Blended Retirement System vs. Legacy High-3: Which Is Better?

Quick Answer: High-3 pays 50 percent of average basic pay at 20 years. BRS pays 40 percent but adds DoD TSP matching up to 5 percent and Continuation Pay at year 12. High-3 is generally better for members certain to reach 20 years. BRS protects members who may separate before 20 and who invest their TSP aggressively.

Does this comparison apply to your situation?

• Are you currently serving in the U.S. military?
  • Yes: Determine which retirement system you are enrolled in before modeling your retirement income
  • No: If you are already separated or retired, this comparison is historical; your retirement benefit is fixed by the system in place when you served
• Did you enter military service on or after January 1, 2018?
  • Yes: You are enrolled in BRS automatically; the High-3 comparison is relevant to understanding what you gave up relative to the legacy system
  • No: Determine whether you opted into BRS during the 2018 window or remained under High-3
• Are you still serving and uncertain whether you will reach 20 years?
  • Yes: BRS’s TSP portability is a significant factor; TSP contributions are yours regardless of whether you reach the 20-year threshold
  • No: If you are certain to serve 20-plus years, model both systems using your actual pay grade trajectory before assuming one is better

This is a general reference. Consult a military financial advisor or a certified financial planner with military expertise for a calculation using your specific pay history.

What Changed in 2018

Before 2018, the U.S. military operated under a defined-benefit retirement system. Members who completed 20 years of qualifying service received a monthly pension calculated at 2.5 percent of the average of the highest 36 months of basic pay, multiplied by years of service. Members who separated before 20 years received no pension and no DoD-funded retirement benefit. TSP contributions from pre-2018 members received no government matching.

The National Defense Authorization Act of 2016 (Public Law 114-328) created the Blended Retirement System, effective January 1, 2018. Congress recognized that the all-or-nothing structure of the legacy system left the majority of enlisted members who served but did not reach 20 years with no employer-funded retirement benefit. BRS extended TSP matching to all service members, reduced the pension multiplier to fund that extension, and added Continuation Pay at year 12 as a retention incentive.

Members who entered service before January 1, 2018 and had fewer than 12 years of service as of December 31, 2017 had a one-year window, from January 1 to December 31, 2018, to opt into BRS. The election was irrevocable. Members with 12 or more years of service as of December 31, 2017 were not eligible to opt in and remained under High-3.

How High-3 Works

The High-3 legacy retirement system, codified at 10 U.S.C. § 1407 and § 1409, calculates monthly retired pay using three inputs:

Years of qualifying service. Active duty service is credited at one year per year. Reserve service is credited at a point ratio that converts drilling points to years of qualifying service.

The High-36 average. The “High-3” designation refers to the average of the highest 36 consecutive months of basic pay. For most members, this is the last three years of service when pay is highest, though it may not be if a member held a higher rank that was later reduced.

The 2.5 percent multiplier. Each year of qualifying service earns 2.5 percent of the High-36 average.

The formula at 20 years: 2.5% x 20 = 50 percent of average basic pay. The formula at 30 years: 2.5% x 30 = 75 percent of average basic pay.

High-3 retired pay adjusts annually by the full Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) under 10 U.S.C. § 1401b. The only exception is REDUX, discussed in a separate article, which uses a reduced COLA.

Under High-3, DoD contributes nothing to TSP on behalf of the member. Members can and should contribute their own funds to TSP, but the only employer-funded benefit is the pension itself.

How BRS Works

BRS, codified at 10 U.S.C. § 1409(b)(2), replaces the 2.5 percent pension multiplier with a 2.0 percent multiplier while adding three new components:

The reduced pension. At 20 years: 2.0% x 20 = 40 percent of the High-36 average. At 30 years: 2.0% x 30 = 60 percent. The COLA structure is identical to High-3, full CPI-W adjustment.

DoD TSP contributions. BRS members receive two tiers of DoD-funded TSP contributions:

• A 1 percent automatic contribution starting from the first day of service, regardless of personal contributions. Members must have two years of service for full vesting.
• Matching contributions beginning after 26 months of service. DoD matches 100 percent of contributions up to 3 percent of basic pay, then 50 percent of contributions on the next 2 percent, for a maximum DoD contribution of 5 percent. Vesting is immediate at 26 months.

The maximum DoD contribution is therefore 5 percent of basic pay for members who contribute at least 5 percent of their own pay.

Continuation Pay. Under 10 U.S.C. § 356, BRS members who reach 12 years of service may receive a lump sum payment in exchange for committing to four additional years of service. The minimum for active component members is 2.5 times monthly basic pay; the maximum is 13 times, determined by branch needs and specialty. Reserve component minimum is 0.5 times monthly basic pay. Members who separate before reaching 12 years do not receive Continuation Pay.

