Financial Field Manual: Personal
Finance Guide for Military Families
Event | Date
Presenter | Presenter’s Affiliation
Invest in Your Future:
Pension
• Pension for 20 or more years of
service.
• As much as 50% of base salary if you
retire after 20 years.
• More if you stay past 20 years.
• Less than 20 years of service: $0.
Financial Field Manual: The Personal Finance Guide for Military Families
Invest in Your Future:
Thrift Savings Plan (TSP)
• The easy way to pay yourself first!
• Low-cost, tax advantage retirement plan similar
to a private company’s 401(k) plan.
• Pre-tax contributions cost less than you think.
• You may contribute up to $17,000 to the TSP in
2012.
• You may contribute up to $50,000 if you receive
tax-exempt pay while serving in a combat zone.
• Contributions grow tax deferred until you
withdraw the money in retirement.
Financial Field Manual: The Personal Finance Guide for Military Families
Invest in Your Future:
Investing inside the TSP
• You can choose among five index mutual
funds that invest in:
• Large companies
• Small companies
• International firms
• Bonds
• Government securities
• Or, you can choose a lifecycle fund
(called the L fund), which builds a
diversified portfolio of the other funds.
Financial Field Manual: The Personal Finance Guide for Military Families
Invest in Your Future:
The power of compounding
• Start early.
• $10,000 contributed this year would grow to more
than $100,000 over 30 years, if your investment
grows at an average rate of 8% per year.
• An investment of $10,000 per year for the next 30
years will grow to more than $1 million.
• Does an 8% annual return sound too good to be
true?
• The annual average return of the stock market
since 1926 – a period that includes not only the
recent Great Recession but also the Great
Depression of the 1930s – is nearly 10%.
Financial Field Manual: The Personal Finance Guide for Military Families
Invest in Your Future:
Roth IRA
•
Enjoy Tax-Free Income in Retirement
• Roth IRA = Delayed Gratification
•
No deduction now but tax-free withdrawals in retirement.
(Withdrawals from traditional IRA are taxed in your top tax
bracket.)
•
You can withdraw contributions at any time tax- and penaltyfee if you get in a pinch.
•
You can contribute up to $5,000 to a Roth IRA in 2012 (or
$6,000 if you’re 50 or older) unless your income is “too high.”
•
If you earn income but your spouse doesn’t, you can
contribute to an IRA in his or her name.
•
If you have tax-exempt combat-zone pay, your money goes
into a Roth IRA tax-free and all withdrawals in retirement are
tax-free.
Financial Field Manual: The Personal Finance Guide for Military Families
Invest in Your Future:
Roth IRA
• You can contribute to a Roth with a single
payment or have money automatically shifted
from your bank account or paycheck (Investing
$416.66 per month will get you to the $5,000
limit.)
• You have until April 15 of the following year to
make an IRA contribution, but the sooner the
money is tucked into the account, the sooner
tax-deferred earnings begin to grow.
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Four steps to avoid predatory lenders
and high-rate, high-fee loans
Step 1. Get a 0% loan through a military
emergency-relief fund.
• Each branch has an emergency relief fund that
offers interest-free loans.
• Army Emergency Relief www.aerhq.org
• Navy-Marine Corps Relief Society
www.nmcrs.org
• Air Force Aid Society www.afas.org
• Coast Guard Mutual Assistance
www.cgmahq.org
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Four steps to avoid predatory lenders
and high-rate, high-fee loans
Step 2. Join a credit union.
• Credit unions on base often offer short-term
loans at reasonable interest rates.
Step 3. Boost your emergency fund.
• Build an emergency fund with at least six
months’ worth of expenses in a safe and liquid
account, such as a money-market account.
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Four steps to avoid predatory lenders
and high-rate, high-fee loans
Step 4. Get credit counseling.
• Consider meeting with a financial-planning
manager on base or a credit counselor who
can help you set up a budget, pay down debt
and prioritize your spending.
