The changing terrain: Military families react to annual pay raise
When it comes to benefits, military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) unsurprisingly rank basic pay as the most important. However, more than four-in-five surveyed in the latest First Command Financial Behaviors Index® said they were negatively affected by this year’s 1.3 percent pay raise.
Therefore, they are taking the following actions to deal with this small raise:
- Put off household maintenance (38 percent)
- Delay a major purchase (35 percent)
- Reduce debt repayment (35 percent)
- Reduce amount put into savings/TSP accounts (28 percent)
- Reduce 401k contributions (26 percent).
Service members’ surveyed selected retirement pay as their No. 2 ranked benefit. When questioned about military retirement specifics, more than half of respondents said the new blended system would have no effect on how long they plan to serve, and nearly one-quarter said they would be more likely to serve to full retirement. A full three-quarters said they would prefer to be grandfathered into the current system rather than opt-in to the blended system.
When it comes to specific components of the blended system, 68 percent are favorable toward the automatic 1 percent contribution to service members’ TSP accounts at the 2-year service mark. Only 42 percent are favorable toward the reduction in pension calculations from 50 percent of high-3 salary to 40 percent of high-3 with a continuation bonus at 12 years. Similarly, 48 percent are favorable toward the partial lump sum pay option at retirement in exchange for a reduced retirement monthly pension.
Finally, service members selected dependent healthcare benefits as their No. 3 most important benefit. Healthcare issues also ranked No. 4 (benefits for Medicare-eligible retirees) and No. 5 (benefits for retirees under 65 years of age.
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