The New (More “Portable”) Changes to Your Military Retirement

A picture of a uniform and the US flag

Adapt and advance. That’s the mantra you can hold to throughout your life and as relates to what’s on the horizon for military retirement changes.

Style portability

The core of the changes to your retirement pension has to do with portability. Your current “all-or-nothing” styled pension plan is evolving to the more “portable” 401(k) style plan appropriate to new service members.

The change occurred in 2016. The national defense budget signed into law an end to the current all-or-nothing system for retirement benefits.

You’re now paid 50% of your base pay as a military retiree (after 20 years of service). You’re entitled to 87.5% of your pay in retirement if you remain in service for 35 years.

But what if you don’t achieve the 20 year mark in the military?

What’s new?

Retired brigadier general and executive vice president and secretary of the American Armed Forces Mutual Aid Association, Michael Meese, confirms that the new system “provides retirement savings for virtually everyone who joins the military, not just the less than 20% who stay to a 20-year retirement.”

The “blended retirement plan,” according to Meese combines a pension style plan with a savings and investment style plan.

Less than 19% left military service with retirement benefits under the old style system compared with 85% under the new system, according to Time Magazine.

No worries!?

It’s no surprise that longterm military service can leave you wondering about the value of your pension. The restyled retirement program can help eliminate those worries if you’re current active duty or a veteran and retiree.

With more than 12 years of military service you will automatically be within the old/former pension style. If you join after January 1, 2018, you would be placed into the new system.

If you’ve served less than 12 years in the military as of January 1, you face a decision. You’re allowed one year to decide between the old or new style of retirement benefits.

Decide to your advantage

A traditional pension plan provided income for “life.” There’s less to manage about how your funds are invested on your behalf.

The new approach blends the responsibility for you as a service member to save and invest. Again, think of it like a the private, corporate sector provisions to a 401(k) plan.

However you view the change it’s important to feel empowered. You can take charge of your financial future and adapt according to the economy.

Portability is to your advantage. Retirement gives you the opportunity to roll-over your government benefits into a civilian type plan.

Contact me about Services provided for Veterans and military personnel including your retirement and related questions. Visit my website for more information.