Military families have unique needs and concerns, but they’re worried about the fiscal cliff just like everybody else. The First Command Financial Behaviors Index found two-thirds of middle class military families are worried the automatic tax increases and spending cuts scheduled for Jan. 1, will not be stopped, the company announced Dec. 12. Another two-thirds of military families are afraid the country will return to recession if the fiscal cliff is not averted.
Military families are especially concerned about sequestration, which divides spending cuts evenly between defense and nondefense programs. Half of respondents said they expected their retirement benefits to fall as a result, or that they will have to take on more of their health care expenses. Forty percent were worried about cuts to personal expense benefits like those for housing, clothing and food. Almost a third said they were worried about cuts to educational benefits, and 31% were afraid their discretionary income would suffer.
“If you make a cut to the military budget, it has a corresponding effect on the lives of our men and women in uniform and their families,” Scott Spiker, CEO of First Command Financial Services, told AdvisorOne Wednesday in an email. “Sequestration is much bigger than the automatic year-end cuts in federal spending that have been the focus of lawmakers and the news media.”
Indeed, respondents indicated serious long-term concerns that may arise as a result of sequestration. Over a quarter of respondents said they were worried about the effects on their career, thinking they may be less likely to be promoted and more likely to leave the service early. Nearly 90% said they were hoping to serve for at least 20 years in order to qualify for traditional military retirement.
“Military families think of sequestration as the significant spending reductions that are already well under way,” Spiker (left) continued. “They recognize that the coming reduction in force will be huge, affecting one-sixth of the military and impacting retirement pay. They see the base realignments and closures that are already in play. They know that promotion rates are being reduced, meaning that fewer by far will be promoted to the next level. They understand that many servicemembers will be facing an up-or-out situation. And of course they see the changes being made to military retirement benefits, such as TRICARE. The result is a diminished confidence within the career military.”