of America’s career military families are facing a big
decision on their retirement benefits: Should they hang
onto their traditional pensions or switch to a new system
designed for the next generation of service members?
The new Blended Retirement System (BRS) calls for a 20-percent
reduction in retirement pay in exchange for a defined contribution
program of automatic and matching Thrift Savings Plan contributions, a
mid-career continuation pay bonus, and options to receive a portion of
retirement as a lump sum.
Everyone who joined the military on or after January 1, 2018, is
automatically enrolled in the new plan, but many current service
members will have the opportunity to choose between staying in
the current system or opting into the new one. This includes service
members who had fewer than 12 years of service on December 31,
2017 and guardsman or reservists with fewer than 4,320 retirement
points.
Proponents say this blending of the old and the new systems will
give service members more control over their financial futures. And,
since only about 17 percent of service members currently retire and
earn a lifetime pension, it will almost certainly increase the number
of people who will leave military service with some benefits. Look a
bit deeper, though, and you’ll find that the new system does not offer
any new dollars. The bonuses and contributions are being paid for by
cutting the size of the monthly pension checks. In essence, a portion
of the guaranteed pension that is part of the current system is being
replaced by non-guaranteed investment opportunities.
We saw a more drastic version of these same reforms 30 years
ago, when companies in the private sector replaced pensions with
401(k) plans. Certainly, it was a successful trade for many employers
who were able to transfer the uncertainty of long term financial risk
from their company balance sheets to the household finances of their
employees. But, a good portion of American workers have not invested
as much as they should. According to the Pew Charitable Trusts, the
median 401(k) account balance for those nearing retirement (ages
55 to 64) is about $76,000—far short of what most middle class
Americans will need to maintain their standard of living in retirement.
Will service members succeed where so many other middle class
Americans have failed? That’s going to depend largely on whether they
take control of their financial future or passively assume that it is set.
The good news is that many appear to recognize that fact. According
to a survey by First Command Financial Services, the majority of career
service members expect to consult with a financial advisor before
deciding whether to stay in the current plan or opt into the new one.
V