First Command Reports: Military Families Shun Stocks in Retirement Savings Accounts

Business Wire

The First Command Financial Behaviors Index® reveals that low-yield G fund is the No. 1 investment option of middle-class military families who participate in the federal government’s Thrift Savings Plan

FORT WORTH, Texas--(BUSINESS WIRE)-- Many career military families who invest in the federal government’s Thrift Savings Plan are avoiding the stock market by stashing their retirement dollars in a low-risk, low-yield government securities fund.

The First Command Financial Behaviors Index® reveals that the G Fund is the most popular investment choice of middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000). November survey results reveal that 36 percent of TSP investors are participating in this government securities fund, which offers protection from loss of principal but delivers returns that may be below the rate of inflation. That’s up eight points from the previous year.

“Steering away from stocks and towards the so-called safe investment option of the G Fund is by no means the safest choice, especially for long-term investors,” said Scott Spiker, CEO of First Command Financial Services, Inc. “While the G Fund may feel like a sanctuary from potential stock market losses in the near term, it may not grow enough over time for service member families to meet their future needs.”

Past market losses have had a strong influence on many TSP participants. In June, for instance, a roiling market prompted enrollees to move $1.8 billion out of equity funds and into the G Fund.

“If someone did that and stayed in the G Fund, they would have missed the market growth that we experienced in July,” said Kim Weaver of the Federal Retirement Thrift Investment Board, which manages the TSP.

November survey results reveal that other commonly held TSP funds include:

C Fund (Common Stock Index Fund) – 33 percent
S Fund (Small Capitalization Stock Index Fund) – 29 percent
F Fund (Fixed Income Index fund) – 27 percent

Interest in the lifecycle funds remains relatively low, ranging from 6 percent to 22 percent.

Half of survey respondents say they are enrolled in the TSP. Notably, service members who work with a financial advisor are more likely to participate in the program. The Index reveals that 54 percent of career military families with a financial advisor participate in the TSP. That’s 22 points higher than the 32 percent participation rate for families without an advisor.

“These findings reinforce the value of professional coaching in saving for retirement,” Spiker said. “Financial advisors appear to be reinforcing and encouraging participation in the TSP, which is a noteworthy finding as they have no direct financial incentive to encourage this higher level of participation in TSP. We see the results of this commitment in our own company, where 68 percent of active-duty clients are participating in TSP. This compares to government data showing an overall 42 percent participation rate.”

A commitment to saving for retirement is particularly important today as lawmakers are changing the traditional military pension to a blended program that includes government matching contributions to TSP accounts.

“The New Military Retirement features a 20 percent reduction in the traditional lifetime pension, which makes saving for retirement through the TSP and other tools even more critical for our men and women in uniform and their families,” Spiker said. “We are confident that financial advisors will play a key role in helping service member families make the most of the TSP as they negotiate the new retirement landscape.”

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. http://www.firstcommand.com/fbi/

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 Advisory Services, Inc., 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. , a broker-dealer. Financial planning and investment advisory services are offered by First Command Advisory Services, Inc., an investment adviser. 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. First Command Financial Services, Inc. and its related entities are not affiliated with, authorized to sell or represent on behalf of or otherwise endorsed by any federal employee benefits programs referenced, by the U.S. government, or the U.S. armed forces.