Military families feel financial optimism in face of retirement reform
The arrival of a long-awaited proposal to overhaul the military’s traditional retirement system comes at a time when members of America’s career military families are feeling a surge of financial optimism and confidence driven by their own positive money behaviors.
The First Command Financial Behaviors Index® reveals that several key measures of financial confidence have been improving in the months leading up to the Jan. 29 release of a report by the Military Compensation and Retirement Modernization Commission that calls for an overhaul of the 20-year cliff vesting system that has defined military careers for generations. Newly-released fourth-quarter survey results show that 53 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-6 and above with household incomes of at least $50,000) believe that their financial situation will improve in the next year (up 5 points from the first quarter). Career military families are also growing more confident in their ability to retire comfortably (49 percent, up 10 points) and less likely to feel financially stretched month to month (35 percent, down 21 points).
The recent surge in financial confidence has been driven by a variety of positive money behaviors, including household savings and working with a financial advisor. During the fourth quarter, military families working with a financial advisor were considerably more likely to save – and put away more dollars – than their do-it-yourself counterparts. The Index reveals that:
- 84 percent put money into short-term savings. This compares to 63 percent for those without an advisor. Monthly median contributions for savers in the two groups are $500.
- 80 percent put money into retirement savings. This compares to 67 percent for those without an advisor. Monthly median contributions for savers in the two groups are $500 and $400, respectively.
- 72 percent put money into long-term savings. This compares to 48 percent for those without an advisor. Monthly median contributions for savers in the two groups are $424 and $275, respectively.
Looking ahead, most military members expect to continue their savings behaviors in the coming months. However, servicemembers with a financial advisor are more likely than those without to anticipate increasing their monthly savings amounts (42 percent versus 32 percent).
These actions helped propel the Index’s behaviors and intentions sub-index scores ahead 11 points each and push the overall Index score to a record high of 137 for the fourth quarter. The Index is set to a benchmark of 100, which was assigned when the Index was launched in 2008.
While overall financial confidence is growing, military families continue to worry about sequestration. December survey results reveal that 74 percent of military respondents feel anxious about cuts to defense spending. That’s up 12 points from the end of the first quarter. In contrast, concern remains muted in the general population with about one in three civilian respondents expressing anxiety.
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