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Military Families Feel Financial Optimism In Face Of Retirement Reform, First Command Reports

Positive financial intentions and behaviors in middle-class military families drive the First Command Financial Behaviors Index® to a record high score

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FORT WORTH, Texas — The arrival of a long-awaited proposal to overhaul the military’s traditional retirement system comes at a time when members of America’s career military families are feeling a surge of financial optimism and confidence driven by their own positive money behaviors.

The First Command Financial Behaviors Index® reveals that several key measures of financial confidence have been improving in the months leading up to the Jan. 29 release of a report by the Military Compensation and Retirement Modernization Commission that calls for an overhaul of the 20-year cliff vesting system that has defined military careers for generations. Fourth-quarter survey results show 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) believe that their financial situation will improve in the next year (up 5 points from the first quarter). Career military families are also growing more confident in their ability to retire comfortably (49 percent, up 10 points) and less likely to feel financially stretched month to month (35 percent, down 21 points).

And that confidence is continuing into 2015. Reports of feeling financially stretched month to month dropped to a record low of 30 percent in January. More than half of March respondents believe that their finances will improve over the coming year and they will be able to retire comfortably.

“This growing confidence is particularly notable as it has occurred during a period of great awareness of proposed changes to the military’s compensation and retirement system,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Our ongoing research reveals that the smaller monthly retirement checks and lump sum payments recommended by the Military Compensation and Retirement Modernization Commission were widely anticipated by career servicemembers, who clearly understood the potential ramifications to their own finances. And these families responded by making meaningful changes to their financial behaviors – changes that are helping to alter their financial attitudes for the better.”

The recent surge in financial confidence has been driven by a variety of positive money behaviors, including household savings and working with a financial advisor. During the fourth quarter, military families working with a financial advisor were considerably more likely to save – and put away more dollars – than their do-it-yourself counterparts. The Index reveals that:

  • 84 percent put money into short-term savings. This compares to 63 percent for those without an advisor. Monthly median contributions for savers in the two groups are $500.
  • 80 percent put money into retirement savings. This compares to 67 percent for those without an advisor. Monthly median contributions for savers in the two groups are $500 and $400, respectively.
  • 72 percent put money into long-term savings. This compares to 48 percent for those without an advisor. Monthly median contributions for savers in the two groups are $424 and $275, respectively.

Looking ahead, most military members expect to continue their savings behaviors in the coming months. However, servicemembers with a financial advisor are more likely than those without to anticipate increasing their monthly savings amounts (42 percent versus 32 percent).

These actions helped propel the Index’s behaviors and intentions sub-index scores ahead 11 points each and push the overall Index score to a record high of 137 for the fourth quarter. The Index is set to a benchmark of 100, which was assigned when the Index was launched in 2008.

While overall financial confidence is growing, military families continue to worry about sequestration. March survey results reveal that 74 percent of military respondents feel anxious about cuts to defense spending. That’s up 12 points from March 2014. In contrast, concern remains muted in the general population with about one in three civilian respondents expressing anxiety.

Roughly three out of four military families expect to be financially impacted by sequestration, and they are continuing to take action through a variety of positive behaviors. Half of March survey respondents say they are cutting back on everyday spending and saving more as a result of cuts to defense spending.

“These survey results underscore the meaningful connection between engaging in positive financial behaviors and feeling more optimistic and confident in your own financial future,” Spiker said. “They also emphasize the benefit of working with a financial advisor. Servicemembers clearly recognize this benefit as a growing number of families are seeking out professional help to deal with their feelings of financial and career uncertainty. The Index reveals that in March 18 percent of military families said they are starting to work with a financial advisor as a way to deal with sequestration. That’s up from just 3 percent in January 2014. This is an important trend that we expect will continue as military families look for ways to take greater control over their long-term financial security.”

About 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. 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 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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