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Big Retirement Changes Coming for the Military

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By Dr. Jarrod Sadulski
Faculty Member, Criminal Justice, American Military University

Serving in the military offers many benefits — a secure career, the opportunity for promotion and retirement, and the chance to travel.

Like many pension plans, the military traditionally has had a 20-year retirement plan. The long-standing concern with that retirement system is that members who leave before they reach the 20-year mark have no retirement benefit. In fact, 81 percent of servicemembers who transition out of the military before reaching the 20-year mark end their career without a retirement benefit.

New Retirement System Similar to 401(k) Plans

The new Blended Retirement System offers a major change for some military servicemembers. It acts much like the civilian government 401(k) retirement plan.

Components of the New Blended Retirement System

The Blended Retirement System has three important components. The first is the Thrift Savings Plan which has been in existence for military members since 1987. In this defined contribution plan, servicemembers can make retirement contributions similar to a 401(k).

However, these contributions are not matched for servicemembers under the legacy retirement plan. The Thrift Savings Plan houses the retirement contributions in the Blended Retirement System.

The next component is a continuation pay that serves as a bonus for servicemembers who complete 12 years of service and re-enlist. Under current law, servicemembers receive two and a half months of their basic pay for active-duty members and one-half of a month’s pay for military reservists who re-enlist. The continuation pay serves as an incentive to remain in military service.

The third component is an annuity. The annuity is two percent of pay times the years of military service and is based on the highest 36 months of basic pay.

The new retirement option is controversial because it has both advantages and disadvantages. For example, one advantage is that about 85% of servicemembers will now receive a retirement benefit if they leave the military prior to the 20-year retirement mark. Under the new system, servicemembers will become vested after only two years.

However, their retirement pay will be less than that of a 20-year retiree. That loss

is reflected in the low number of servicemembers who have taken the Blended Retirement System option over the traditional retirement pension

Some Servicemembers Have Joined New Retirement System; Others Haven’t

Servicemembers who joined the military after 2006 but before January 1, 2018, have the choice to remain in the traditional military retirement system, where they are vested at 20 years, or opt into the new Blended Retirement System. For example, 1.6 million active duty and reservists have the choice to opt into the Blended Retirement System, but only one in six has done so    . This is far below the military’s expectations and reflects a resistance to the new retirement option.

It is important to note that only those servicemembers who joined between 2006 and January 1, 2018, have the choice between retirement plans. The deadline to enter the new system is December 31. As of September, however, only 16.5 of servicemembers voluntarily signed up.

Newer Servicemembers Will Be Placed in Blended Retirement System

Servicemembers who do not elect to enter the new system will remain in the current 20-year pension benefit plan. Members who enter the military on or following January 1, 2019, will not have a choice and will automatically go into the Blended Retirement System.

These changes have major implications for servicemembers’ retirement. Servicemembers who have the choice of opting into the Blended Retirement System or remaining in the legacy retirement plan may wish to speak with a financial advisor to determine which plan will best meet their needs based on their career intentions.

About the Author

Dr. Jarrod Sadulski has been a member of the Coast Guard since 1997. His expertise includes infrastructure security, maritime security, homeland security contraband interdiction and intelligence gathering. He has received commendations from the Coast Guard. Currently, Jarrod is a supervisor in the Reserve Program and provides leadership to Reserve members who conduct homeland security, search and rescue, and law enforcement missions.


Wes O’Donnell is an Army and Air Force veteran and writer covering military and tech topics. As a sought-after professional speaker, Wes has presented at U.S. Air Force Academy, Fortune 500 companies, and TEDx, covering trending topics from data visualization to leadership and veterans’ advocacy. As a filmmaker, he directed the award-winning short film, “Memorial Day.”

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