Analysis of the effectiveness of the retire tool when deciding between HIGH-36 retirement and blended TSP retirement

Abstract

The Department of Defense has enacted military retirement reforms that will change the vested pension system into a hybrid pension and matching Thrift Savings Plan contribution called the Blended Retirement System. The purpose of this research was to evaluate the effectiveness of a previously developed retirement tool (RETIRE Tool) that allows service members to evaluate and compare the net present values (NPV) of the HIGH-36 retirement system (HIGH-36) and the blended Thrift Savings Plan retirement system (BRS) in order to make an informed retirement decision. The effectiveness of the RETIRE Tool was assessed through a before-and-after survey of military personnel at the Naval Postgraduate School. Service members who have less than 12 years of active service by December 31, 2017 can opt into the BRS between January 1, 2018 and December 31, 2018. The RETIRE Tool provides financial value estimates of the old retirement system compared to the new retirement system. The research findings show evidence that the RETIRE Tool has a positive net effect on the confidence levels of service members given the choice between HIGH-36 and the BRS. Participants were able to identify which methods of financial education would best assist them with the decision between HIGH-36 and the BRS.