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Legacy vs. Blended Retirement System (BRS): BRS calculator

A short Google search on the subject of retirement readiness quickly results in an overarching feeling that Americans have rapidly been falling behind. In fact,, 42% of Americans currently aren’t saving for retirement at all.So what about you? Will you have enough saved in retirement? Will your retirement be sustainable? Use this post as a quick military pension calculator for guidance on how best to start saving.

Military Retirement Changes

For military members, ‘retirement’ has taken on a whole new set of complications with the updated pension system the government rolled out in 2018. We’ve provided a guide and outlined the general implications of this Blended Retirement System (BRS), such as whom it affects and when the changes will be implemented; however, there are deeper weeds to dig into about how specifically the BRS plan will truly affect military members’ retirement from a “numbers” perspective.

Let’s look at how the military’s pension planswork (old & new) and how to think about building your savings with help from our military retirement calculators.

The Old Way to Retire: Legacy Plan

First, let’s discuss the government’s current military retirement pension system, called the Legacy Plan, for those who joined the armed forces before 2018. Personnel must serve at least 20 years in order to qualify for a pension, but once they have hit 20 years, there is an easy military pension calculator that determines the monthly amount they will receive:

2.5% X number of years served X retired base pay*

*The retired base pay is an average compilation of the pay that the service member received at their highest rank, for a consecutive 36 months.

To give an example using real numbers, let’s imagine a service member who has been in the military for exactly 20 years, and had a highest monthly average base pay of $8,500 (a close estimate of what a 0-5 pay grade at 20 years of service would receive). Using the formula above, they would receive a monthly pension of $4,250:

2.5% X 20 years X $8,500 = $4,250

Get the Scoop - Blended Retirement System: Guide to Military RetirementWith the current Legacy military retirement plan, there is no equivalent of a civilian 401(k) matching plan as part of this benefit. Military members can invest funds into the Thrift Savings Plan (TSP) but there is no matching element under the legacy system. A key part of the legacy system is the requirement to serve a full 20 years to receive any type of pension benefit.

Still Existing: Thrift Savings Plan

The second type of military retirement benefit to explore is the Thrift Savings Plan (TSP) account, a retirement savings account specifically for Federal employees and military members.However, there is a major difference between a typical 401(k) and the TSP.

The TSP does not have any ‘matching’ funds program like most 401(k)s do. The burden is completely on the service member to open an account, make contributions, and grow their savings while in service.

Within the TSP, however, one unique benefit is that there are two types of contributions service members can choose between: traditional contributions or Roth contributions.

  • With traditional contributions, you defer paying taxes until the money is withdrawn.
  • With Roth contributions, you pay taxes as you make them and then your withdrawals are tax-free.

With Roth TSP contributions, much like you would find in a civilian Roth 401(k), rather than a Roth IRA, there are no income limits for contributions and you can contribute up to $18,000 this year. These two types of contributions help when making your retirement tax-planning decisions.


Additionally, it’s important to remember that any retirement savings account will have costs associated with the administration of the account or the specific fund you choose, otherwise known as an expense ratio. With the TSP, this management fee is extremely low; on average 0.038%, or a mere $0.38 per $1,000 invested, whereas other offerings typically range around 1% or higher – a significant difference!

In summary, while the Legacy Plan currently provides a higher quality pension, a major difference with the BRS is that you must serve at a minimum of 20 years in order to be eligible, and secondly that there is no government-matching in the TSP.

See also: When Should You Cash Out Your Thrift Savings Plan (TSP)?

The New Way: Blended Retirement System

The BRS is a new system that replaced the Legacy Plan in 2018, and brought with it several significant military retirement changes. First, as far as the pension is concerned, the formula used to calculate benefits will also change. Instead of the 2.5% we saw above, the initial multiplier will reduce to 2.0%. Let’s take a look using the brs calculator below:

2.0% X number of years served X retired base pay

To best show how BRS changes will directly affect the military pension calculations, let’s use the same numbers from our previous example. With a 0-5 who served exactly 20 years with a retired basic pay of $8,500, here’s how much they’ll now receive monthly under the new plan:

2.0% X 20 years X 8,500 = $3,400

Same service member, same number of years of service, and yet $850 less per month in pension benefits!

To make up for this 20% decline, the government decided to switch to something more akin to a civilian 401(k) retirement plan and put some of the responsibility for military retirement savings back on the service member.

Click here to download our guide to military retirement: Blended Retirement System

Through the BRS, the government will now fund an automatic 1% of a service member’s base pay each month directly into their TSP, starting once he or she has completed two months of service. Then, once that military member reaches three years of service, the military will begin offering a matching plan, matching up to an additional 4% of the service member’s base pay. A key component of the new blended retirement plan is that it allows service members that don’t complete a full 20 years of service to transition out of the military and still receive some transferable benefits in the form of the matching TSP payments.

How DoD Retirement Matching Works in the new Blended Retirement System

This chart represents what the Department of Defense states as its automatic and matching contributions, as stated at 

Invest in Veteran Business BondsWhile there are benefits to both the legacy system and the BRS, service members have the potential to grow additional retirement savings through the BRS’ matching TSP plan. Yet, even with this new plan there are still limitations under the general TSP program. The TSP only offers six types of funds, with each one varying in strategy and risk; ranging from government securities that only earn interest, to bonds, to S&P 500 stocks, to small-cap stocks, to international stocks, to a life-cycle fund.

In summary, under the new BRS plan, the government-match is a military benefit that service members can utilize to help offset a smaller pension. To fully capture this benefit, however, service members will need to contribute enough to receive the full government match, and will need to make smart investment decisions within the TSP fund offerings.

