Retirement Plan Dilemma for Military Personnel
The current and prospective military service members could definitely be affected by changes to the pension system. The new plan has a defined contribution plan that is combined with the traditional pension. However, the success of the new retirement plan for military personnel will depend on financial education.
The US military aims to secure the financial future of its members by introducing a new retirement plan. According to Pentagon officials, the new plan is an improvement of the current military benefits and pensions plan that has been in place for over 70 years.
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However, one must serve for a minimum of 20 years in order to qualify for the legacy plan. The most unfortunate thing is that most military members never serve for 20 years. According to the military compensation director for the U.S Army, there is a need to have a retirement benefit plan that one can move with from one job to another.
Modernization of the System
According to the director of the military compensation policy, Jeri Busch, the long-term savings can be jump-started with the new program. Ensuring military readiness is the first step towards retaining talent with the force. The new retirement plan can be compared to the private sector 401(k) plan that has a defined contribution plan and the traditional pension system.
The plan is commonly referred to as the Blended Retirement System and has been in operation since the 1st of January 2018. Therefore, new members that have been joining the military from that date would be under the new retirement program. However, members that had served at least 12 years by the end of 2017 will be entitled to the guaranteed pension under the old retirement plan.
The Big Decision
The current military personnel, including National Guard Reserve, and active duty members have a tough choice to make concerning their retirement plan. The members have to choose between the legacy plan and the new BRS program. In fact, those that have served for less than 12 years are the ones in a dilemma.
Members that are not interested in the old plan will be expected to decide on the amount of money to contribute to the new plan. Civilian government employees have always been offered the Thrift Savings Plan by the federal government for many years.
Therefore, it is this plan that had been ignored for many years that will now be revived under the new retirement plan. According to the new plan, a member can start receiving up to 5% of their salary immediately after joining the new plan depending on their contributions. If one serves for 20 years, they will also be entitled to the pension under the new plan.
Shifting Responsibility
The new plan will help members to learn how to save for their future, despite the fact that it comes with some responsibility. However, this might be a tough decision for some military personnel who feel that there is no need to abandon the legacy system if they intend to serve for 20 years. For others, the new plan is worth trying as one can move with their long-term savings when they change jobs.
The Importance of Financial Education
There is an increasing need for military personnel to receive financial education, both online and on bases, for them to understand the merits and demerits of each retirement plan. According to Pentagon officials, one has to undergo training before they can make the final decision.
