The 800-pound gorilla of the federal budget deficit and all of its consequences has begun to undermine the long-term financial confidence of many military families. What's more, the deficit's effects may have a significant impact on the traditional 20-year retirement benefit Servicemembers receive for honorable service.
A recent survey conducted by the First Command Financial Behaviors Index, a registered trademark, shows that only 37 percent of middle-class military families are confident that their financial situation will improve during the next year. The data also indicated that just 34 percent of those Soldiers surveyed are confident they will retire in comfort. The survey focused on Soldiers with the rank of E-6 and above with household incomes of at least $55,000.
"This drop in consumer sentiment is the result of concerns over the economy in general and military benefits in particular," Scott Spiker, CEO of First Command Financial Services, Inc.," said in a news release. "Two thirds of middle-class military families say they feel nervous about a proposed phase-out of the traditional 20-year retirement system."
Founded in 1958 with the mission of improving the financial well being of America's professional military families, First Command Financial Service develops and delivers comprehensive financial plans in order to allow military families to reduce debt, build wealth and pursue their financial and retirement goals. "We embrace time-tested financial principles and advocate a disciplined, long-term approach to saving and investing," an online brochure for the company reads.
As the federal government attempts to tame that gorilla of a budget deficit that continues to grow, it is seriously considering a change to the current 20-year military retirement contract with Servicemembers.
For generations, those who have served honorably for a minimum of 20 years could expect to receive immediate lifetime payments.
This may change.
A recent Pentagon-sponsored report ("Modernizing the Military Retirement System," July 2011), by the Defense Business Board, a private sector advisory panel, has proposed an overhaul that would phase out the traditional 20-year military retirement plan in favor of a civilian style 401(k) program.
In line with mounting concerns about the economy and proposed retirement benefits, some military families are changing their financial profiles. Two out of five Servicemembers are moving toward conservative investments, paying down personal debt and reducing personal spending.
"Military families are changing their behaviors, possibly as a way to prepare for this potential overhaul," Spiker continued. "As the changes continue to progress, we will be watching closely to see how military families work to cope with and counter these developments."
For more information on this subject, visit www.firstcommand.com/research.