• Find a credit counselor through:
• National Foundation for Credit
Counseling www.nfcc.org
• Association of Independent Consumer
Credit Counseling Agencies
www.aicca.org
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Five steps to avoid Identity Theft
Step 1. Be protective of your Social Security number.
Step 2. Monitor your accounts online.
•
Check your bank, credit-union and credit-card
accounts regularly.
•
Develop a plan for yourself (or a trusted family
member) to review accounts while you’re deployed so
any suspicious activity is spotted quickly.
•
Contact your bank or credit union’s customer service
number if you receive an e-mail or call about any
“problems,” with your account – DO NOT click on a
link or answer any personal questions on the
telephone.
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Five steps to avoid Identity Theft
Step 3. Check your credit report.
•
You can get a free copy from each of the three major
credit bureaus every year www.annualcreditreport.com.
•
Stagger requests to get a report every four months.
Step 4. Put an “active-duty alert” on your credit report.
•
FREE service notifies creditors that you’re on active
military duty. Contact Experian.com, Equifax.com or
TransUnion.com to place an alert.
Step 5. Put a credit freeze on your account, especially if you’re
deployed and unable to monitor your credit report regularly.
•
Freeze prevents lenders from accessing your credit
report without your permission. Helps stop identity
thieves from taking out new credit in your name.
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Avoid High-Fee Investments
•
•
Verify a broker’s record.
•
Use Finra’s BrokerCheck tool to get information on a
broker’s licensing status and any disciplinary action he
or she has faced. http://brokercheck.finra.org
•
Check the broker through your state securities
regulator. www.nasaa.org
Check out insurers and agents with your state insurance
department.
•
Find links to regulators at the National Association of
Insurance Commissioners. www.naic.org
•
The NAIC’s www.InsureUonline.org offers insurance
advice for members of the military.
Financial Field Manual: The Personal Finance Guide for Military Families
Don’t get ripped off
Avoid High-Fee Investments
Beware of affinity fraud.
• Criminals have no qualms about fabricating an
affiliation with the military to gain a family’s trust,
oftentimes using a military connection to sell products
and services, including:
• Burglar-alarm systems to families of deploying
troops.
• High-fee work-at-home schemes for military
spouses.
• Used cars with questionable titles.
• Fake life insurance and investments.
What you can do:
• Contact the base community-service office.
• Contact your local Better Business Bureau or check
out businesses and get help resolving issues at
www.bbb.org.
Financial Field Manual: The Personal Finance Guide for Military Families
Take Advantage of Your Benefits
The Post 9/11 GI Bill
Free College for Yourself – or for Your Kids
•
May cover the full cost of in-state tuition and fees for public
colleges for up to 36 months (four academic years), or up to
$17,500 per year for private colleges and foreign schools.
•
Applies to undergraduate and graduate programs, and for
certain programs at vocational, trade and distance-learning
schools.
•
Eligibility based on the length of time you serve. For
maximum benefits, you must serve at least 36 months.
•
You may be able to transfer your benefits to your spouse or
children. For details, visit:
www.defense.gov/home/features/2009/0409_gibill
•
A Yellow Ribbon scholarship can provide additional aid.
Click on “Yellow Ribbon Program” in the Post 9/11 GI Bill
section of www.gibill.va.gov .
Financial Field Manual: The Personal Finance Guide for Military Families
Take Advantage of Your Benefits
Other Special Benefits
Interest-Rate Reductions and Other Special Legal Rights Under the
Servicemembers Civil Relief Act (SCRA).
•
If you have to move unexpectedly, are deployed or leave a
civilian job to go on active duty with the Reserves or National
Guard, you can, in some situations:
•
Lower the interest rate on a mortgage, credit card, car
loan or other debt to 6% if military service affects your
ability to pay.
•
Above rule applies only to debts incurred prior to military
service/activation, not to debts taken on while on active duty.
•
Loans for which a nonmilitary spouse is jointly liable can
qualify for the rate reduction.
