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Military Pensions: Servicemembers Need Better Information to Support Retirement Savings Decisions

GAO-19-631 Published: Sep 19, 2019. Publicly Released: Oct 21, 2019.
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Fast Facts

In 2016, DOD and the military service branches began providing training to help servicemembers make informed decisions about the military’s new retirement system.

The training courses incorporated many effective financial literacy practices. However, some of them do not assess servicemembers’ financial literacy. DOD could use such assessments to ensure its courses are effective and revise the courses in areas where servicemembers need more assistance.

DOD could also do more to help servicemembers understand how lump sums—an optional form of payment for some retirement benefits under the new system—are calculated.

We made 3 recommendations.

Example of a DOD Retirement System Training Announcement

Image showing "register here" for training on the Uniformed Services Blended Retirement System

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What GAO Found

In 2016, the Department of Defense (DOD), along with the military service branches, began a multi-year effort to provide training to help servicemembers make informed decisions about saving for retirement through DOD's new retirement system, the Blended Retirement System (BRS). DOD provided computer-based training to help military supervisors, financial counselors, and eligible servicemembers understand the new retirement system, implemented in 2018, and its impact on saving for retirement. DOD trained financial counselors to provide servicemembers in-person, one-on-one financial counseling and classroom courses on BRS and related topics. In addition, DOD prepared ongoing financial literacy training that servicemembers will take upon reaching specific career and life stages.

BRS trainings met many of the effective practices for financial literacy training identified in prior GAO work, but some DOD trainings do not incorporate the practice of assessing servicemembers' financial literacy. DOD could use such assessments to modify course material to bolster training in areas where servicemembers' comprehension was weaker. Without assessing whether its financial literacy training is effectively conveying course information, DOD may be missing opportunities to better support servicemembers' retirement decisions. Servicemembers also reported challenges in taking the Opt-In Course for BRS that may inform ongoing and future DOD training.

Examples of Servicemembers' Financial Literacy Challenges on Retirement

  • understanding the training due to a low initial level of financial literacy
  • relating to long-term goals of retirement due to short-term life goals
  • setting up online access to Thrift Savings Plan accounts

Source: GAO interviews with military supervisors and financial educators at five military installations. | GAO-19-631

DOD determines BRS lump-sum payment amounts at retirement by applying an interest rate (or discount rate) to calculate the present value of annuity payments servicemembers forego by taking a lump sum. The BRS discount rate exceeds the rate used by private-sector pension plans, resulting in a lower lump sum than if private-sector rates applied. DOD can take certain steps to help servicemembers understand how to compare the BRS lump-sum payment option with the full annuity option. Without this information, servicemembers may not make informed decisions and potentially risk their retirement savings.

Why GAO Did This Study

DOD's new retirement system, BRS, provides automatic and matching DOD contributions to servicemembers' individual Thrift Savings Plan accounts but reduces the retirement annuity paid to those who serve at least 20 years. BRS also offers servicemembers the option of taking part of their retirement annuity as a lump-sum payment.

GAO was asked to describe DOD's financial education efforts under BRS. This report examines (1) actions DOD has taken to help servicemembers understand BRS and saving for retirement, (2) what DOD can learn from financial literacy training effective practices and its implementation of BRS training to continue supporting servicemembers in saving for retirement, and (3) how BRS lump-sum payment amounts are determined.

GAO reviewed DOD's efforts to educate servicemembers on retirement decisions, conducted group interviews with senior officers and enlisted servicemembers at five military installations on facilitating the rollout of BRS training to junior servicemembers, and created a lump-sum payment calculator to compare different calculation methods and assumptions on the value of the lump-sum payment.


GAO recommends 1) DOD assess its course evaluations to improve its financial literacy training on retirement for servicemembers, 2) DOD provide key information on the calculation of retirement lump-sum payments, and 3) Federal Retirement Thrift Investment Board explore alternatives for servicemembers to receive their TSP passwords. Both agencies agreed with their respective recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should evaluate the results of its financial literacy training assessments to determine where gaps in servicemembers' financial knowledge exist and revise future trainings to address these gaps. (Recommendation 1)
Closed – Implemented
DOD concurred with this recommendation. As of March 2023, DOD updated DOD-wide requirements for common military training on financial education based on the results of their Status of Forces survey, which assesses the military population's understanding of basic financial concepts. Officials noted that they use other opportunities to identify gaps in servicemembers' financial knowledge, such as feedback from the Military Services, site visits, focus group sessions, and regular field reports from financial counselors. DOD is also undertaking a multi-year study to assess the effectiveness of its financial literacy programs. These actions provide DOD with more information on servicemembers' financial literacy which helps them to revise trainings and address existing gaps and satisfy this recommendation.
Department of Defense The Secretary of Defense should provide servicemembers disclosures that explain key pieces of information about the lump-sum payment, including some measure of its relative value, the potential positive and negative financial ramifications of choosing the lump-sum payment option, and a description of how it was calculated. (Recommendation 2)
Closed – Implemented
DOD agreed with this recommendation. DOD updated information it provides to servicemembers in its training materials to help educate servicemembers on how to compare taking benefits as a partial lump sum or as an annuity, including examples of how payments compare when a lump is chosen versus when it is not. It also included a lump-sum section in its BRS calculator. The information in these materials include some of the pros and cons of choosing a lump sum; information on how the lump sum is calculated; and information on the relative value of the lump sum at different discount rates. These updated disclosures provide servicemembers with key information on the lump sum option.
Office of the Executive Director The Executive Director of the Federal Retirement Thrift Investment Board should work with the Secretary of Defense to explore alternative options (including online resources) for servicemembers to receive their initial Thrift Savings Plan password so that servicemembers can access and manage their online accounts without added delays. (Recommendation 3)
Closed – Implemented
FRTIB agreed with this recommendation. As of March 2023, FRTIB implemented a new recordkeeper that allows for online access to set up TSP. New participants still receive a welcome package with information on how to set up a new account. However, if a servicemember has moved or otherwise doesn't receive the welcome packet, they can still set up their account online. In this way, the website allows for servicemembers to set up their accounts online.

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Discount ratesFinancial literacyInterest ratesMilitary forcesMilitary retirementPension plansRetirement savingsRetirement systemThrift savings planVeterans pensions