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First Command Reports: TSP Participation Strongest Among Military Families With A Financial Advisor

The First Command Financial Behaviors Index® reveals that middle-class military families who work with a financial advisor are more likely to participate in the Thrift Savings Plan than their do-it-yourself colleagues

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FORT WORTH, Texas – Career military families who work with a financial advisor are more likely to participate in the federal government’s Thrift Savings Plan (TSP), reinforcing the value of professional guidance in amassing retirement assets.

The First Command Financial Behaviors Index® reveals that 53 percent 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) with a financial advisor participate in the TSP. That’s ten points higher than the 43 percent participation rate for families without an advisor.

“These survey results strongly suggest that financial advisors are reinforcing and encouraging participation in this valuable government savings vehicle,” said Scott Spiker, CEO of First Command Financial Services, Inc. “That is a notable finding as financial advisors have no direct financial incentive to encourage this higher level of participation in TSP. They do not earn the fees or commissions they might receive from recommending mutual funds and other investments commonly offered in the financial planning industry. The above-average participation rate in TSP is a compelling indicator that financial advisors are putting the long-term financial interests of career military families ahead of their own. We see the results of this commitment in our own company, where 68 percent of active-duty clients are participating in TSP. This compares to government data showing an overall 42 percent participation rate.”

These findings are particularly important today as lawmakers are changing the traditional military pension to a blended program that includes government matching contributions to TSP accounts. As part of the 2016 National Defense Authorization Act, Congress has approved a major overhaul of the military retirement system that includes:

  • Automatic government contributions of 1 percent of a new entrant’s annual salary to the TSP with full vesting after two years of service. Government matching (up to 4 percent of military pay) will be contributed to a service member’s TSP account, with a 26-year sunset on matching contributions.
  • Reducing the post-20-year military retirement from 50 percent of high-three salary to 40 percent. This reduction will be offset by a continuation bonus at 12 years of service.
  • A lump sum payout option of 25 percent or 50 percent of total anticipated retirement pay until the retiree reaches 60 years of age. The remaining reduced pension amount will be paid monthly.

“Under the new law, the TSP will become an even more important and valuable retirement savings tool for our men and women in uniform and their families,” Spiker said. “A reduced lifetime pension benefit means that service members will need to become increasingly diligent about saving for their own retirement future. We are confident that financial advisors will play a key role in helping service member families negotiate the new retirement landscape and make the most of the TSP benefit.”

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 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.


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