Readiness for Blended Retirement: A Descriptive Analysis of Financial Literacy among Young American Military Members

In January 2018, the Department of Defense began the new blended retirement system for military members which includes an investment matching program in addition to a reduced pension at 20 years of service. This new system requires a forward thinking financial decision from a young population of Americans who may not possess substantial financial knowledge and experience to make an educated long term decision. The study examines the financial literacy of two groups of young enlisted Air Force members separated by two years experience in the service to determine if any significant changes in financial literacy occur through time and education in the military. The findings show a statistically significant difference in financial literacy between new recruits and two year airmen as measured by the Test of Financial Literacy and a subset of questions that measure knowledge of savings and investment. Subjective analysis shows poor financial knowledge and practices overall and is cause for concern regarding the readiness of young Airmen to decide about the matching program. This result contributes to a greater understanding of how little typical high school graduates in America know about personal finance and the positive effect of experience in the marketplace. The conclusions help curriculum designers gain understanding of how financial literacy changes through the early years of an Air Force enlisted career. Recommendations are included to provide better training systems to the youngest members of the military who must decide about investments at such an early stage in their career