FORT WORTH, Texas--(BUSINESS WIRE)--A second year of sequestration-fueled cuts to annual military pay increases is taking a financial toll on America’s career servicemembers.
The latest results of the First Command Financial Behaviors Index® reveal that reductions in annual pay increases are a significant sequestration concern 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). Thirty-eight percent of March survey respondents identified reduced raises as one of the ways military budget cuts impacts their families. That’s up 10 points from mid 2014, making it the new top sequestration concern of military families.
These heightened concerns follow on the heels of the Jan. 1 military pay raise, which was capped for a second straight year at 1 percent versus the 1.8 percent that some lawmakers had proposed as a way for servicemember pay to keep pace with private sector wage growth. The two lower-than-expected raises were approved as a way to keep personnel costs in check as part of the budget sequester and defense downsizing. Together, they represent the smallest annual increases in the 40-year-plus history of the all-volunteer force.
Basic pay is consistently ranked by career military families as their most important benefit. It was ranked No. 1 by 28 percent of March survey respondents, statistically unchanged from when the question was added to the survey last summer. Other key military benefits identified by survey respondents are:
- Retirement pay (ranked No. 1 by 19 percent)
- Dependent healthcare benefits (12 percent)
- Healthcare benefits for Medicare-eligible retirees (10 percent)
- Healthcare benefits for retirees under 65 years of age (10 percent)
- Education (10 percent)
- Allowances for housing and subsistence (7 percent)
- Bonuses and special pay (4 percent)
“Servicemembers and their families are dealing with a second year of reduced pay raises, but that’s not their only area of concern,” said Scott Spiker, CEO of First Command Financial Services, Inc. “They value a broad range of benefits, and a growing number of them fear that military budget cuts will compel them to assume greater responsibility for these costs. This year they saw a modest change in pharmacy fees and a reduction in their housing allowances. Looking ahead, three out of four military families say they expect to be financially impacted by cuts to defense spending.”
Active-duty families have been responding to budget cuts through a variety of positive financial behaviors. They are:
- Saving more (50 percent)
- Cutting back on everyday spending (48 percent)
- Decreasing the aggressiveness of investments (21 percent)
- Moving investments to cash (19 percent)
- Starting to work with a financial planner (18 percent)
“We anticipate increasing demand for the services of financial planners in the months ahead,” Spiker said. “Working with a knowledgeable professional is a time-tested approach for getting squared away in your finances. Our research and professional experience reveals that those who work with a financial coach save more and feel better about their finances than their do-it-yourself colleagues. It’s an effective way to respond to the uncertainties of sequestration and defense downsizing.”
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. www.firstcommand.com/research
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 Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through knowledgeable advice and coaching of the financial behaviors conducive to success, First Command Financial Advisors have built trustworthy, lasting relationships with hundreds of thousands of client families since 1958.
First Command Financial Services, Inc., is the parent of First Command Financial Planning, Inc. (Member SIPC, FINRA), 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. 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 Educational Foundation is a 501(c)(3) public charity. It is not affiliated with First Command Financial Services, Inc., or any of its affiliated entities.