FORT WORTH, Texas--(BUSINESS WIRE)--Support for the military’s Blended Retirement System is strengthening among America’s career service members, with two out of five families now expressing a desire to opt in to the new plan.
Recent results of the First Command Financial Behaviors Index® reveal that 41 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 opt in to the new system, which goes into effect on Jan. 1, 2018. That’s up from just 8 percent in August.
The Blended Retirement System features a 20 percent reduction in current guaranteed retirement pay generated by the old traditional pension in exchange for a variety of new benefits that include automatic and matching Thrift Savings Plan contributions, a mid-career continuation pay bonus and options to receive a portion of the reduced pension as a lump sum. Service members who enter the military on or after Jan. 1, 2018, will be automatically enrolled in the new system. The new plan is also available to many current service members, specifically those who will have less than 12 years of service as of Dec. 31, 2017. They can choose to either stay with the old retirement system or opt in to the new one.
Proponents say the Blended Retirement System 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 it’s not a reasonable trade for the many current service members who are already guaranteed lifetime financial security under the traditional military pension, according to Scott Spiker, chairman/CEO of First Command Financial Services, Inc.
“While the cash contributions and other benefits may seem appealing on the surface, this new system is no reward for current service members who expect to serve out their career and earn the traditional retirement benefit,” Spiker said. “There are no new dollars. The bonuses and contributions are being paid for through a 20 percent cut in the size of monthly pension checks, which today begin arriving immediately upon retirement and grow in size through annual cost of living adjustments that continue for the life of the retiree. In essence, the long-term financial security of our service member families will be built on a cash buy-out. The guarantees and lifetime financial security offered by the traditional military pension makes it a powerful choice for the vast majority of current 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. Survey results reveal that 56 percent are extremely or very likely to consult a financial advisor. And among those who are already working with a financial advisor, 66 percent say they are extremely or very likely to ask their advisor for help with the opt-in decision (compared with only 18 percent of those who do not have a financial advisor).
About the First Command Financial Behaviors Index®
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. http://www.firstcommand.com/fbi/
About Sentient Decision Science, Inc.
Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data.
About First Command
First Command Financial Services and its subsidiaries, including First Command Financial Planning and First Command Bank, coach our Nation’s military families in their pursuit of financial security. Since 1958, First Command Financial Advisors have been shaping positive financial behaviors through face-to-face coaching with hundreds of thousands of client families.
First Command Financial Services, Inc., is the parent of First Command Financial Planning, Inc. (Member SIPC, FINRA), First Command Advisory Services, Inc., First Command Insurance Services, Inc. and First Command Bank. Financial planning services and investment products, including securities, are offered by First Command Financial Planning, Inc., a broker-dealer. Financial planning and investment advisory services are offered by First Command Advisory Services, Inc., an investment adviser. Insurance products and services are offered by First Command Insurance Services, Inc., in all states except Montana, where as required by law, insurance products and services are offered by First Command Financial Services, Inc. (a separate Montana domestic corporation). Banking products and services are offered by First Command Bank. In certain states, as required by law, First Command Insurance Services, Inc. does business as a separate domestic corporation. Securities products are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met. First Command Financial Services, Inc. and its related entities are not affiliated with, authorized to sell or represent on behalf of or otherwise endorsed by any federal employee benefits programs referenced, by the U.S. government, or the U.S. armed forces.