•
You need to send the lender a written request for the rate
reduction, which you can do on your own or with help from an
Armed Forces Legal Assistance Office.
http://legalassistance. law.af.mil
Financial Field Manual: The Personal Finance Guide for Military Families
Take Advantage of Your Benefits
Other Special Benefits
If you are deployed or have to move, the Servicemembers
Civil Relief Act (SCRA) gives you the right to:
• Terminate an apartment lease if you have orders for
a permanent change of station or are deployed to a
new location for 90 days or more.
• Terminate a car lease without an early-termination
fee if you are deployed for 180 days or longer.
• Terminate a cell-phone contract without penalty if
you receive orders to relocate for more than 90
days to an area that is not supported by the
contract.
• For additional information about SCRA protections,
visit www.servicemembers.gov.
Financial Field Manual: The Personal Finance Guide for Military Families
Take Advantage of Your Benefits
Other Special Benefits
Servicemembers’ Group Life Insurance (SGLI)
• Costs only 6.5 cents per $1,000 of coverage
per month, or $312 a year for the maximum
$400,000 – regardless of your age, health or
likelihood of being deployed.
• You can get $100,000 in coverage for your
spouse for as little as $60 a year if he or
she is under age 35.
• Visit www.insurance.va.gov/sgliSite for
details.
Financial Field Manual: The Personal Finance Guide for Military Families
Deployment Strategies
Before You Leave
1. Review estate-planning documents and beneficiaries.
• Work with the base legal affairs office to draw up a power
of attorney that gives a loved one or trusted friend
authority to handle finances while you’re gone.
•
A general power of attorney gives your representative
broad powers over financial transactions. Or you can use a
power of attorney limited to specific transactions, such as
buying a house while you’re deployed.
•
Update your will.
•
Update beneficiary information on your life insurance, TSP
and IRAs. Remember: Beneficiary designations legally
supersede a will.
•
Visit http://legalassistance.law.af.mil to find a legal
assistance office near you.
Financial Field Manual: The Personal Finance Guide for Military Families
Deployment Strategies
Before You Leave
2. Save on Auto Insurance
• You can lower auto insurance premiums by about 75%
while deployed by eliminating liability and collision
coverage on a stored vehicle.
• Keep comprehensive coverage, which will pay if your car
is damaged or stolen.
• Ask insurer about specific rules and other potential
breaks in your state.
3. Suspend your cell phone service. (See previous slide on
discontinuing without penalty.)
4. Set-up a Bill-Paying Plan.
• Sign-up to have your bills paid automatically from your
checking account or to pay them online.
Financial Field Manual: The Personal Finance Guide for Military Families
Deployment Strategies
Before You Leave
5. Get Organized
• Put together a “brain book” – a compilation of key
financial information that might be needed in your
absence.
• Inventory your financial accounts and how to access
them. Include a copy of your will, power of attorney,
medical directive and a letter of instruction should
anything happen to you.
• Notify your bank, credit union, credit-card companies and
other financial institutions about your deployment.
6.
Build-up your Emergency Fund
• Try to build up enough cash in an accessible account to
cover at least six months’ worth of expenses.
Financial Field Manual: The Personal Finance Guide for Military Families
Deployment Strategies
Make the Most of Extra Savings
Opportunities
1. Savings Deposit Program
• Deployed servicemembers can invest up to $10,000 and
receive 10% annual interest, compounded quarterly. This
deal lasts while you are deployed and for up to three
months after you return.
• You can’t contribute until you’re deployed, but should try
to stockpile some money beforehand so you can
contribute as much as possible as soon as you are
eligible.
• For more information, visit the Savings Deposit Program
at the Defense Finance and Accounting Web site:
www.dfas.mil/militarymembers/payentitlements/sdp.html
Financial Field Manual: The Personal Finance Guide for Military Families
Deployment Strategies
Make the Most of Extra Savings
Opportunities
2. Higher Thrift-Savings Plan Limits
• Deployed servicemembers can supercharge
contributions to the TSP. Most participants are limited
to investing $17,000 in the TSP in 2012, but if you
receive tax-exempt pay while serving in a combat
zone, you can contribute up to $50,000 for the year.
