By the end of 2018, only 25 percent of army soldiers eligible opted into the military’s new Blended Retirement System, the lowest of all the armed services, with the opposite end being the Marine Corp, who opted in at 60 percent.
The Blended Retirement System is closer to the standard 401(k) than the 20-year retirement benefit program the military offered prior.
When addressing Congress as to why this might be, Sergeant Major Dan Dailey told Sen. Thom Tillis, the chair of the Armed Services subcommittee on personnel that the overwhelming majority of soldiers said: “I plan to stay 20 years, and I feel as if the traditional retirement system will benefit me better in the future.”
More than half the servicemembers in a recent Army Times poll reported that they planned to serve at least 20 years. Only those with less than 12 years in the service are eligible for the Blended Retirement System, about 800,000 soldiers. This, according to the Dailey is part of the issue, citing that a lot of soldiers are already too advanced in their careers to “capitalize on the full investment of their blended retirement contributions.”
The Thrift Savings Plan, on the other hand, is the traditional retirement plan, with the Department of Defense putting in an automatic 1 percent contribution of a soldier’s pay into it. The soldier can then choose to increase their contribution if they like, and the Defense Department will match up to 4 percent over the course of 26 years. Leaving before 20 years, with this plan, would give all the money saved before then back to the enlistee, which they can then invest in an IRA or other retirement plan, or whatever they choose. If the enlistee stays over the 20-year mark, they get to keep that money and get a monthly benefit in addition to it.
The dealbreaker, for most soldiers, is the speed at which they can access their funds, according to Dailey. Most soldiers are on the younger side, younger than 24, and it could be several decades before they can get to their money without incurring penalties if they retire on the 20-year plan. With the traditional plan, the parameters of their benefits are more clearly defined.
“I think that the soldiers who come in now understand the value of investment,” said Dailey.