- Military benefits are generous yet complicated. Knowing what is available and how those programs work is the first step to ensuring you make the most of them
- The military offers a long list of benefits including education, housing, healthcare, insurance and plans for retirement
- Decisions around military benefits can have long-term implications for you and your family’s financial security, healthcare access, and educational opportunities
- Having a plan in place can help to ensure you get the most out of the benefits you’re eligible for
As a member of the military, past or present, the government offers benefits that can help you and your family establish a healthy financial foundation in key areas of your life. Knowing that these benefits exist is a big part of the picture, but understanding the rules around them can help you effectively take advantage of them and unlock the value they can provide.
Servicemember benefits range from opportunities to cover education costs, to programs that assist with home purchases, access to retirement funding as well as insurance options.
While these benefits are designed to be generous, they typically follow a unique structure and are often complex and confusing. Eligibility for different programs can vary depending on a number of factors, including date of enlistment, length of service, and current status.
The first step toward getting the most out of these benefits is knowing what is available and understanding how the programs work. The following is an overview of some key benefits servicemembers and veterans should know about.
A college education can expand graduates’ job opportunities and increase lifetime earned income. To support servicemember’s educational goals, the Post-9/11 GI bill offers free postsecondary education for you or your family.
Post-911 GI Bill
The Post-911 GI bill covers public in-state college or vocational school tuition, and fees. Given that tuition at private or out-of-state public schools typically costs more by comparison, students are required to pay the difference. An exception is private schools that subsidize incremental costs through their participation in the Yellow Ribbon Program.
Servicemembers may transfer unused tuition benefits to a spouse or child via written request. The program also offers scholarships to dependents of military personnel killed in the line of duty.
Key takeaway: In an environment where the cost of college is skyrocketing, the possibility of free education is a major potential benefit. The tradeoffs of paying more to attend a private or out-of-state college should be considered within the context of one’s long-term financial goals, including potential career plans and what level of expected earnings that brings.
Housing and VA loans
Home ownership has long been considered the American dream. It is also a way to build wealth. However, coming up with the necessary down payment can seem like an impossible challenge. For military personnel, the government offers a couple of different ways to make home ownership more affordable.
VA home loan benefit
The VA Home Loan benefit allows servicemembers to qualify for a loan with less cash required at closing, when compared to loans eligible to civilians. Through the program a house may even be purchased without any down payment, or through private mortgage insurance, because the VA guarantees the loan. Competitive interest rates and reduced closing costs keep the total cost of the loan relatively low as well.
Property tax deductions
Property tax deductions are another way the government helps veterans reduce the cost of home ownership. Most states provide disabled veterans with some level of property tax relief. Qualifications and the value of the tax exemption can vary by county and state.
Key takeaway: Deciding whether or not to buy a home is a major financial decision. It’s important to consider how long you plan to stay in one location. If you could end up moving in the next five years, it may make sense to wait until you are ready to put down more permanent roots. Even when mortgage costs are more affordable, if house prices fall you risk losing money should you have to sell in a down market.
Healthcare and medical benefits
Medical expenses are the number one cause of bankruptcies in the US. This makes healthcare benefits provided by the military particularly important.
Tricare group health insurance
The healthcare program offered to servicemembers is called Tricare. Four different plans are offered with eligibility dependent on factors such as whether you are in the reserves, are active or inactive military status, and if you are age 65 or older.
- Active-duty military must enroll in the HMO plan, known as Tricare Prime, which covers all in-network healthcare expenses. Family members can opt for either Tricare Prime or the PPO, called Tricare Select.
- Once a servicemember or veteran turns 65 years old, Tricare converts to Tricare for Life which serves as a Medicare supplement policy, meaning it will help cover out of pocket expenses and some medications. You must have Medicare Part A and B to qualify.
- Premium-based plans are also available for inactive reserve service members.
- Out of pocket expenses will vary depending on the selected coverage.
Key takeaway: Medical expenses following an injury or surgery have a way of spiraling out of control, especially as people get older. Securing the proper amount of health insurance is essential. It’s also vital to understand how your coverage works, including out-of-pocket expenses and what is considered “in-network” coverage.
Long-term care insurance
Long-term care expenses can be shockingly high and cause a disastrous hit to one’s financial well-being. The probability is that more than half of Americans over the age of 65 will need some form of long-term care. Military benefits provide a couple of options to choose from as a means of insuring against this potential future expense.
Options for active-duty members of the military and veterans include two different long-term care options, as well as life insurance.
Federal Group Long-Term Care
The first option is a policy known as Federal Group Long-Term Care.
Servicemembers, and their spouses, as well as their adult children, parents, parents-in-law, and stepparents are all eligible to purchase a policy.
A pre-packaged policy is one option. Also available are customized policies, in which the employee can select a $100-$450 daily benefit, a two-, three- or five-year benefit period. These include cost of living adjustments on a percentage or future-purchase basis, and underwriting is typically required.
VA coverage is also available, and serves as what is essentially a safety net. In this case, you aren’t required to pay premiums for the service. Instead, it’s available to those who are without alternatives, which may happen if you run out of money while covering your own assisted living expenses out of pocket.
The VA offers long-term care to veterans and their spouses through the Department of Veterans Affairs. This is relatively inexpensive, but is also typically considered a lower-quality option.
Availability will vary by state. Veterans are offered a bed in a facility based on availability, not location. If the offer is turned down, the veteran will be moved to the bottom of the waiting list.
Key takeaway: Quality long-term care can be staggeringly expensive, and assessing your family’s unique risks and needs can make the difference in quality of life during one’s golden years. Taking advantage of the military’s long-term care and life insurance benefits can be a cost-effective way to ensure you have the right protection for you and your family.
Military retirement plan
Having a good savings plan for retirement will determine both when you can retire as well as the quality of your future lifestyle.
If you have served or plan to serve at least 20 years in the military, you are eligible to receive a pension. The benefit amount will depend on when you enlisted, how long you served, and your base pay.
For the majority of servicemembers who serve fewer than 20 years, retirement planning will center around the Thrift Savings Plan (TSP) since, with limited exceptions, they will be ineligible for a pension.
Thrift Savings Plan
The Thrift Savings Plan is a tax-advantaged retirement and investment plan that is available to federal employees and servicemembers. It is a defined-contribution plan that is the federal equivalent of a 401(k) plan, with similar limitations and features.
The plan basically leaves building the account up to the participant. However, it does add a sweetener in the form of a match. The government provides an initial automatic 1% deposit and you have the opportunity for a 4% match on contributions. In order to get a 5% total deposit by the government, you would need to contribute 5% of base pay. Eligibility for the match doesn’t kick in until the servicemember’s third year of service.
Choosing the right fund, or mix of funds, is a varied process depending on the investor. It involves balancing your risk tolerance and retirement goals to support successful outcomes, so you can sleep comfortably at night.
Key takeaway: Being able to retire comfortably takes planning and proper saving. Maximizing the benefit of the government match can give the growth of your retirement nest egg a real boost. It can be an empowering process that gives you peace of mind while helping you to better understand future goals. For members of the military, this process is highly influenced by time served. Like most things in life, getting an early start is a major plus.
The appropriate choice of benefits is highly individualized and will change along with your life circumstances. Having a financial planner by your side can help you navigate the complexity of military benefits, weigh the tradeoffs, and make choices that ensure you get the most value out of your benefits while aligning with your goals and your family’s best interest.