Service members who expect to make a career out of the military prefer to stick with a traditional pension rather than opt for the retirement reforms recently proposed by Congress.
The latest results of the First Command Financial Behaviors Index reveal that 70% 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) who say they are likely to serve to full retirement want to be grandfathered into the current retirement system. These findings are consistent with monthly survey data collected since the Military Compensation and Retirement Modernization Commission announced its proposal to restructure the traditional 20-year retirement system as a blended program that includes a reduced pension in exchange for a lump sum bonus and a new 401(k)-type plan.
“Our career servicemembers are understandably wary of giving up their traditional pension in favor of matching funds and other elements of defined contribution plans,” says Scott Spiker, CEO of First Command Financial Services, Inc. “Defined contribution plans have not worked for middle-class Americans in building a suitable income for retirement. There is no reason to believe they will work for our middle-class military force either.”
However, the survey found many career military members are open to the idea of retirement reform for their non-career colleagues (that is, the people who would otherwise leave service without any government-sponsored retirement savings). Sixty-six percent of survey respondents are in favor of the proposed blended retirement system. When asked to explain why, those in favor of the proposed system said it will increase “the amount of people who would be eligible for benefits” and “provide more financial benefits” for service members.
“The traditional 20-year retirement system has been an important part of our nation’s commitment to ensuring lifetime retirement security for generations of our men and women in uniform. Military retirement reform is too big an issue to push through quickly. We urge caution and propose moving forward at a slow and intentional pace that reassures our service members and encourages a continued public debate,” says Spiker.