Military Benefits: A Planning Overview
The U.S. provides military service members with excellent benefits, but they are often challenging to understand and navigate.
The U.S. Department of Defense (DoD) provides uniformed service members with some of the best benefits in the world. But they can be challenging to understand and navigate given the complex range of programs, eligibility requirements, and policies that span across different administrative agencies.
As a former active-duty service member who transitioned to reserve status, I’d like to help other uniformed service members—from soldiers who’ve just enlisted, to those who’ve transitioned from active to reserve status and may soon be approaching retirement—with an overview of the most crucial components for securing your financial future. Understanding how these benefit programs work can be especially crucial when transitioning your military status.
Each service member will have their individual set of circumstances and should seek personalized guidance along the way. When working with institutions and providers outside of the DoD, it is suggested that you choose specialists who know the military systems well and can help ensure you’re maximizing your eligible benefits according to your specific financial considerations. Below are a few resources that offer more specialized help.
The Thrift Savings Plan (TSP) is a key component of the new Career Status Bonus/REDUX (CSB) system. Members who entered service between 1986 and 2018 had the option to switch to CSB, and many chose to do so for increased control over their retirement funds and investments. The TSP functions similarly to a 401(k) plan: Participants direct part of their income into a retirement account and elect investment options. After you separate from service, these proceeds can be rolled over, allowing for more management flexibility and more investment options. Find further details at www.tsp.gov.
Once uniformed service members complete their minimum threshold for time in service, they become eligible for pension benefits. This threshold depends on several factors, including your ability to reach the relevant standard for years of qualified service. In some cases, members are selectively retired early for administrative or health-related reasons. For example, I have several friends who retired from Army Special Operations at 18 years of service, as opposed to a typical 20-year threshold, because they were injured in the line of duty and could no longer fulfill their job.
The formulas that determine pension benefits use several variables including rank/grade (pay scale), length of service, type of years (active/reserve), as well as any special programs that may apply. Find useful tools and calculators for active members at Calculators (defense.gov).
Reserve members need to take extra care in ensuring their records are correct. The DoD and its various agencies are continually trying to improve their personnel record keeping, but members should retain every pay stub and service-related document as a backup. They should also check periodically that their records are correct (I’d suggest once a year as a simple guideline). Unfortunately, it’s common for reserve members to find years of eligible service missing from their records. Any incomplete or inaccurate information needs to be updated at the administrative level to ensure pension and other benefits are calculated correctly.
Disability is the toughest benefit category to navigate because it requires the documentation of your physical status throughout your military service. It’s best to keep your own set of medical records from the start—and this becomes extremely important if you are injured, whether in combat or not. The Med Pros system (DoD medical records) is not integrated into the VA (Veterans Affairs) at this time. When applying for disability, you’ll need to provide these records, and possibly any civilian or other medical records for evaluation.
The disability system assesses a percentage, up to 100%, of salary for determining a service member’s disability payments. Some members may experience lesser disabilities due to their job, e.g., airborne soldiers jumping out of planes and fracturing their back or wrist. Other members may experience major disabilities from injuries sustained in combat, e.g., an explosive device causing amputation of an extremity. The total assessment (percentage) of your physical impairments can be increased over time based on the number and severity of your injuries.
Applying for disability benefits is often a frustrating and confusing process that involves setting up the necessary appointments, filing out all the required documents, and ensuring that they have been appropriately administered. I encourage service members to seek help from a specialized service, such as Veterans Guardian, for assistance.
For active military, the DoD system provides healthcare directly and with preferred partners. But when transitioning from active to reserve status, you will have more options to consider, including the DoD Tricare programs. In most cases, the Tricare plan options cost less than comparable civilian plans. For instance, a Tricare West HMO plan covering a service member and their family currently costs about $250 a month. However, you’ll still want to compare the rates and combinations available for your circumstances, e.g., options available through a civilian employer plan or a spouse’s coverage.
VA Home Loans, which have no down payment requirements, put homeownership in easier reach than most mortgages. Figuring out the right time to buy a home, especially if deployed, can often be the biggest challenge in taking advantage of the program. Conventional mortgage lenders, e.g., banks and credit unions, handle the applications for these loans. The VA backing ensures good terms and enables competitive rates, but the agency advises shopping around to compare lenders. A home purchase that’s appropriate for your circumstances can be a great investment, but ownership requires responsibility along with many other considerations. Discuss the possibilities with a financial advisor so that your decision fits well with your long-term financial plan. Learn more at benefits.va.gov/homeloans/.
Property & Casualty Insurance
When you purchase a home or a car, you will of course need to insure it. These policies aren’t specific to service members, but I’m including this product category to illustrate how working with people who really understand military service can make a significant difference.
In 2012, I was on a mission in a remote area of Afghanistan, when my car back in Arizona, was hit while parked. Two weeks later when I found out about the incident, the car was already repaired! I had purchased my auto policy through a company that specializes in providing insurance and other financial services to those who have served in the armed forces. I had given my father a limited power of attorney to handle my affairs while I was deployed and had listed him on my policy. The representatives understood the situation and were able to work with my father to get my car fixed quickly and easily. There are many companies that offer property and casualty insurance, but only certain ones know how to handle situations for military personnel.
That auto insurance decision went well, but I learned many other lessons the hard way when dealing with my own benefits, so I hope I’ve helped you gain a better grasp of these programs and how to troubleshoot potential hassles. For further military benefit questions, Military One Source can typically point service members in the right direction. Ultimately you should seek guidance from a Certified Financial Planner® who can help you form a comprehensive financial plan that makes the best use of these generous benefit programs for your long-term financial freedom.
Thanks to all of you who have served this great nation and the families that have supported you along the way.
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