A comparison of retirement saving behavior between active duty military members and civilians

Abstract

Secondary data was used from the 2018 Financial Industry Regulatory Authority (FINRA) Investor Education Foundation’s National Financial Capability Study (NFCS) to investigate predictors of retirement savings behavior of active duty military personnel. Using the framework of social learning theory, this study investigated personal, environmental, and behavioral factors related to making regular contributions to a retirement plan for active duty military personnel compared to civilian personnel. Results of the study indicate that some similarities exist between the two populations regarding propensity to contribute to a retirement plan. Higher levels of subjective financial knowledge, objective financial knowledge, and financial confidence all showed a positive correlation for both groups. Similarly, having an established emergency fund and calculating retirement needs were positively correlated. Saving for a child’s college fund and having student loans showed positive correlations, indicating neither is crowding out retirement savings. Analyses also revealed several differences between the two populations. Workplace financial education showed a positive correlation for the civilian population, but not the military. Overspending had a negative association with retirement saving for the civilian populace, while positive credit card behaviors such as paying off the balance each month showed a positive association. Neither was a significant predictor for the military sample. These results indicate that the active duty and civilian populations differ in several aspects. This dissertation adds to the literature by examining this financial outcome of a little researched population of interest, active duty military personnel, which have not been fully addressed in prior research. An increased emphasis on financial education that focuses on increasing the financial self-efficacy of its members and utilizes instructors to whom the military audience admires and relates may be one effective approach to increasing retirement savings plan participation rates for the military. Implications of this research are important to active duty military members, Department of Defense policy makers, and the financial services industry who service the military community. They will become increasing more important due to recent changes in the military retirement system that is converting from a purely defined-benefit plan to a hybrid plan that includes some elements of a defined-contribution program.