Need for Good Financial Counseling Grows

Amilitary retirement reform plan likely to be adopted by Congress this year would require young soldiers to take a more direct role in decisions about their retirement savings, a move expected to include improvements in financial management counseling for all ranks. Counselors who have experience in training soldiers and their families about money management say it's time they took control of their finances.

The Thrift Savings Plan (TSP) is the future of military retirement, according to the DoD Blended Retirement System Proposal now before Congress. All soldiers will be automatically enrolled in TSP when entering the Army, and 3 percent of their basic pay will automatically go into their TSP accounts. DoD will match up to 5 percent of their basic pay contributions. Soldiers will be responsible for managing investments in their accounts, and training will help make that transition a success, according to financial counselors.

Why This Matters

"Many soldiers are not really prepared for retirement. Many of them focus on getting a retirement check, but it depends on where they go. The cost of living can play a major factor. Family can also be another big factor. There are a lot of things involved with that," said Robin Sherrod, Financial Readiness Program supervisor.

Accredited financial counselors like Sherrod and her team at Army Community Service at U.S. Army GarrisonHawaii are focusing their teachings on preparation and preventive training. They've coined it financial resilience, which addresses financial wellness and dispels the stigma associated with individuals who actively seek out assistance. These non-mandatory training sessions are available to all soldiers.

The financial resilience training, designed before the DoD proposal, will help soldiers transition to any type of retirement system, Sherrod said.

"Most of the time, in our field, we see soldiers because of remedial financial counseling. They have too much debtto-income ratio, or their credit is shot. Our goal is to meet the need for preventive and proactive means," she said.

Currently, if a soldier serves 20 years honorably, he or she receives a lifetime retirement salary, according to Army regulations. Those days are not completely coming to an end but may be altered a bit. There are also soldiers who don't serve the entire two decades. Some soldiers receive a small severance and some receive nothing at all, depending on the amount of time they served, according to the DoD Blended Retirement System Proposal. This system will help most soldiers transition out of the military with some type of retirement benefit through using the TSP.

Blended retirement will enable DoD to continue recruiting and retaining armed forces personnel in the years to come, according to the proposal. Most service members will receive some type of portable retirement benefit. Future troops will receive 80 percent of current retirement benefits when serving 20 years or more. All of this will require the service member to take a more active role in his or her future financial planning.

If the proposal becomes law, the target year to start is 2018. This will allow adequate time for the military to provide education and training on the new retirement plan. Additional time will be needed to develop supplemental programs and test them to ensure soldiers get proper service.

Four Days of Training

The training in place at Army Community Service at Schofield Barracks, Hawaii, is a four-step plan over a course of four days. All units on U.S. Army Garrison-Hawaii are encouraged to attend all four sessions, or individual sessions. The key points Sherrod's team focuses on during financial resilience training include money management, basis of budgeting, repairing and rebuilding credit, responsible spending and basic investing.

The first step is developing financial goals. Writing down short- and long-term goals, including completion dates, is key. Take account of how much money is needed to achieve said goals and include them in the budget. A large part of this step is paying yourself first, according to the TSP.

Secondly, create a working budget and evaluate needs versus wants. Keep a record of all expenses to have an idea of where your money is going. While assessing those things, figure out what can be cut back on. Eating out, purchasing excessive amounts of retail, going to amusement parks and things of that nature may be on the list. Moving a portion of your income into a savings account on a biweekly basis could help cut down on spending. One of the most important parts of Step 2 is saving $1,000 in an emergency fund. Sherrod's team teaches soldiers that sacrifice as part of financial resilience leads to achieving the goals they're attempting to reach.

Step 3 is having a credit report review. The three credit bureaus offer this service free of charge online. Reviewing your credit report with all three of these agencies is critical. Part of Step 3 is also creating a balanced plan to pay debt and executing that plan. Sherrod's team encourages paying minimums on all credit cards regularly and placing the emergency funds in a separate savings account to avoid spending it on something frivolous.

Invest for Retirement

The final step is starting to invest for retirement. Sherrod and her team encourage the TSP or a Roth Individual Retirement Arrangement. Continuing to increase retirement contributions, such as investing more into the TSP at various points in your career-like after a promotion or pay raise-and increasing emergency savings is also part of Step 4.

"We're becoming more effective each day in preparing soldiers for their lives in finance. When leaders come to us, our job is to have a package for them to look at. A lot of units will request the entire series of our training. We've learned to take the services to where the soldiers are versus offering services and expecting them to walk through the door," Sherrod said.

Leanna C. Rahll, a financial counselor with Survivor Outreach Services, a facility that provides emotional and financial planning support at Fort Meade, Md., encourages soldiers to use the same steps that Sherrod's team teaches as changes to military retirement are proposed. Rahll helps junior and senior troops manage their financial lives and learn how to build wealth with the income they presently are earning.

"In terms of building assets, begin preparing for retirement as soon as you get your first paycheck. The greatest financial asset of young people is their capacity to earn money. The game is to convert that income stream into assets that will support you when you no longer work. It's so easy to make a young person into a millionaire that it should be a crime. It's surprising that everyone doesn't become one. Treat retirement like a bill that comes monthly and you'll be that millionaire years down the line," Rahll said.

Sgt. 1st Class Janeiro Miller is preparing to transition out of the military, and he wishes he had made better financial decisions during his younger years. Miller, a finance and program management NCO in Washington, D.C., is making more informed decisions these days, but he reflects on an alternate retirement reality he'd be walking into now if he had followed all the financial resilience steps starting in his early 20s.

"Finances tie into everything you do. Some jobs are not even available if your finances aren't in order. I've been cleaning up my credit lately and focusing on life after the military-and there is real life after the military. I'm glad I had a chance to learn about finances on a greater level because it has helped change the way I live my life," he said.

Miller describes balancing finances, saving and investing as things that aren't glamorous. They're necessary, though, for a more stress-free and relaxed everyday life now and in the senior years, he said. The TSP has the possibility to make a large difference for the soldier of the future. Financial resilience training and the opportunities of the TSP present a soldier with the tools needed to succeed financially.

-Ferdinand H. Thomas II

Specialist Wins Spot on Olympic Team

Spc. Nathan Schrimsher rides his horse, Taboo, during the men's modern pentathlon at the 2015 Pan American Games in Toronto. Schrimsher's bronze-medal finish in the pentathlon-a one-day competition of equestrian show jumping, fencing, swimming, and a combination of cross-country running and laser pistol shooting-earned him a spot on the 2016 U.S. Olympic team. The U.S. Army World Class Athlete Program soldier is from Roswell, N.M.