Troops Savvier than Civilians About Retirement


WASHINGTON, Feb. 24, 2009 — Servicemembers are more practical about their retirement needs than their civilian counterparts, according to a survey conducted by the Financial Industry Regulatory Authority, or FINRA, Investor Education Foundation, in cooperation with the Employee Benefit Research Institute. The findings bode well for servicemembers' readiness to transition out of work and into retirement, FINRA's foundation president says.

"Unless you are aware of the amount of money you're going to need in retirement, it's going to be hard to start saving the amount you need," John Gannon, president of the FINRA Foundation, said. "The good thing is the military is much further along in understanding their savings needs than the general public."

While 26 percent of civilian workers think they can retire on less than $250,000, only 10 percent of servicemembers believe that to be true. On the other hand, nearly a third of servicemembers think they'll need more than $1 million, which is a lot closer to the truth, Gannon said.

For most people, $1 million probably will be enough, given that most people will spend 20 to 30 years in retirement, he added.

Servicemembers may be in better stead thanks to the military's efforts to provide financial education. While there's always more that can be done, the services understand the importance of financial readiness, especially in conjunction with military readiness, Gannon said.

"You really don't want somebody being deployed to Iraq or Afghanistan who's worried about back home not being able to pay bills, having credit problems and having their spouse get calls from collection agencies," he said. "That can all cause problems."

In fact, personal finance issues can jeopardize a security clearance.

Though servicemembers, generally, are ahead of civilians when it comes to having a realistic investment plan, they're not doing all they can to make that plan happen, Gannon said.

Only one in five servicemembers are aware of the government's Thrift Savings Plan and fewer than half of those participate in the TSP. More than 87 percent of federal civilian employees participate in the TSP.

"I think it's very important that they understand that the Thrift Savings Plan exists because, for many servicemembers who don't stay in the military for 20 years and get access to the pension, it's really their only retirement savings vehicle in the military," Gannon said. "It's one of the best-designed, employer-sponsored contribution plans that exists in the United States, as far as I'm concerned.

"It's extremely low cost, has great investment options and appears to be a very well-run program."

A section of the FINRA Web site is dedicated to helping military members develop a retirement savings plan. It offers tools such as a retirement calculator and a link to the American Saving and Education Council's "Ballpark Estimate," which allows users to estimate how much they'll need for retirement.

"They're really straightforward simple things to really put themselves in a position to understand their retirement savings needs," Gannon said.

In addition, nearly every military base around the world has a personal financial manager to provide financial counseling to servicemembers and their families.

Another thing most servicemembers have going for them is youth, Gannon said.

"That's the great thing about the military" that 65 percent of servicemembers are under 30, Gannon said. "Time is on their side."

Though saving for retirement is important at any age, the earlier one can start, the better. If retirement is ominously looming, it's still not too late, Gannon said.

"Once you hit 50, you can contribute an extra $5,000 to the TSP," he said. "It's set up so that for people who start late, they can contribute more and catch up."

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