File:BLENDED RETIREMENT SYSTEM OPT-IN DECISIONS- A BEHAVIORAL ECONOMICS ANALYSIS (IA blendedretiremen1094562233).pdf

Modernization of the military retirement system, beginning in 2018, left many Marines with an important decision to make about their futures. They were allowed 12 months to choose whether it was in their best interest to opt into the new Blended Retirement System (BRS), or to remain under the legacy High-3 retirement plan. By analyzing their choices through the lens of behavioral economics, the primary goal of my research is to determine if Marines made rational or irrational retirement savings decisions. By the end of 2018, 49 percent of eligible Marines opted into the BRS, 28 percent opted out of the BRS, and 23 percent failed to register a decision via Marine Online, making a passive choice for the status quo. I find significant variation in the timing of Marines’ opt-in decisions, and those with lower years of service, who are younger, and more cognitively able are more likely to have opted in. Using a Linear Probability Model, I also find life events such as a change in the number of dependents, promotion, and re-enlistment to be significant determinants of their choices. Lastly, I provide summary statistics on their Thrift Savings Plan contribution percentages. Through analysis of this information, I find some evidence that Marines may have demonstrated irrational behavior with regard to their retirement decision making, suggesting that some pundits’ predictions prior to the opt-in period were overly optimistic.

Subjects: Blended Retirement System; military retirement; behavioral economics; nudge theory; continuation pay