Career military families investing in new retirement system

Participants in the new Blended Retirement System feel more confident in their ability to retire comfortably than those covered under the traditional military pension program

FORT WORTH, Texas – Career military families who participate in the new Blended Retirement System (BRS) are diligently investing their own dollars in the program – and feeling more confident in their financial futures.

Recent survey results from the First Command Financial Behaviors Index® that middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) who are covered by the new retirement system are more likely that those in the traditional pension program to:

• Contribute to the government’s tax-advantaged savings program. Families covered under the BRS are significantly more likely than those covered under the traditional military pension to contribute to the Thrift Savings Plan (TSP), the government’s 401(k)-style defined contribution plan for service members and federal employees. The Index reveals that the TSP participation rate is 81 percent for those in the BRS versus 56 percent for those in the traditional pension system. That’s a 25-point gap.
• Invest 5 percent or more of their paychecks in TSP. Among those participating in TSP, 82 percent of BRS participants are contributing 5 percent or more of their pay to the savings plan. That compares to just 51 percent for those in the traditional system, or a difference of 31 points.
• Feel positive about their retirement prospects. Eighty-four percent of BRS participants say they feel extremely or very confident in their ability to retire comfortably. That compares to 56 percent for those in the traditional system, or a 28-point gap.

“The majority of career service members in the BRS are capitalizing on the benefits of the program through their own positive financial behaviors,” said Scott Spiker, chairman and chief executive officer of First Command Financial Services, Inc. “They are more likely than those in the traditional pension system to participate in the TSP, and they are putting more dollars into their accounts. That’s a smart move as the BRS allows service member families to earn government matching up to 5 percent of their pay. Perhaps most significantly, families who participate in the TSP feel better about their financial futures. This confidence data aligns with our long-term findings that saving and investing helps people feel more assured in their finances.”

TSP participation is particularly high among career military families who seek out professional financial assistance. The Index reveals that the participation rate is 70 percent for those who work with a financial advisor versus 45 percent for their do-it-yourself colleagues.

“One of the ways financial advisors bring value to families is by coaching them in behaviors associated with the long-term pursuit of financial security,” said Mark Steffe, president and chief operating officer of First Command. “By leveraging the TSP and other benefits of a military career, financial advisors provide knowledgeable coaching that helps service member families make the most of their pay.”

Coaching can play a significant role in helping BRS families make the right investment choices, too. The Index reveals that their No. 1 investment pick is the G Fund, a government securities fund which offers protection from loss of principal but delivers returns that may be below the rate of inflation. The G Fund was selected by 43 percent of BRS participants versus 25 percent of those in the traditional pension.

“These findings suggest that BRS service members who invest in the TSP may be more risk adverse than those in the traditional pension system,” Steffe said. “While the G Fund may look like a haven from stock market losses in the near term, it may not deliver enough growth for service member families to meet all of their retirement wants and needs. A knowledgeable financial coach can help service members concentrate on investments best suited for building personal wealth, and that typically means a broad participation in the stock market.”

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. https://www.firstcommand.com/financial-behaviors-index/

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.