New military retirement system could impact service members financial future


JACKSONVILLE, N.C. (WNCT) – Most people agree, saving for retirement is something everyone should start doing as soon as possible.

A new change to the military retirement system could have a big impact on how service members invest in their future.

9 On Your Side sat down with a financial adviser to break the information down.

“Unless you want to be at Uncle Sam’s mercy for the rest of your life you really have to put your own money away,” said certified financial planner Joe McLaughlin.

The new “blended” retirement system, which goes into effect January 1, 2018, has three options.

Option one is a 401-K style component, “For the first time ever, active duty military will get a thrift savings plan match up to 5-percent like their federal workers have had for a very long time,” said McLaughlin.

“You have to do 5-percent on your own to get the government’s 5-percent match and that’s a huge huge benefit, it’s free money.”

Option two is a retirement annuity similar to the one in place for those completing 20-or-more years of service.

“At retirement,when you leave the military, you can decide to have a portion of your retired pay advanced in a lump sum,” McLaughlin continued.

And at 12 years of service, depending on your military specialty and branch of service, you could be eligible for a continuation bonus.

“Could be anywhere from 2 1/2-to-15 months extra pay and that’s yours to keep as long as you commit to another four years of service,” said McLaughlin.

Who all does it affect?

For service members with less than 12 years of service as of December 31, 2017, you will have the option of choosing the new system or continuing under the current one.

For those who served longer than 12 years, they would stay in the current retirement system.

Those joining the service after January 1, 2018 will have to enroll in the new retirement system.

McLaughlin said the new system is beneficial for those looking to plan for the future and urges people to start saving beginning with their first paycheck.

“People who get help do better,” he said.

For more information on military retirement plans, visit the Department of Defense website.

You can also reach out to your financial advisor for help.

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