Paul Tarins, RICP®,WMCP®,CSRIC™
In honor of Military Appreciation Month, we’re recognizing those in the military as well as their families. Military members and their families face one-of-a-kind challenges, such as deployment to conflict zones, overseas assignments and the constancy of change - all of which make dedicating time to personal finance a challenge. Luckily, there are special tax breaks and other benefits unique to service members. Follow these five tips to take advantage of potential benefits and simplify your military family’s personal finances.
Tip #1: Focus on Retirement Savings
The Thrift Savings Plan is one way to save for retirement that's specific for military members. You may also have access to a Roth TSP, which acts similarly to a Roth IRA but without income restrictions. By contributing to a Roth TSP, you don't lower your taxable income now, but you will be able to withdraw the money tax-free when you enter retirement.
Tip #2: Save with High Interest
The Savings Deposit Program allows eligible personnel serving in designated combat zones to deposit up to $10,000 and earn up to 10 percent in annual interest.1 This can be an effective way to get a boost on your savings for the future. By comparison, it's not uncommon to find savings accounts at various banking institutions that offer less than one percent in annual interest rates.
Tip #3: Tax-Free In, Tax-Free Out
Saving in a Roth IRA may be a good idea if you receive tax-free combat-zone pay. This allows you to deposit tax-free income and take tax-free qualified withdrawals in retirement. You can also withdraw contributions to a Roth IRA at any time, without the income taxes or penalties.
Tip #4: Take Advantage of Your Education Benefits
The Post-9/11 GI Bill covers the full cost of in-state tuition, up to 36 months, plus housing fees and $1,000 a year to use for books and supplies.2 You can even transfer these benefits to your spouse or children if you don’t plan on using them yourself.
Tip #5: Low-Cost Life Insurance
Backed by the Department of Veterans Affairs, the Servicemembers’ Group Life Insurance protects your family with low-cost term life insurance coverage. If you are an eligible service member, you may be automatically enrolled in this program.3 Depending on your status or branch, you may have other life insurance options available to you as well. If you haven’t already, you’ll want to review your options and determine whether or not your coverage is up-to-date.
More Ways to Maximize Your Money
Aside from specialized programs and offerings, there are a few things every military family can do to help get or keep their financial standings in order.
Like any mission, success begins with articulating goals you want to pursue. Make sure they’re measurable, attainable and timely.
Establish a Budget
A budget can serve as the foundation of financial discipline. Having a weekly or monthly budget set in place can help you control spending impulses that lead to greater debt levels.
Pay Yourself First
Determine how much money you need to set aside to reach your savings goal, deduct this amount from your paycheck and budget yourself to live within the limits of what remains.
Establish an Emergency Fund
Uncertainty marks the life of military families, so be sure you have an emergency fund that allows you to be as prepared as possible for these changes.
Control Your Debt
Indebtedness is one of the enemies of financial independence. Focus your efforts on paying down high-interest debt, like credit cards or personal loans.
As you think through your financial goals, remember that taking action today is your first and most important step. Take advantage of all your unique benefits and opportunities, so that you and your family can live your best financial life.
Paul Tarins is an investment adviser representative of and offers investment and advisory services through Portfolio Medics, a registered investment adviser. Nothing contained herein should be construed as a solicitation for investment advisory services. Sovereign Retirement Solutions and Portfolio Medics are not affiliated.