What does the Blended Retirement System vs High-3 pension gap cost you?

Years 2 to 12: the BRS match and continuation pay arrive

Under BRS the government puts in an automatic 1 percent of basic pay after 60 days of service, then matches up to 4 percent more once you have 2 years in. You only get the full 5 percent if you contribute 5 percent yourself, and matching stops after 26 years of service.

Here is the tax fact the rest of this page builds on. Every agency dollar, automatic and matching, lands in the traditional TSP balance, even if you send 100 percent of your own deferrals to Roth. So a BRS member always retires with a traditional bucket that is taxed as ordinary income when it comes out.

Continuation pay comes between 8 and 12 years of service, in exchange for more time on your commitment. It's taxable in the year paid. You can send part of it to the TSP, within the IRS employee limit of $24,500 for 2026. Sending it to Roth TSP means paying the tax now at a mid-career rate, which is usually lower than the rate a colonel's pension plus a second-career salary produces later.

Know what can change. The opt-in election into BRS was one-time and can't be undone. Your contribution percentage and your Roth versus traditional split can change in any pay period. And acting too late hurts: every year below 5 percent is matching that never comes back.

The decision rule: contribute at least 5 percent of basic pay in every pay period from year 2 through year 26, and pace larger deferrals so you don't hit the limit before your last December paycheck. Front-loading the TSP to reach $24,500 by August is a mistake careful savers make. On $10,000 a month of basic pay, 4 months × 4 percent = $1,600 of agency money lost, and the TSP makes no catch-up deposit afterward.

What you can change and what you can't

How much smaller is the Blended Retirement System pension than High-3 at 20 years?

At 20 years of service the Blended Retirement System pension is 10 percent of your High-3 average smaller than the legacy pension: 40 percent instead of 50 percent. On an $8,000 High-3 average that is $3,200 a month instead of $4,000, a gap of $800 a month.

The back-of-envelope version takes three steps. The multiplier difference is 0.5 percent. Multiply by 20 years and you get 10 percent. Ten percent of $8,000 is $800 a month, or $9,600 a year of pension you won't get.

Now turn that into a TSP target. If the TSP must cover $9,600 a year for 25 years starting at age 60, that is $240,000 before growth. Compare it with what BRS adds: 5 percent of $6,000 a month of basic pay is $3,600 a year, and over about 18 years of matching that's roughly $64,800 before growth.

Growth closes part of that difference, not all of it, and nobody can promise the growth. Edgepoint Wealth Management sizes this gap in monthly pension dollars before it picks any fund mix, because the income number decides how much risk the TSP needs to take. A rough rule: if the gap times 25 is more than your match plus savings so far, expect to raise your rate.

The three-step gap math

What the TSP has to cover

At 28 years of service, 70 percent becomes 56 percent

Hypothetical Omar, 57, is a retired Army colonel with 28 years of service, divorced, now a consulting director earning $180,000. His pension is about $8,000 a month, and he holds $900,000, mostly in traditional TSP. Under High-3 that pension is 2.5 percent × 28 years = 70 percent of a High-3 average of about $11,430 a month, roughly $8,000.

Run the same career under BRS. The multiplier is 2.0 percent × 28 = 56 percent, about $6,400 a month. The gap is $1,600 a month, or $19,200 a year. Our calculator handles this kind of comparison if you want to plug in your own High-3 average and years.

Here is the tax side. Traditional TSP draws are taxed exactly like pension dollars, so replacing the missing pension with TSP money saves no tax by itself. It only moves when the income shows up. Say that plainly to yourself before anyone sells you a strategy.

The real lever is the room a smaller pension leaves. At ages 57, 58 and 59, High-3 Omar reports $276,000 ($180,000 + $96,000 of pension). BRS Omar reports $256,800 ($180,000 + $76,800). So BRS Omar could convert $19,200 of traditional TSP money to Roth each year and still land on $276,000. That moves $57,600 over 3 years.

A conversion shifts tax earlier. It saves money only if his later rate would be higher, which can happen once RMDs start at age 73 or 75 and IRMAA tiers apply. If consulting ends at age 60, BRS Omar draws $19,200 a year from the TSP, taxed like the pension it replaces.

The timing matters too. Conversions at ages 57 to 59 sit outside the age 63 income year that sets his Medicare Part B premium at age 65. Medicare's 2026 table starts at $202.90 a month and rises to $284.10 above $109,000 of single MAGI (modified adjusted gross income). Before Edgepoint Wealth Management suggests converting a dollar, it lays out each year's taxable income from now to age 75, so the conversion years are picked on purpose. Our Roth conversion article for military retirees goes deeper.

The pension gap in dollars

Where the tax actually moves

90 days out from retirement, the lump sum locks in

A BRS retiree with 20 or more years can take 25 percent or 50 percent of the discounted value of the pension up to age 67 as a lump sum. In exchange the pension is cut to 75 percent or 50 percent until age 67. The election is made before the retirement date (check the exact deadline with your service's retirement office) and can't be reversed.

The lump sum is ordinary income in the year paid, so it stacks on top of terminal leave, final pay and a new contractor salary. Taking it as 4 annual installments spreads that income across 4 tax years. One payment in a year with a full second-career salary is the timing error to avoid, and it can also lift your age 63 income into a higher IRMAA tier.

Rough rule of thumb: DoD discounts the pension it buys back, so the lump sum usually buys less than the pension it gives up. It tends to make sense only to wipe out debt costing more than that discount rate, taken in installments over low-income years. Otherwise, leave it alone.

Put these questions to the retirement services office, a CPA or the TSP:

Why one payment is the risky choice

• What discount rate applies to my lump sum this year?
• How much federal tax is withheld from each installment?
• Does my state tax the lump sum the way it taxes retired pay? (Some states tax retirement income; check yours.)
• How does the TSP handle my agency balance if I separate before I'm fully vested?

At age 67 the lump-sum reduction ends

At age 67, which is full Social Security retirement age if you were born in 1960 or later, a BRS retiree who took the lump sum gets the full pension back, with the COLAs it would have earned. Taxable income jumps that year. Your TSP should carry the extra draws only until then, and its own RMDs start at age 73, or age 75 if you were born in 1960 or later.

One age 63 question for Edgepoint Wealth Management

Bring one question: given my multiplier, my traditional and Roth TSP split and my second-career salary, which years should carry my income draws or conversions so the pension gap is filled without pushing my age 63 income into a higher IRMAA tier? Edgepoint Wealth Management answers that with a year-by-year income table in your playbook. Every fee for that work is listed in the client agreement, and nothing outside it is billed. This page doesn't cover disability retirement, Reserve point-based pensions or SBP costs.