Lots of dumbassery out there regarding the BRS, despite all of the mandatory training. The general impression is BRS is another way to cut our retirement with absolutely no upside despite the 5% TSP match up to 26 years. I have heard some wild things like no medical coverage for BRS, no pension at all, and even been told that the match takes 2 years after 2018 to reach full 5% from 1%. These fears are all untrue. I have suggested you look at BSR as insurance for those who prematurely get medically or administratively separated before hitting the 20 year pension mark. The official calculator has not been release, but it turns out the numbers don’t matter since everyone is making the decision based on feelings. So this post will not be one on data and spreadsheets, but rather to coddle your gentle snowflake feelings.
There are no guarantees in life, you could want to do 20 years, but then die or get kicked out. You could also find a better job and leave at 19.9 years and never get the pension. The worst scenario is you do your 20 years and just die one day into retirement. Of the best laid plans of mice and men, who knows? The BRS switch is an opportunity to be free from the 20 year retirement carrot, and walk away with some sort of retirement like the rest of American society. You can’t rely on this pension as your sole sourse of old man income. It is time to put on your big boy/girl pants and actually save for retirement. You can’t rely on a pension, your snot nosed kids, or a sugar mama when your 80 years old for your rent and food.
I was listening to 1 March 2017 Planet Money podcast titled “Dear Economist, I Need A Date“. The concept of “Loss Aversion” was brought up which is a concept by the great behavioral economist/psychologist Daniel Kahneman, he won the Nobel Prize in economics, even though he’s not an economist. Loss aversion implies that one who loses $100 will lose more satisfaction than another person will gain satisfaction from a $100 bonus. It’s irrationally painful to loose money and no big deal earning that same amount. In the Case of BRS some can’t get over the 20% pension cut which you may never get. This aversion makes you blind to the upside where the upfront 5% base match is compounding in TSP for 20 years on top of a retirement pension. In the case of the podcast the boy doesn’t want to prom because he fears the rejection. The economist replies:
So now let’s think about prom night. What are the gains of a prom date that goes well versus the losses from a prom date that doesn’t go well or you ask someone to the prom and they say, no? Well, actually, you weren’t going to have a prom date anyway if you didn’t ask. So the cost of asking somebody and being refused is actually really quite small. It doesn’t feel good, but it’s no big deal. Whereas you never had the date before, so, hey, if this date goes well, this could be the start of something really big for you. So remember loss aversion when you are weighing up these two choices. I can’t tell you what to do. But I can tell you you’re probably taking the downside risk too seriously and not thinking enough about the potential upside.
Are those haters taking the 20% pension cut is affront to geriatric robbery? Keep in mind this downside may never happen because you might not do 20 years despite really wanting to do 20 years. Everyone needs to see the upside for the free money match of 5%, even the short timer LT ends up with $8,777 in 5 years. The DoD should of framed BRS not as 20% pension cut, but rather retirement insurance where you don’t make 20 because you get an even more awesome job from the skills you learned in the service.