About 1.7 million troops are eligible to switch from a traditional pension plan to a blended plan that works more like a 401(k). But some lack the financial skills to evaluate their options.
Navy Lt. Commander Jeff Raunig leads a busy life, juggling shared parenting duties and work as a physician for a Marine Battalion at Camp Pendleton, near San Diego. His clinic was slammed recently during an extra-busy Southern California flu season.
Amid the hustle, he had to make a big financial decision- whether to opt in to the military's new Blended Retirement System, which brings more financial flexibility but also more uncertainty.
Before this year, that part of his financial planning had always been a breeze. Under the prior system, when people like Raunig decided to make a career out of the military, they knew a dependable monthly pension check was waiting at the end of 20 years of service.
"You just always heard, 'Do your 20. Get your pension,'" he said. "Do whatever you want after that."
On January 1, the old model of military retirement changed, and Raunig is one of around 1.7 million service members who must choose whether to stay in the old system or transition into Blended Retirement. The new plan introduces matching contributions of up to five percent for military members through a federal 401(k)-style Thrift Savings Plan.
New service members will be automatically enrolled in Blended Retirement, while troops with more than 12 years of service (or the equivalent for Guard and Reserve) are grandfathered in to the legacy pension system.
But members like Raunig, with fewer than 12 years of service, must choose by the end of the year whether to opt in to the new system or stay with the old model.
For Raunig, that meant crunching a lot of numbers.
"Med school doesn't teach you that much about economics," he said. "So I can't say I'm really that skilled in those areas."
Congress put the changes into motion in 2015 as part of the National Defense Authorization Act, the comprehensive yearly plan for military spending. The legislation included recommendations from a special commission on modernizing military retirement.
That commission estimated reforms would save the government billions of dollars and increase the long-term fiscal sustainability of the military retirement system. It also predicted updated retirement offerings would make the military more attractive to younger people who don't plan to stay in the service for decades.
People who remain in the military for 20 years under Blended Retirement will still get a pension, but it will be smaller than it was under the legacy model. The new system also includes a mid-career bonus and the option to take part of the pension in a lump sum.
Currently, over 80 percent of troops separate before reaching 20 years of service, meaning they walk away with no government retirement benefit.
"[Blended Retirement] will provide earlier vesting and portability to our service members, which we think is huge," said Jeri Busch, the Pentagon's Director of Military Compensation.
The new model demands that service members take a more active role in managing their money.
In preparation, the Pentagon is requiring an online training course for everyone facing the Blended choice, and it's providing tools like a comparison calculator to help members weigh their options. There are even a series of YouTube explainers hosted by "Robyn," a friendly character with red glasses and cheerful answers to Blended Retirement questions.
"I'm fictitious, but the work of financial readiness is real," she beams in a video discussing "facts and fictions" about retirement options.
Suze Orman, the former TV host and author, is pitching in. The Pentagon announced last year that Orman is offering an online personal finance course free to military members.
The rollout also includes posting personal financial counselors on-base, part of an overall push to boost troops' financial literacy.
Who should switch?
The Pentagon isn't taking a position on whether service members should opt in to Blended Retirement or stay with the old pension model. "It is a personal financial decision that members and their families must make," said Busch.
"Members first and foremost need to consider what their long-term career plans are. For those who are thinking they might leave the military before reaching 20 years of service, they should give BRS serious thought," Busch said.
For military members who are in the decision window of fewer than 12 years of service and plan to stay until 20, there's no clear answer.
"This is going to be a really hard decision," said Frank Laatsch, a retired professor of finance and Air Force veteran who gave briefings on Blended Retirement to Reservists at Camp Shelby in Mississippi.
"Almost every briefing, at least someone would stand up and ask, 'Just tell me what to do,'" said Laatsch. "And I can't. It's very complicated."
Members weighing the switch to the new system have a lot of variables to consider, including how much of their paycheck they could potentially contribute to a Thrift Savings Plan over the rest of their military career, what type of funds they will invest it in, and how much the new continuation bonus will add to their retirement nest egg.
Then, they must compare that to the value of the higher guaranteed pension payment in the legacy system.
Laatsch said he's concerned many young people are entering military service without the basic financial skills they'll need to navigate the new retirement options.
"How do you convince that 18 year-old kid who's getting his first serious paycheck that he needs to save five, ten percent of it instead of buying that new car or the stereo?" Laatsch said.
Even at close to 12 years of service and with a medical degree under his belt, the Blended Retirement choice didn't come easy to Jeff Raunig.
After completing the required training course and doing his own calculations, he concluded that joining the new system would be more unpredictable and cost him too much in lower pension payments in the long run.
"I do think it's going to be a really good product for some people," Raunig said. Just not for him.
Troops have until the end of 2018 to make the Blended Retirement choice, and that decision is permanent.
For service members who decide to switch, Frank Laatsch advises they make the jump as soon as possible to start receiving the matching funds. "And put in the entire five percent. At least get that matched. It's so-called 'free money,'" he said.
This story was produced by the American Homefront Project, a public media collaboration that reports on American military life and veterans. Funding comes from the Corporation for Public Broadcasting and the Bob Woodruff Foundation.