Opting Into BRS: Avoiding a Common Mistake

While it’s great to see so many people opting into the new Blended Retirement System (BRS), it’s not so great to see one of the biggest benefits being missed entirely; matching retirement plan contributions.

According to numbers provided by the Defense Department, over 10% of people aren’t putting money into their Thrift Savings Plan despite switching to BRS. As you may know, 1% of your basic pay will automatically be contributed to a TSP account under BRS. However, what you may not know is that to receive matching contributions of up to 4%, service members need to contribute manually from their own pay. Without taking this extra step, you could be missing out on a large chunk of matching contributions from the government.

 

Essentially, the TSP is very similar to a 401(k) and the legacy retirement system suggests the government doesn’t need to match the contributions of service members. Under BRS, this is different, and the government does play a more active role. After opting in, you’ll need to adjust your TSP contributions via MarineOnline, MyPay, or Coast Guard’s Direct Access. Currently, scores of people are missing out on this bonus.

 

Is It Worthwhile?

 

If you’re wondering how much of an impact this can have, let’s take an E-5 with five years of service as an example. After opting into BRS, the automatic government contribution of 1% applies and, in 2018, this comes to around $27 per month. If the service member were to actively increase this contribution to 5%, this contribution increases to nearly $140; this means that a lack of TSP contribution could be costing you well over $100 per month.

 

In the short-term, this can be a huge loss, but it becomes even more noticeable once you consider potential pay rises in the future. If we assume a standard 7% TSP rate of return, the total loss over a period of 15 years can equal $100,000. Thanks to the matched contributions, half of this loss is extra money that can be earned from the employer.

 

Utilizing Your TSP Under BRS

 

How do you fix this problem and make the most of your TSP? For those who have opted into BRS but haven’t yet contributed anything extra to their TSP, emails have been sent from the Federal Thrift Investment Board and various service officials. Furthermore, Leave, and Earnings statements now have friendly reminders, and the message has even reached the largest platforms of social media.

 

Thanks to rule changes in 2018, all new personnel to the military will be enrolled into the BRS automatically. Reserve component members (with less than 4,320 retirement points) and anybody with fewer than 12 years of service at the end of 2017 still have the option to opt in to BRS or remain in the legacy system. If you’ve opted in, we highly recommend checking your emails and contributing to your TSP because this will allow you to maximize the matching contributions feature of the BRS. Without it, you could be missing out on thousands of dollars both now and in the future!