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Military Families Finalizing BRS Decisions

December 18th, 2018

First Command Financial Behaviors Index® reveals that 39 percent of eligible middle-income military families have chosen to opt into the Blended Retirement System

FORT WORTH, Texas – As the Dec. 31 deadline for the Blended Retirement System opt-in period nears, two out of five eligible middle-income military families say they’ve decided to trade their traditional retirement pension for the new system.

The latest survey results from the First Command Financial Behaviors Index® reveal that 39 percent of eligible middle-income military families (commissioned officers and NCOs in pay grades E-5 and above with household incomes of at least $50,000) say they have chosen to opt into the Blended Retirement System (BRS). Another 43 percent say they’ve decided to stick with the traditional system. And of the undecided 18 percent, one out of three say they will likely stick with the traditional system.

These numbers represent notable movement since June 30, which was the mid-point of the year-long BRS opt-in decision period. At that time the DoD reported that just 13.5 percent of the roughly 1.6 million service members who are eligible for the opt-in decision had already picked the new system.

“While our current survey results indicate that the BRS is a popular choice, the traditional pension with its lifetime benefits is still preferred by a significant percentage of service members,” said Scott Spiker, chairman/CEO of First Command Financial Services, Inc. “Our financial coaches have been meeting with many of these families, helping them carefully weigh the options between the BRS and the traditional retirement so they can make an informed decision.”

The Index reveals that 79 percent of eligible families say they consulted a financial advisor for help making the decision. That’s particularly promising news as the Index continues to reveal that career military families who work with a financial advisor are more likely to save more and feel more confident about their finances than their colleagues who do not work with an advisor.

Generations of retired military families have depended on the traditional retirement pension with guaranteed monthly pay to provide them with a lifelong income. The BRS represents a major shift, one that features a 20 percent cut in the monthly pension payments. That cut helps pays for a new defined contribution program that includes automatic and matching Thrift Savings Plan (TSP) contributions, mid-career continuation pay and a lump sum buyout option. The BRS is the new standard retirement package for all new service members since Jan. 1, but military members with 12 years or less of service on Dec. 31, 2017, are eligible to opt in to the new program. Dec. 31 is the last day that eligible service members can make this choice.

“While matching funds and other benefits of BRS appear appealing at first glance, a 20 percent reduction in guaranteed lifetime income is a matter of serious concern,” Spiker said. “Our concern is that many of these families who jump into the new system may not be prepared to make the most of the opportunity. Are they thinking through all of the ramifications? Have they adequately considered the impact on their future financial security? Investor behavior is critical to success in the BRS. Military families have to make the right decisions at every step of their career in order to be successful.” 

First Command President and Chief Operating Officer Mark Steffe stressed the importance of contributing to the TSP.

“We know that roughly one in ten service members who’ve switched to the Blended Retirement System are not investing their own money in the TSP,” he said. “That means they are not earning the government’s matching contributions, which is a key advantage of the BRS. Now that the pension is reduced 20 percent, the way you make up the difference is to take full advantage of the TSP. The Department of Defense makes automatic contributions of 1 percent of basic pay. After two years, your contributions are matched dollar for dollar for the first 3 percent and 50 cents on the dollar for the next 2 percent. So if you contribute 5 percent of your basic pay to the TSP, the government will add another 4 percent to your account for a maximum of 5 percent. Like a 401k, you put money in and you can take it with you when you leave the military. Don’t leave dollars on the table. This is literally free money.”

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.

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.

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