Army Sgt. John Bernert, an air traffic controller in the Kentucky National Guard who is about to start warrant officer school, said the numbers make sense for him to stay with the military’s legacy retirement system.
“I have every intention of staying 20 years,” the E-5 said. “That’s the point of going to warrant officer school.”
He doesn’t think the new Blended Retirement System’s features are enough to offset the 20 percent reduction in the retirement pay he would receive. Reservists who qualify for retirement start receiving retired pay at age 60.
“It’s risk versus reward,” he said. “The risk is more than the reward if I do stay 20. If I stay for 20, I will have foregone more than I can ever recoup.”
Bernert has 1,100 reservist retirement points. He entered the Florida Guard in July 2005, after some time in ROTC in college, but has a three-year break in service. He moved to the Kentucky Guard in 2014. All in all, he has nine years of credited service, he said.
Using the Defense Department’s BRS calculator, Bernert determined that the numbers are in his favor to stay with the legacy system:
In 2046, the first year he could get full retirement pay as a reservist, he’d get $21,045 under the legacy system. Under BRS, he’d get $16,836. If he maxed his TSP match under BRS, he’d add $2,298 a year from those added funds, making his highest first-year BRS haul $19,134. There’s a lag in getting those retirement funds in both cases — retired reservists get retired pay at age 60; money in TSP can be withdrawn starting at age 59½.
His total retirement pay — if he lives to age 85 — would be $731,215 under the legacy system. Under BRS, he’d get $584,972. Both figures factor in cost-of-living increases. He’d get another $59,000 or so thanks to returns on TSP DoD matching funds.
Under BRS, he’d also get $82,985 worth of projected investment return from his own contributions, which would include an extra $2,352, representing half of his continuation pay at his 12-year mark. But he doesn’t count that as part of his BRS total: “If I want to put 5 percent of my Guard pay into my TSP, I can do that regardless of whether I’m in the BRS,” he said.
As an E-5, 5 percent of his drill pay adds up to about $30 a month, he said, which means that under BRS, he’d receive — at most — about $30 a month from the Defense Department in matching TSP contributions.
“Active duty can benefit a lot more as far as the matching funds to TSP,” he said.
Small amounts can add up over time, said JJ Montanaro, a financial adviser with USAA, especially as investments grow. For example, if you contribute $50 a month to your TSP, and it’s matched by DoD, that $100 a month grows to about $50,000 in 20 years, assuming an investment return of 7 percent. If you’re 41 years old when you retire after 20 years, and let it continue to grow, at age 59½, when you can start withdrawing without penalty, it would have grown to about $178,000, Montanaro said.
But that’s understating the end result, because as a service member’s pay increases with promotions and time in grade over the years, the same 5 percent will be a percentage of an ever-growing number, Montanaro notes.
Montanaro talked to Bernert about his decision-making process, and said he agrees with his logic.
“We primarily focused on his current glide path,” Montanaro said. “He’s relatively certain he will go 20 years. That’s where our conversation focused. I think it’s less about the math than it is about whether someone’s going to serve long enough to qualify for retirement.”
Bernert has about nine years of service. “He’s about halfway there, and that makes it easier for me to follow and agree with his logic,” Montanaro said.
“Someone with one or two years of service could say the same thing — ‘I’ll serve for 20 years’ — but a lot of life can happen between now and then that can get in the way of that, not to mention what could happen with performance, service requirements, and force-shaping issues.”
Bernert, who is married and has a 3-month-old son, is already plowing money into his retirement savings through his civilian job with the federal government, where he also works as an air traffic controller. He contributes 10 percent of his salary to his civilian Thrift Savings Plan and gets a 5 percent match from the government.
He hopes to eventually contribute all of his Guard pay to his TSP, he said, once they pay off some bills.
“He’s doing a good job” in preparing for retirement, Montanaro said. “He has done retirement planning, to see where he stands. For someone who is 32, that’s pretty unique.”