Leaders must protect those who protect us
While my family and I celebrated Independence Day earlier this month, it was honestly difficult for me to enjoy the holiday, watch fireworks and do the normal things we all do. As a veteran, it’s very clear to me that the independence and freedoms American citizens enjoy are ensured by our soldiers, sailors, airmen, Coast Guardsmen and Marines who protect them.
Like many of you, I’m concerned about the state of our nation as we endure one of the most polarizing election seasons in our lifetime with veterans’ issues often being politicized. The methodical shootings here in Dallas of police who were protecting protestors, followed by attacks on policemen in Baton Rouge, can only be described as shocking. In reaction, foreign countries are issuing travel alerts for their citizens considering a trip to the United States. These are complex problems that need to be addressed in many ways, but there is one thing of which I am certain. As an overarching principle, our leaders must increase the support and protection for those who protect us: Our armed forces and our law enforcement.
Why the New Military Retirement System is an epic change
As you likely know, late last year the federal government changed the retirement compensation it provides active duty military who risk their lives to protect our country.
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 among current service members, the argument in favor of lifetime financial security is making the traditional pension the preferred option according to the latest results of the First Command Financial Behaviors Index®. Three out of four survey respondents who say they are likely to serve to full retirement want to be grandfathered into the current retirement system. No wonder. The New Military Retirement System shifts the career military into the same type of blended retirement scenario that is failing so many of America’s civilians.
Truly many people don’t realize the magnitude of the shift to the New Military Retirement. For the next generation of career servicemembers, the long-term financial security they traditionally have counted on in exchange for the risk and sacrifice of military service, will now depend on the servicemembers’ careful savings and investment decisions at several key junctures of their careers. For example, how much to invest in the TSP, how to allocate those contributions among the various investment options and what factors to consider in determining whether it makes sense to take a portion of their retirement in the form of a lump sum payment.
That’s a lot to put on a military professional whose focus is elsewhere. It is a significant strategic shift in the “deal” we make with those who protect our country. But I digress.
DoD has begun to launch education programs to support servicemembers. But like civilians, many active duty personnel are seeking out detailed guidance from a trusted Financial Advisor, as they decide whether or not to opt in. While the decision between the two plans doesn’t need to be made until 2018, at First Command, we are already getting questions from our active-duty clients. This aligns with our survey results, which show that two thirds of service members who are already working with a financial advisor say they are extremely or very likely to ask their advisor for help with this decision.
The bottom line
The bottom line is that troops will have to consider a number of variables, and the individual choices made can have a huge impact on a servicemember’s financial future. We do not want to see our active duty ending up with the debt and lack of retirement savings plaguing their civilian neighbors. We’ve got to take care of the troops.
Andrew Fortunato spent a career as a United States Marine Officer that spanned two decades (1987 – 2007) and work on four continents. Some of his military career highlights included service as a: heavy lift assault support helicopter pilot, Aviation Weapons and Tactics Instructor, Forward Air Controller, Navy/Marine Corps Parachutist, ANGLICO Detachment commander, lead planner for Marine aviation in Korea as well as the largest geographic area on Earth (Asia & the Pacific); and leading one of the most recognized and respected brands in the world (The Few, The Proud, The Marines) through a brand modernization effort that included orienting a large national sales force toward the Millennial generation.
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