Airmen approaching 12 years served who convert to the new Blended Retirement System will be eligible for a continuation pay bonus, but those planning on retiring after 20 years may benefit more from the current system.
Active-duty airmen who commit to 48 months of additional service will receive a one-time bonus of 2.5 times their monthly basic pay, according to an Air Force statement issued on Nov. 27. Reservists will receive 50 percent of their base pay.
If reserve airmen are on active-duty orders when they convert to the new system, they’ll earn the active-duty payment rate.
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Airmen must elect to receive continuation pay before the start of their 12th year of service. They can choose to receive the payments in a lump sum or yearly installments, subject to tax withholding, and will be required to pay it back if they don’t complete their service.
Each of the services will offer a continuation bonus for converting to the blended system, but the law gives them the discretion to make the offer to servicemembers between eight and 12 years of service.
Currently, servicemembers who retire after 20 years each month receive 50 percent of the average of their highest three years of base pay, plus 2.5 percent more for each year of active duty after 20 years.
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Under the new blended plan, the payout is reduced to 40 percent and 2 percent more for each year of active duty after 20 years.
However, the new plan includes matching contributions to the Thrift Savings Plan, a program similar to a traditional 401(k). Servicemembers can choose to invest their money in different funds, with varying risk.
All current servicemembers are grandfathered into the current retirement plan, but those with less than 12 years of service can opt into the new plan throughout 2018. Starting Jan. 1, all new servicemembers are automatically enrolled in the new plan.
Mandatory training at the Joint Knowledge Online website directs servicemembers to a retirement calculator that can help them decide whether to switch plans. The difference in benefits could amount to hundreds of thousands of dollars.
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