The military’s new blended retirement system, which drastically changes how servicemembers’ retirement income will be decided, offers more risk and less security than the original pension, according to First Command Financial Services, since it cuts the traditional pension by 20 percent but offers a confusing array of other features.
Choosing between the new and the old plans, for those who are given a choice, is a big decision. Unfortunately, the new plan isn’t well understood by servicemembers or their spouses.
Although the First Command Financial Behaviors Index indicates that 82 percent of spouses in middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) expect to be extremely or very involved in the decision process as servicemembers decide whether to opt in to the BRS or stick with the pension, that might not actually be the case.
“These survey findings stand in sharp contrast to the reality facing military spouses,” Scott Spiker, chairman and CEO of First Command Financial Services, Inc., says in a statement.
Spiker adds, “Wives and husbands receive limited access to government education or training and have no voice in decisions involving the new program. That’s a troubling oversight as the BRS opt-in decision is clearly one of the most important financial choices facing our nation’s career military families. It’s a decision that can significantly affect the long-term financial security of service members and spouses.”
Military spouses are often the financial decisionmakers of the household, particularly in the case of long deployments that take the servicemember away from home for years at a time. According to Spiker, spouses have to step up on household budgeting and savings.
In addition, Spiker is quoted saying, “Our research confirms that military spouses are deeply involved in preparing for retirement, so it’s understandable that they want education and to be involved in the BRS opt-in decision. Our survey results reveal that 39 percent of spouses think they should have an equal voice in the opt-in decision. Twenty percent say spouses should be the primary decision maker.”
The BRS applies to all new servicemembers starting Jan. 1, 2018, but military members with 12 years or less of service on Dec. 31, 2017, are eligible to opt in to the new program during 2018.
And while BRS regulations include mandatory education for servicemembers before they make that choice, nearly all spouses in the survey said they also would find education and training to be valuable in helping them understand what’s at stake.