How to compare the Blended Retirement System vs. High-3 on pension and TSP math

Blended Retirement System vs. High-3 at 20 years: $2,400 or $3,000

Numbers first. High-3 pays $6,000 × 2.5% × 20 years = 50%, or $3,000 a month. The Blended Retirement System pays $6,000 × 2.0% × 20 = 40%, or $2,400 a month. The gap is $600 a month, or $7,200 a year, and it never closes on its own.

Three versions of the same career are worth setting side by side:

One tax fact matters before anything else. Retired pay and traditional TSP dollars are both taxed as ordinary income, so the system you're under changes when you pay tax, not whether you pay it.

Where the tax lands

• High-3: $3,000 a month, taxed monthly as ordinary income, paid for life.
• BRS monthly: $2,400 a month plus TSP agency money, both taxed as ordinary income; the pension lasts for life, the TSP only as long as the balance lasts.
• BRS with a 25% or 50% lump sum: cash now, then a reduced pension until Social Security full retirement age at 67.

Which system am I under?

BRS covers everyone who entered service after Dec 31, 2017. Members already serving could opt in during calendar 2018 if they had under 12 years of service (active duty) or under 4,320 retirement points (Guard and Reserve). Everyone else stayed under High-3.

If you opted in at 10 years and built your numbers around the old 2.5%, rerun them at 2.0%. Then check your TSP statement to confirm the match has run every pay period since 2018; a missed setup shows up as a gap you can't refill.

Later law also raised the RMD age to 73 (75 for people born in 1960 or later). All that traditional agency money can stay tax-deferred longer, and it can produce larger RMDs later.

Can the TSP match close a $600 a month gap?

Roughly half of it. To replace $7,200 a year at an illustrative 4% income draw, you need $7,200 ÷ 0.04 = $180K in the TSP at retirement, and the BRS agency money alone grows to about $89K over 20 years on these assumptions.

Here's the agency math. The 1% automatic contribution plus a 4% match (which requires you to put in 5%) is 5% of an assumed $54K average basic pay, or $2,700 a year. Assuming 5% a year growth, for illustration, $2,700 × 33.07 ≈ $89K. That's about half of $180K.

The popular belief, that the match replaces the pension cut, goes wrong right there. It covers about half, and only if you put in your own 5% from the start. Continuation pay and your own extra savings have to cover the rest.

TSP balances can fall, and a bad market can cost you part of your own contributions. Retired pay doesn't depend on markets. A pension with a COLA and a balance that can run down aren't the same kind of money, so treat the $180K as a rough yardstick. Our calculator reruns these steps on your own pay and years.

The yardstick and the agency money

Does my Roth TSP election make the match Roth?

No. Agency automatic and matching contributions go to the traditional balance even when all of your own deferrals are Roth, so a Roth-only BRS member still builds a traditional balance taxed at income draws and RMDs. The matching contributions vest immediately; the automatic 1% vests after 2 years of service. Check which balance your TSP statement shows, not which box you ticked.

Colleen's High-3 pension and the tax it adds

Hypothetical: Colleen, 54, is a single retired Coast Guard commander. She now directs emergency management at a hospital for $140K, her mother lives with her, and she holds $780K in a mostly traditional TSP. She retired under High-3 at 22 years with a $10K a month High-3 average.

Her High-3 pension: 2.5% × 22 = 55%, or $5,500 a month ($66K a year). The BRS version of the same career: 2.0% × 22 = 44%, or $4,400 a month ($52.8K a year). The difference is $1,100 a month, or $13,200 a year.

Stacked on her salary, at an assumed 24% marginal rate for illustration, that $13,200 adds $13,200 × 24% = $3,168 a year of federal tax. So BRS would have trimmed her tax now. But its agency money would have gone into a TSP that's already mostly traditional, and the tax cost moves to her RMDs at 75. It doesn't disappear.

Whether the move saves anything depends on her bracket at 75, which nobody knows today. A lower bracket later makes the shift a real saving; the same or a higher one makes it a timing change with a bigger RMD attached.

First Premier Bank writes down which tax year each dollar lands in before comparing the two systems, then takes the decision with the nearest due date first. For Colleen that's her DFAS withholding, because $66K of retired pay on top of $140K can leave her under-withheld come April. Her Roth conversion question gets its own treatment on the Roth TSP versus traditional TSP page.

The two pensions side by side

What moves and what doesn't

Should I take the BRS lump sum at retirement?

Sometimes, but not by default. A BRS retiree can take 25% or 50% of the discounted value of retired pay as a lump sum, the monthly pension stays reduced until Social Security full retirement age (67 for those born in 1960 or later), and the lump sum is taxed as ordinary income in the year it's paid.

Two hypothetical households with the same $2,400 a month pension should choose differently. Retiree A, an E-7 with 20 years, starts a $140K job the month after retiring. A lump sum on top of that salary is taxed at a high marginal rate, so keeping the full monthly pay usually wins.

Retiree B has the same pension but goes to school full time on the GI Bill with no salary for 2 years. The housing allowance isn't taxable, so a 25% lump sum would fill lower brackets instead of stacking on top of a paycheck.

The belief that the lump sum is free money is wrong. It's a discounted trade for years of reduced pension, so compare the tax cost and the reduction before you sign the election.

First moves, paperwork and the easy errors

Gather five things first. The LES in myPay shows your TSP lines; the TSP statement at tsp.gov shows the traditional and Roth split; the BRS comparison calculator on the Defense Department military pay site gives the pension side. If you opted in during 2018, find the confirmation in your personnel records. Last year's tax return shows your current bracket.

Then work in this order: confirm your own contribution is at least 5% of basic pay; check that agency contributions show in the traditional balance; decide the Roth and traditional split for your own money (the Roth versus traditional TSP page covers that); 12 months before retirement, map which tax year a lump sum would land in; and set DFAS withholding. Whether retired pay is taxable, and what the 1099-R shows, has its own article.

Waiting until year 6 to raise TSP contributions to 5% is a timing error. Matching starts after 2 years, so those 4 late years forfeit 4% × an assumed $54K basic pay = $2,160 a year, or $8,640 of agency money before any growth. The TSP has no way to backfill a missed match. Two other easy slips: assuming a Roth election made the match Roth, which leaves an untaxed traditional balance that surfaces at RMD time, and letting a lump sum land in a salary year, where it's taxed at the higher marginal rate.

Every line except VA compensation and qualified Roth money is ordinary income at some point.

If your bracket at 73 or 75 turns out higher than today's, the Roth lines in this table become more valuable; if it's lower, deferral wins.

Documents and the order of moves

The costly errors

Where First Premier Bank would start with your BRS numbers

First Premier Bank lines up your LES, your TSP statement and your expected retired pay, then picks the decision with the earliest deadline. That might be raising your TSP contribution to 5% or making the lump sum election. You leave with that one decision priced out in your roadmap. We meet clients nationwide over video or a phone call, and we state the fee before any work starts.