Get the Scoop on Military Retirement Planning & Changes

To help you through your military retirement planning process, our partners at the Defense Credit Union Council (DCUC) developed a guide. It provides a total view of what to be thinking about when planning for retirement and gives all of the details you need to know about the new Blended Retirement System. Download it now.

Get the Scoop - Blended Retirement System: Guide to Military Retirement

This content is for informational purposes only and may not contain all material information about financial planning, nor is it intended to address any particular reader's individual financial planning goals. This information is not intended to be, nor should it be construed or used as, financial, tax, legal, or investment advice. Please consult with your advisor regarding your financial planning and/or retirement goals.


The Blended Retirement System Explained

The military made major changes to its retirement system on Jan. 1, 2018, adding the Blended Retirement System. Let's look at what it means for military members.

What Is The New Retirement System?

The new retirement system is known as the "Blended Retirement System" or BRS. The “blending” in BRS comes from the blending of two major sources of retirement income: the existing annuity provision for those who retire after 20 or more years of service, PLUS the Thrift Savings Plan (TSP). The TSP is a government run 401(k) retirement account that allows members to invest their own money in either stocks or government securities and also get a contribution to that account from their employer.

What Is New About This Retirement System?

BRS uses the retirement annuity formula that has been in place for years: the average of the service member's highest 36 months of basic pay times 2.5% of their years of service -- but the 2.5% is adjusted downward by half of a percentage point, from 2.5 to 2%.

To make up for this reduction the government will contribute to a member's Thrift Savings Plan (TSP).

After the first 60 days in the service, all members are enrolled in TSP and receive an automatic government contribution of 1% of basic pay into their account each month.  This 1% contribution is automatic, you don't have to put any of your own money in to receive it. Additionally, members are automatically enrolled to contribute 3% of their out-of-pocket basic pay to the TSP each month (they can change or stop this at any time).  

After two years of service, the government will match the member's contributions up to an additional 4%.  So, after two years of service, members can get up to a 5% government matching contribution on top of what they contribute each month. Therefore if a member contributes 5% of their basic pay the government will match it, making a total contribution to the TSP of 10% of their basic pay.

If a member only contributes 3% of their basic pay to the TSP, the government matching contribution will be 3%, and so on. If a member has the ability to contribute more of their basic pay to the TSP - say 10% - the government will still only contribute a maximum amount that equals 5% of the member's basic pay.

For an E-4 with 4 years service contributing 5% of the basic pay that equals over $3,000 being saved each year. Compound those contributions and interest over several years and you are talking serious savings -- hundreds of thousands of dollars over a military career!

Why Is Adding The TSP To Retirement A Good Thing?

The best part of having a TSP contribution really applies to those who don't stay in the military long enough to get a retirement check.

The government says that 83% of people who join the military don't stay long enough to retire, so when they leave after 5 or 10 years of military service they basically get nothing towards their future retirement. This plan changes that.

By contributing to the TSP, military members can leave the service at any time and have an existing retirement fund that they can take with them anywhere. Even if they get out of the military before completing 20 years they would keep the money they have in their TSP fund. That money can be left in the TSP, taken out, or moved to a different retirement fund to get tax savings.

What Else Is New About the Blended Retirement System?

Continuation Pay

BRS also includes a mid-career continuation pay at about 12 years of service, as a further incentive to convince military members to remain in the service until they reach the 20 year mark and qualify for monthly military retired pay. The amount, length of addition service required, and actual time payable differ for each branch of service, in some cases different military occupations get different amounts too. Check with your personnel office for specific details.

Related: Continuation Pay Explained

Lump Sum Option

When you retire ( or at age 60 for guard/reserve members), you will be given the option to receive monthly retirement pay checks, or you can take a lump-sum payment of either 25% or 50% of your gross estimated retired pay, and get smaller monthly checks.

If you take a 25% lump-sum payment, your monthly retirement pay will be 75% of the normal full retirement pay. If you take the 50% lump-sum, it will be 50% of the normal retirement pay.

Also, your lump-sum payment is discounted by an amount that changes every year. For 2020 this discount rate is 6.75%. That means that if your total retirement is determined by your finance office to be $100,000 you would only receive $93,250 (100,000 discounted by 6.75%). Also, the lump sum payment is taxable.

When you reach age 67 your retirement pay goes back up to the full amount if you take either lump-sum option.

The Blended Retirement System Summed Up

The new system is made up of 4 specific components:

  1. Defined Benefit:
    • Retired pay will be 2% times number of years of service. If you retire at 20 years service you get 40% of your final base pay. If you retire at 30 years service you get 60% of your final base pay.
    • You can either get your full retirement when eligible or opt to get a lump-sum benefit at retirement. If you take the lump-sum you will get a reduced monthly retirement check until age 67.
  2. Defined Contribution:
    • The military will contribute 1% of your base pay to your TSP no matter what you do, even if you don't put any of your own money in
    • You will be automatically enrolled with a 3% base pay contribution to your TSP. (You can change this at any time.)
    • The military will match up to 5% of your contribution after 2 years of service.
    • You can always stop contributing to the TSP, get a loan of your TSP balance, or withdraw your money from the TSP account.
  3. Continuation Pay:
    • When you reach 12 years of service and commit to 4 more years of service you will be eligible for a cash incentive of 2.5 to 13 times your regular monthly basic pay if you are active duty and 0.5 to 6 times your monthly basic pay if you are in the reserves.
  4. Choice of lump sum payment
    • If you take a lump sum payment it will be discounted to allow for inflation.
    • If you take the lump sum payment, your monthly retirement benefits (and survivor benefits) will be reduced. 

For More Information About The Blended Retirement System

DFAS has several resources that explain the BRS on their website. Members should also receive BRS training at their units. The DOD also has a BRS calculator online.

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Military Retirement Calculators

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How To Win With The Military’s Blended Retirement System

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