Usaa Blended Retirement System Calculator

The USAA Blended Retirement System (BRS) combines traditional and Roth retirement accounts to optimize tax efficiency. This calculator helps you determine the optimal allocation between these account types based on your financial situation and tax bracket.

What is USAA Blended Retirement System?

The USAA Blended Retirement System is a tax strategy that allows members of the United States Armed Forces to combine traditional and Roth retirement accounts. This approach aims to maximize tax efficiency by strategically allocating contributions between the two account types.

Key benefits of the USAA BRS include:

Potential tax savings through strategic withdrawals
Flexibility in retirement planning
Protection of tax-deferred growth in traditional accounts
Tax-free growth in Roth accounts

Note: The USAA BRS is available to active and retired members of the military, as well as their families. It's important to consult with a financial advisor before implementing this strategy.

How the USAA Blended Retirement System Works

The core principle of the USAA BRS is to allocate contributions between traditional and Roth accounts based on your current tax bracket and expected future tax brackets. Here's how it works:

Determine your current marginal tax rate
Estimate your future marginal tax rates
Allocate contributions to traditional accounts when your current tax rate is higher than your future rate
Allocate contributions to Roth accounts when your current tax rate is lower than your future rate

Optimal Allocation Formula:

Roth Allocation = (Future Tax Rate - Current Tax Rate) / (Future Tax Rate)

Traditional Allocation = 1 - Roth Allocation

This strategy works because:

Tax-deferred growth in traditional accounts can be withdrawn tax-free in retirement
Tax-free growth in Roth accounts provides tax-free withdrawals in retirement
The strategy takes advantage of the time value of money

Using the USAA BRS Calculator

Our calculator provides a simple way to determine your optimal allocation between traditional and Roth accounts. Here's how to use it:

Enter your current marginal tax rate (as a percentage)
Enter your expected future marginal tax rate (as a percentage)
Click "Calculate" to see your recommended allocation
Review the results and chart showing your allocation

The calculator will show you:

The recommended percentage to allocate to Roth accounts
The recommended percentage to allocate to traditional accounts
A visual chart showing your allocation

For best results, use this calculator in conjunction with your personal financial plan and tax advisor.

Example Calculation

Let's look at an example to see how the USAA BRS calculator works. Suppose you have:

Current marginal tax rate: 24%
Expected future marginal tax rate: 12%

Using the formula:

Roth Allocation = (12 - 24) / 12 = (-12) / 12 = -1.0

This negative value indicates that you should allocate 100% to traditional accounts in this scenario.

This makes sense because your current tax rate is higher than your future rate, so you benefit more from tax-deferred growth in traditional accounts.

Scenario	Current Tax Rate	Future Tax Rate	Roth Allocation	Traditional Allocation
Example 1	24%	12%	0%	100%
Example 2	15%	25%	60%	40%
Example 3	30%	30%	0%	100%

Frequently Asked Questions

Is the USAA BRS available to all military members?

The USAA BRS is available to active and retired members of the military, as well as their families. However, eligibility may vary based on specific circumstances.

How often should I review my BRS allocation?

It's recommended to review your BRS allocation at least annually, or whenever your tax situation changes significantly.

Can I use the USAA BRS calculator for non-military members?

While the calculator is designed for military members, the principles of tax-efficient retirement planning can be applied to anyone looking to optimize their retirement savings.

What happens if I don't follow the recommended allocation?

Not following the recommended allocation may result in less tax-efficient retirement savings. However, the actual impact depends on your specific financial situation.