Support for the military’s current retirement system is strengthening among America’s career service members, with four out of five families expressing a desire to stick with the traditional pension rather than opt in to the new blended retirement plan that goes into effect in 2018.
Third quarter results of the First Command Financial Behaviors Index reveal that 82 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) say they want to be grandfathered into the current retirement system. That’s up nine points from the previous quarter and 14 points from the same time a year ago.
The new system, which goes into effect on Jan. 1, 2018, calls for a 20 percent reduction in current retirement pay in exchange for a defined contribution program of automatic and matching Thrift Savings Plan contributions, a mid-career continuation pay bonus and options to receive a portion of retirement as a lump sum.
Proponents say the new structure will offer greater financial flexibility and pave the way for a higher percentage of service members to leave the military with at least some retirement savings. But the majority of today’s career military remain unconvinced.
“Our survey data continues to reinforce the obvious preference that career service member families feel for the lifetime financial security offered by the traditional military pension,” says Scott Spiker, CEO of First Command Financial Services, Inc. “While proponents of the new blended retirement system tout the value of the cash contributions and other benefits, today’s service members appear to strongly value the guarantees of the existing system. They clearly view the military’s traditional retirement program as a powerful benefit, one that has formed the foundation of long-term financial security for generations of career service members.”
Looking ahead, the majority of current service members who qualify to opt in to the new system expect to seek professional help making that decision. September survey results reveal that 87 percent are likely to consult a financial advisor.
And among those who are already working with a financial advisor, 60 percent say they are extremely or very likely to ask their advisor for help with the opt-in decision (compared with only 20 percent of those who do not have a financial advisor).
Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 4.3 percent with a 95 percent level of confidence.