A far-reaching plan to radically remake the military’s traditional retirement system is generating considerable concern in the ranks of active-duty personnel, prompting many families to reassess their long-term options and contemplate increases to their savings and debt-cutting behaviors.

Two thirds of military families making at least $50,000 a year say they feel nervous about the potential changes, which would phase out the 20-year cliff vesting system that has defined military careers for generations, according to recent findings of First Command Financial Behaviors Index®

Elements of the Pentagon-sponsored proposal include:

• Converting to a civilianized 401(k)-style system under which full retired pay wouldn’t be paid until age 57–60.
• Authorizing the services to make variable annual retirement contributions depending on changing retention and skill requirements.
• Vesting retirement benefits after 10 years of service.

Military families are starting to react to these potential changes. Roughly half are being proactive by planning to get more information on the proposal and alternative plans. Many are looking at making changes to their savings and debt-cutting behaviors; 43 percent say they will work to increase their savings and 46 percent say they will work to pay down debt.

Perhaps most significantly, one in five families say they are going to start looking into different retirement options.

These findings confirm that active-duty families recognize the need to take control of their financial futures in the face of a potential overhaul of the traditional military retirement system. The proposed elimination of the inflation-adjusted annuity – earned in return for 20 years of service – means that many career military professionals could see a reduction in their lifetime benefits. At the same time, the plan would actually mean new benefits for those who serve less than 20 years. For instance, personnel who now leave after a decade of service with nothing could walk away with a significant nest egg.

By no means is the proposed overhaul a sure thing. But if major changes do come to pass, a sizeable number of military families may being to seek out information and guidance from financial advisors and other knowledgeable professionals as they look to develop new retirement plans.

“Three out of 10 military families already have a supplemental retirement plan in place,” said Scott Spiker, CEO of First Command Financial Services, Inc. “We can expect to see these numbers grow as military families reassess their long-term strategies and take a more active role in planning for their financial futures.”

To learn more about how proposed changes to the military retirement system could affect your financial future, visit our dedicated online resource, “Making the Most of Your Military Retirement Benefits”.

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. 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 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. 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. 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. In Europe, investment and insurance products and services are offered through First Command Europe Limited. First Command Europe Limited is a wholly owned subsidiary of First Command Financial Services, Inc. and is authorised and regulated by the Financial Services Authority. Certain products and services offered in the United States may not be available through First Command Europe Limited.