As a military service member, you make sacrifices: moving around, deploying, and putting your life on the line for your country. To acknowledge that sacrifice, the U.S. government provides you with military benefits.
Military life can present many financial challenges. However, your military benefits offer opportunities to overcome those challenges and experience financial success. Consulting with a financial advisor at Prosperity Financial Solutions can guide you to take full advantage of your benefits.
Here’s a look at how you can maximize military benefits for financial success.
Understanding Your Pay and Benefits
You have opportunities to earn extra pay beyond your basic pay with bonuses and special-duty pay. Depending on your situation, you may be able to save on taxes.
For instance, you pay federal income taxes on basic pay. However, you don’t have to pay income taxes while stationed in a state that taxes if your home state doesn’t. You pay no taxes for Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence. You also don’t pay taxes on money earned while in combat, including basic pay.
Leveraging Your Thrift Savings Plan (TSP)
Your TSP is similar to the 401(k) civilian employers offer. The money that you and the military contribute before taxes grows tax-deferred until you take it out. Also, if you contribute at least 5 percent of your pay, the military matches that 5 percent. You can also contribute to a Roth TSP, allowing your after-tax contributions to grow. Then they can be withdrawn tax-free.
Using Your Veterans Affairs (VA) Benefits
After you transition out of the military, VA benefits can help you save money in three major areas of life:
Education: The G.I. Bill
Healthcare: Tricare
Housing: VA home loan
The G.I. Bill can pay for your tuition at a public institution. Depending on your years of service, Tricare (the health insurance you have on active duty) may be available to you under VA benefits.
You can also take advantage of a low-interest VA home loan. It has a no-deposit option, a closing cost limit, and assistance if you run into difficulty repaying.
Transitioning to Civilian Life
The VA provides a Transition Assistance Program for career planning. You can transfer your Servicemembers’ Group Life Insurance (SGLI) to Veterans’ Group Life Insurance (VGLI). While you’ll no longer be able to contribute to your TSP, you can leave it in place, roll it over to a retirement account, or withdraw your money. All choices have tax considerations.
Understanding Your Pension and the Blended Retirement System (BRS)
If you joined the service after January 2018, you’re automatically enrolled in the BRS. This means the military contributes to your TSP. Service members who entered before January 2018 chose to either stay with a traditional pension or join the TSP.
Taking a lump sum, with a reduced pension up to age 67, may be appropriate for someone who needs money immediately or plans to invest it wisely. Otherwise, the pension provides a regular income for life.
Shielding Your Family With Insurance
If you qualify, you’re automatically signed up for SGLI with Traumatic Injury Protection (TSGLI), with premiums significantly less than civilian policies. SGLI and TSGLI can help support your family should you die or are injured in service.
Planning for Your Family
A will is vital to estate planning to distribute your assets when you die. Equally important is assigning a power of attorney to manage your affairs if you’re incapacitated. It’s also crucial to keep your beneficiaries up to date.
Creating a Solid Financial Plan
Maximize your military benefits by setting clear goals and aligning your financial goals with your values. A financial advisor can guide you through developing a financial plan to get everything you should from your military benefits.
Talk to a Financial Advisor About Your Military Benefits
Service members often aren’t aware of all the military benefits they’ve earned. Prosperity Financial Solutions is a trusted advisory that can help you experience the retirement you want. We work to see that you don’t outlive your money. Call (561) 207-6213, email ramsden@brookstoneadvisor.com, or book a 30-minute complimentary call online.
About David
David Wilcox is president and cofounder of Prosperity Financial Solutions, a financial services firm, based in Palm Beach Gardens, FL, specializing in retirement planning, estate planning, and investments. Since 1987, David has been assisting pre-retirees, retirees, and investors with comprehensive retirement planning, helping them preserve their wealth, increase their retirement income, and avoid common financial mistakes. Prioritizing financial education, he employs strategies to instill confidence and comfort in his clients as they make decisions and move toward their ideal financial future. He also highly values building relationships with clients and strives to make them feel like part of his family.
David holds an associate’s degree from Broward College, a bachelor’s degree from Florida State University, as well as the Life Underwriter Training Council Fellow (LUTCF®) and Long-Term Care (CLTC®) certifications. A firm believer in professional education and participation, he is a member of the Global Financial Association, a member of NAIFA (National Association of Insurance and Financial Advisors), and is a Certified National Long-Term Care instructor. Teaching and mentoring other financial advisors, David presents dozens of seminars and workshops on long-term care and investment planning throughout the country. Outside of the office, family man David enjoys golfing, fitness, and spending time with his kids on the boat, going for long walks, and traveling to new places. He wants to provide a positive example for his children and show them that it’s never too late to follow your dreams. To learn more about David, connect with him on LinkedIn.