3. Totally Tax-Free Income in a Roth IRA
• Tax-free combat-zone pay can go into a Roth IRA;
withdrawals in retirement are tax-free. A double tax
benefit that’s tough to beat.
Financial Field Manual: The Personal Finance Guide for Military Families
The State of Your
State-Tax Situation
1. Your legal residence for state tax purposes (domicile)
begins as your home state when you join the military .
. . and can remain the same regardless of where you
are stationed.
2. If you are stationed in a state with no state income tax
and choose to make that your home (with the intention
of settling there when you leave the military), you can
claim that state as your domicile.
• Doing so would shield you from state income tax on
your military pay even when stationed in a state
that imposes state income tax.
Financial Field Manual: The Personal Finance Guide for Military Families
The State of Your
State-Tax Situation
1. New rules expand state-tax relief to cover husbands
and wives of servicemen and servicewomen.
2. A spouse who has the same domicile as a
servicemember can maintain that legal residency if
the couple moves to a new state under military orders.
• His or her civilian pay will be taxed under the rules
of the domicile, not the state where they actually
live.
Financial Field Manual: The Personal Finance Guide for Military Families
Smart Home-Buying (and Selling)
1. Key Home-Buying Decisions
• Your housing allowance is tax-free. See the Basic
Allowance for Housing – BAH – by rank and zip code, at
www.defensetravel.dod.mil/site/bahCalc.cfm
• Consider buying only if you plan to stay put for at least
three years – five is better.
• Limit housing costs to no more than 30% of take-home
pay.
• Consider the home’s rental possibilities as part of the
buying decision, in case you are unable to sell when you
leave the area.
• Try to hold mortgage payments to a few hundred dollars
less than the BAH for someone of similar rank in the
area. This way, you’re likely to have a pool of potential
renters.
Financial Field Manual: The Personal Finance Guide for Military Families
A Smooth Return to
Life as a Civilian
1. Prepare for a bigger tax bite
• If your state of residency while in the military has
no income tax, moving as a civilian to one that does
could be quite a financial shock.
2. Replace your life insurance
• Servicemembers’ Group Life Insurance expires 120
days after you leave the military.
• For more information about SGLI an VGL, please
see www.insurance.va.gov/sgliSite
Financial Field Manual: The Personal Finance Guide for Military Families
A Smooth Return to
Life as a Civilian
3. Replace your health insurance
• If you retire after 20 years in the military, you’ll
qualify for health care in retirement.
• If you leave before serving 20 years, healthinsurance premiums can be surprisingly steep.
• If neither you nor your spouse has a job with health
insurance, you can sign up for the Continued Health
Care Benefit Program (CHCBP) for up to 18 months.
• You have 60 days after you leave the military to
enroll in the CHCBP, which costs $1,065 per quarter
for individuals or $2,390 for three months for
families.
Financial Field Manual: The Personal Finance Guide for Military Families
A Smooth Return to
Life as a Civilian
4. Protect your TSP
• You can maintain your account after you leave the
military. Or, you can roll the balance into a new
employer’s 401(k) or an IRA.
• If you roll TSP money into another plan, keep track
of any contributions made with tax-free combat
pay. A portion of each withdrawal from the new
plan will be tax-free to account for the tax-free
contributions.
5. Build your emergency fund
• A stash of accessible cash is more important once
you move into a civilian job that may be
susceptible to lay-offs.
Financial Field Manual: The Personal Finance Guide for Military Families
A Smooth Return to
Life as a Civilian
6. Take advantage of transition and education resources
• Contact the transition office at your installation to
learn the procedures you must follow when you
leave the military, the benefits you’ll receive and
the resources available to help.
• Talk with someone who has already left the military
and ask about financial surprises.
• The Department of Labor’s Veterans’ Employment
and Training Service program is packed with
resources to help veterans find jobs. Please visit
www.dol.gov/vets
Financial Field Manual: The Personal Finance Guide for Military Families
Contact Information
• Presenter’s Contact Information
• Investor Protection Trust
www.investorprotection.org
Financial Field Manual: The Personal Finance Guide for Military Families