USBA Blog: How the New U.S. Military Retirement System Affec...

How the New U.S. Military Retirement System Affects You

2/7/2017

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USBA describes military retirement changes

The first major change in military retirement since WWII was approved in 2016 as part of the National Defense Authorization Act. The new modernized retirement system blends elements of the current system with the government making automatic and matching contributions to a service member’s Thrift Savings Plan (TSP).

How does this affect you?

  • Everyone serving today is grandfathered and can stay under the current system.
  • However, those with fewer than 12 years of service as of December 31, 2017 will have an opportunity to opt in to the new system during calendar year 2018.
  • Service members with over 12 years of service as of December 31, 2017 will remain in the current retirement system with no changes.
  • The new retirement system automatically applies to all joining the military after January 1, 2018.

Overview of the new retirement program:

  • The new plan reduces the pension paid to retirees after 20 years of service by 20%. However, it supplements the pension with government contributions to participants’ TSP.
  • It starts with an automatic contribution by the government of 1% of a service member’s base pay to his or her personal TSP account.
  • The service member can also contribute a percentage of his or her base pay, which the military will match up to 5%.
  • After serving 2 years, a soldier, sailor, airman, Marine or member of the Coast Guard leaving the military is fully vested and can keep his or her personal TSP contributions, as well as the government’s contributions and all earnings.
  • At 12 years, those who commit to serving an additional 4 years will receive a mid-career continuation bonus of at least 2 ½ months’ pay.

Here are answers to frequently asked questions about the new retirement system.

Note: VGLI insurance for retiring veterans is not affected by the new Act. All active, honorably discharged and retired members of the Army, Navy, Marines, Air Force and Coast Guard also remain eligible to apply for USBA military life insurance.

Get a free quote for veterans life insurance from USBA.

USBA is a not-for-profit Association that provides group life insurance, health insurance supplements, and other products and services to military personnel, Federal employees, National Guard and Reserve members, Veterans and their families.

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