Military personnel rethinking retirement benefits

Proposed changes to the military retirement system have made many men and women in uniform rethink their government benefits.

A recent survey from the First Command Financial Behaviors Index revealed that one-quarter of middle class military families, those who make at least $50,000 a year and are not retired, are rethinking their government-offered retirement benefits in light of a proposal from the Defense Business Board to overhaul the Pentagon’s traditional retirement system. The potential change would phase out the traditional vesting system that provides lifetime income to retirees after 20 years of service.

They also are thinking more about the military’s Survivor Benefit Plan, which is designed to protect spouses and children by ensuring that a portion of their retired pay continues after their death, providing guaranteed lifetime income. Once a military person makes the decision to take advantage of the Survivor Benefit Plan, it is irrevocable. Spouses must agree to any protection that is less than 100 percent. If the maximum election is made, the cost of spouse-only coverage is 6.5 percent of gross military retired pay.

Three-quarters of survey respondents said they are aware of the SBP program, with more than half describing the program as “very” or “extremely” appealing. Among active-duty personnel who say they plan to make use of military retirement benefits, 43 percent said they intend to enroll in SBP. Thirteen percent said that the proposed overhaul of the military’s benefits plan has started them thinking more about their plans for SBP and supplemental or alternative products and planning strategies for insuring retirement income for their surviving spouse.

“Our men and women in uniform are justifiably concerned about how the proposed overhaul of the military retirement system might affect their long-term financial futures,” said Scott Spiker, CEO of First Command Financial Services, Inc. “They are beginning to educate themselves about these potential changes and how they might affect themselves and their families. We expect to see a growing number of active-duty consumers reassess their long-term strategies and take an increasingly active role in planning for their financial futures.”

The First Command Financial Behaviors Index assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of 530 U.S. consumers between age 25 and 70 with annual household incomes of at least $50,000. The report is compiled by Sentient Decision Science Inc., a behavioral science and consumer psychology consulting firm.

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