FORT WORTH, Texas – As the year-end fiscal cliff deadline approaches, military personnel are increasingly worried about their financial futures – and they are taking actions to shore up their household finances.
The First Command Financial Behaviors Index® reveals that two thirds 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 not confident that Washington will be able to avert the automatic tax hikes and spending cuts known as the fiscal cliff that kick in on Jan. 1 unless Congress intervenes.
"The fiscal cliff is a major concern for servicemembers and their families," said Scott Spiker, CEO of First Command Financial Services, Inc. "Roughly seven in ten believe that a failure to resolve the fiscal cliff stalemate will mean an increase in their taxes and a slowdown in job growth. Two thirds of survey respondents fear the U.S. economy might slip back into recession."
Concerns are also running high regarding the federal budget cuts known as sequestration, with men and women in uniform expecting to see their family finances impacted in a number of ways. Half of households anticipate a reduction in their military retirement benefits and increased responsibility for healthcare costs. They expect to see cuts in:
- Personal expense benefits for housing, clothing and food (40 percent).
- Educational benefits (32 percent).
- Discretionary income for non-essentials (31 percent).
Career concerns are high, too. Almost three out of ten military families (28 percent) believe that sequestration will mean they are less likely to be promoted and more likely to experience early separation. An early forced exit from the armed forces is seen as a serious financial threat, with almost nine out of ten survey respondents hoping to qualify for a traditional military retirement by completing at least 20 years of service.
"While the looming fiscal cliff deadline has been making the headlines, military families may be even more troubled by the spending reductions that are already in process," Spiker said. "Defense downsizing will affect one-sixth of the military, impacting retirement pay and benefits. Promotion rates will decline. The result is an uncertain future for many military families."
Notably, military families are responding to the fiscal cliff and sequestration with a variety of belt-tightening actions. Almost half are cutting back on everyday spending. Other changes include:
- Increasing the amount of savings (28 percent).
- Decreasing the aggressiveness of investments (20 percent).
- Moving investments to cash (9 percent).
- Starting to work with a financial planner (5 percent).
"Working with a financial planner is a particularly smart move," Spiker said. "Families who work with a financial coach are more likely to spend less, save more and pay down debt in their pursuit of financial security. And they feel better about their financesthan those without a planner. Our research consistently indicates that military families who work with a financial coach are more likely to feel financially secure and confident in their ability to retire comfortably. We anticipate increasing demand from military families for financial planning assistance over the coming year."
About the 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. www.firstcommand.com/research
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. First Command Financial Services, Inc., is the parent of First Command Financial Planning, Inc. (Member SIPC, FINRA), First Command Insurance Services, Inc. and First Command Bank. Financial planning services and investment products, including securities, are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Insurance Services, Inc. in all states except Montana, where as required by law, insurance products and services are offered by First Command Financial Services, Inc. (a separate Montana domestic corporation). Banking products and services are offered by First Command Bank. In certain states, as required by law, First Command Insurance Services, Inc. does business as a separate domestic corporation. Securities products are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met.