May is Military Appreciation Month which means it is a special time for our team to celebrate and recognize those who have provided military service to our country. Military members face unique challenges as part of their daily lives, such as deployment to conflict zones, assignments overseas, and a lifestyle of constant change. This can make it difficult for them to set aside time for planning finances. Fortunately, there are special tax breaks and other financial benefits that are unique to service members that can help to improve their financial life. Here are our top five tips from our team of Metro-Detroit Area Financial Advisors:
Tip #1: Take Advantage of ‘The Thrift Savings Plan’ and a Roth TSP
Have you heard of ‘The Thrift Savings Plan’? This plan is a great way, specifically for military members, to save for their retirement. As a military member, you may also have access to a Roth TSP, which acts similar to a Roth IRA but includes less income restrictions. By contributing to a Roth TSP, you are able to withdraw money that you contribute to your account tax-free after you enter retirement.
Tip #2: High Interest That Can Help Save
Another useful program to take advantage of is ‘The Savings Deposit Program’ which allows military members in designated combat zones to deposit up to $10,000 plus earn up to 10 percent in annual interest.1 This could be a great tool for boosting your savings for future use. Comparatively, it’s common to find savings accounts at various banking institutions that offer below one percent in annual interest rates.
Tip #3: Tax-Free Deposits & Withdrawals
If you receive tax-free combat-zone pay, you may want to consider saving in a Roth IRA. This will give you the opportunity to deposit tax-free income and make tax-free qualified withdrawals once you are retired. You will also be able to withdraw contributions to a Roth IRA at any time, without the income taxes or penalties.
Tip #4: Take Advantage of Your Education Benefits
There are many useful benefits to the Post-9/11 GI Bill which will fully cover the cost of in-state tuition for up to 36 month including housing fees and even $1,000 a year that can be used towards school supplies and textbooks. Military members may also transfer their benefits to their spouse or children if they do not plan on personally using them.
Tip #5: Low-Cost Life Insurance
Have you heard of ‘Servicemembers’ Group Life Insurance, also known as SGLI? SGLI offers automatic coverage to active military members which includes coverage of up to $400,000. This coverage also includes traumatic brain injury and conditions like blindness and amputations. If you’re eligible to receive this benefit, you may be automatically enrolled in the program. Some active military members may also have additional life insurance options that are available to them depending on their status or branch. If you are an active military member, you will want to review your options to ensure that your coverage is up-to-date.
Beyond special programs and benefits, there are many other steps military families can take to empower their financial future and get their financial life in order.
- Set a Financial Goal: Just like any great military mission, success starts with outlining the goals that you want to achieve. Be sure to pick goals that are timely, realistic, and can easily be measured.
- Establish a Budget: A budget is essential to any financial plan and will serve as the foundation for your financial success. Putting together a weekly or monthly budget will help you to control impulsive spending that could lead to debt down the road.
- Always Pay Yourself First! It’s important to decide how much money you will need to start saving in order to reach your financial goals. Once you have determined a dollar amount, deduct this amount from your paycheck and budget the rest of your income to live within your means. This step can be difficult but it is crucial to planning your financial future.
- Set Aside an Emergency Fund Unforeseen events are common in the lives of military families. That is why it is important that you have established an emergency fund that allows you to be prepared and ready, should any unexpected changes arise.
- Control Your Debt In order to truly be financially healthy, you will need to steer clear of debt. This is one of the greatest dangers to future financial independence for you and your family. Make sure you are making every effort to pay down high-interest debt like credit cards or personal loans.
Our team of financial advisors encourage you to continue to think about your financial goals! Taking action today will be your first and most important step toward achieving financial wellness. As you begin this journey, be sure to investigate your benefits and take full advantage of all financial opportunities that are offered to you as a military member. This will make it possible for you and your family to live your best financial life!
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.