Military Families Losing Confidence In Ability To Retire Comfortably

Editor's note: The following analysis comes from a Financial Behaviors Index release.

The long-term financial confidence of military families is beginning to unravel, reflecting concerns over the economy and a proposed overhaul of the military retirement system.

Recent survey findings from the First Command Financial Behaviors Index reveal that just 37 percent of middle-class military families (senior NCOs and commissioned officers in pay grades E-6 and above with household incomes of at least $50,000) are extremely or very confident that their financial situation will improve over the next year, down from 41 percent in the first quarter. And just 34 percent are extremely or very confident in their ability to retire comfortably, down seven percentage points from the first quarter.

“This drop in consumer sentiment is the result of concerns over the economy in general and military retirement benefits in particular,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Two thirds of middle-class military families say they feel nervous about a proposed phase-out the traditional 20-year retirement system. One in five respondents say they are going to start looking into different retirement options. Combined with continuing economic uncertainty, the result is a loss of long-term financial confidence among active-duty personnel and their families.”

Congruent with concerns about the economy and retirement benefits, many military families are changing their financial behaviors for the better. Two out of five servicemembers are moving to more conservative investments, and many families are working harder to pay down debt and cut spending. During the third quarter average monthly debt payments reached a two-year high of $1,103 for short-term debt and $1,371 for long-term debt. And half of military families report cutting back on everyday expenses. A previous Index survey revealed that two-thirds of military families expect to reduce their holiday spending.

At the same time, though, these families are finding it more difficult to save. During the third quarter, survey respondents reported putting an average of $2,630 per month into short-term, long-term and military retirement savings accounts – down more than $200 per month from the first quarter.

“As the government continues to propose new changes to the military retirement system, the First Command Financial Behaviors Index points to increased concern with their long-term finances and the ability to retire comfortably,” Spiker said. “As a result, military families are changing their behaviors, possibly as a way to prepare for this potential overhaul. As these changes continue to progress, we will be watching closely to see how military families work to cope with and counter these developments.”