Military Blended Retirement Benefits

Retirees with fewer than 20 years of service still receive some benefits

Military retirement plans are not created equally.
••• fstop123/Getty Images

The military retirement system was overhauled in 2016, with a new system taking effect in 2018.

Across the U.S. military, soldiers, sailors, Marines, airmen and Coast Guard personnel were able to choose between a traditional pension and a more modern blended retirement option. The newer plan is closer to a civilian 401 (k) plan but allows those who leave the military with fewer than 20 years of service to retain some of what they have invested. 

The National Defense Authorization Act for Fiscal Year 2016 created the blended system, which was presented as a modernized retirement system for the military. Those with fewer than 12 years of service as of December 31, 2017, were able to opt-in to the new system during the calendar year 2018. 

The overhaul of the system was made based on recommendations from the Military Retirement Modernization Commission, following a long-term study. The changes were made with the goal of attracting younger recruits from the millennial generation, many of whom tend to switch jobs more frequently than their parents, but who may not have access to or interest in retirement plans.

Military Retirement Prior to 2016

Under the previous retirement plan, military personnel could retire after 20 years of active duty service. A military member who retired at 20 years of service received 50 percent of his or her monthly base pay. For each year served over 20 years, the military member received an additional 2.5 percent, up to a maximum of 75 percent of their base pay, at 30 years of service.

Military members who entered the service after September 8, 1980, but before August 1, 1986, fall under a slightly different system that pays a little less. Instead of a direct percentage of the base pay they were receiving at the time of retirement, these members received a percentage of their average base pay during the three years of service when their pay was the highest (which is usually, but not always their last three years of service).

Military Retirement Pay Overhaul

The National Defense Authorization Act changed the way the military saves and pays its members retirement benefits. Service members who joined after 2006 but before January 1, 2018, had the choice of whether to stay with the existing system or opt into the blended retirement system. Those who joined before 2006 remained in the previous system.

Blended retirement was created to benefit the entire force. Previously, approximately 81 percent of those members who joined the military left with no retirement benefits. Under the blended system, about 85 percent of service members receive a retirement benefit, even if they don’t qualify for full retirement (in other words if they serve less than the minimum 20 years).

All service members joining after January 2018 are enrolled in the Thrift Savings Plan (TSP), with automatic and matching Department of Defense (DoD) contributions. After completion of two years of service, the service member is vested and that money belongs to them. If they leave, it goes with them.