The TSP Contribution Gap: What DoD Matching Is Actually Worth

The value of DoD TSP matching depends on how much the member contributes and how long those contributions compound.

A member whose basic pay averages $4,500 per month over an 18-year period of TSP matching (starting at 26 months of service) who contributes 5 percent of basic pay ($225 per month) receives an additional $225 per month in DoD matching (5 percent of $4,500). Over 18 years:

Total DoD matching contributions: approximately $48,600.

At a 7 percent average annual return over 18 years, those contributions could grow to approximately $95,000 by the 20-year retirement point. Monthly income from a $95,000 balance at 4 percent withdrawal rate: roughly $316 per month.

The pension gap at the same pay level: 10% x $4,500 average = $450 per month in additional pension income under High-3 compared to BRS.

In this scenario, the pension difference exceeds the TSP benefit at the 20-year mark. The TSP balance continues to grow after retirement, which changes the long-run comparison, but it illustrates why High-3 is typically more valuable for members who serve exactly 20 years and do not continue compounding TSP after separation.

These are illustrative figures. The actual outcome depends on pay grade trajectory, TSP contribution rate, investment return, and the real return on TSP assets after inflation.

Continuation Pay: Lump Sum at Year 12

Continuation Pay provides immediate cash at the 12-year career mark in exchange for a four-year service commitment. The minimum of 2.5 times monthly basic pay represents a meaningful payment. An active duty E-7 at the 12-year mark with a basic pay of approximately $4,700 per month would receive a minimum Continuation Pay of $11,750 before taxes. Officers and critical specialties typically receive significantly more.

Continuation Pay is taxable. Some members choose to contribute all or a portion directly into TSP to defer tax and add to their retirement account. The contribution limit for TSP in 2026 ($23,500 employee limit) applies regardless of source.

Members who entered BRS and reach the 12-year mark have an incentive to accept Continuation Pay and commit to year 16, positioning them to evaluate their situation before the 20-year cliff. Members who decline Continuation Pay give up the lump sum but retain the flexibility to separate at any time.

Choosing Between BRS and High-3

For members who have a choice (pre-2018 members who entered during the 2018 opt-in window), the decision depends on individual career expectations and investment behavior.

High-3 is typically better when: The member is highly confident in reaching 20 or more years of qualifying service, has a high-earning military career with consistent promotion, or does not expect to maximize TSP contributions regardless of matching.

BRS is typically better when: The member is uncertain about reaching 20 years and wants some employer-funded retirement benefit in any separation scenario, or the member will maximize TSP contributions and expects strong long-run investment returns that allow the TSP balance to compensate for the lower pension multiplier.

For members already enrolled in one system with no choice remaining, the calculation shifts to maximizing outcomes within the system in place: maximizing TSP contributions under BRS, and relying on pension optimization (maximizing years of service and pay grade) under High-3.

This article is legal and financial information for educational purposes. It does not constitute legal, financial, or medical advice. Veterans and service members planning retirement should consult a certified financial planner with military expertise before making irrevocable elections.

Governing Authority

Governing authority: 10 U.S.C. § 1407 (retired pay base, High-36 average definition); 10 U.S.C. § 1409 (retired pay multiplier; BRS 2.0 percent multiplier at § 1409(b)(2)); 10 U.S.C. § 356 (Continuation Pay); 10 U.S.C. § 1401b (COLA for retired pay); NDAA 2016 (Public Law 114-328, creating the Blended Retirement System effective January 1, 2018)

Sources and References

• 10 U.S.C. § 1409. Retired pay multiplier - uscode.house.gov
• 10 U.S.C. § 356. Continuation Pay - uscode.house.gov
• National Defense Authorization Act for Fiscal Year 2017 (Public Law 114-328). Blended Retirement System provisions
• Defense Finance and Accounting Service. BRS Calculator - dfas.mil/RetiredMilitary/plan/retirement-planning/BRS
• TSP. Thrift Savings Plan contribution limits and matching - tsp.gov

Related Articles:

• Military Retirement Pay Calculator: How Your Monthly Check Is Calculated: Apply the High-3 and BRS formulas to your own pay grade and years of service to model your retirement income under each system.
• REDUX Retirement: Why Most Soldiers Should Avoid It (And When It Makes Sense): REDUX is a variant of High-3 that trades pension and COLA reductions for a $30,000 lump sum at 15 years. Only available under the legacy system.
• Military Retirement Pay and VA Disability: How CRDP and CRSC Work: Military retirees with VA ratings of 50 percent or higher can receive both full retirement pay and full VA disability compensation under CRDP.
• 2026 VA Disability Pay Rates: Complete Chart by Rating and Dependents: VA disability compensation is tax-free and separate from military retired pay, understanding both is required to calculate total military retiree income.