Marc A. Hebert's Money Sense: Benefits for military families can help with financial mattersBy MARC A. HEBERT
September 08. 2017 7:32PM
Military families face many financial challenges. Fortunately, there are programs to help ease these burdens. Here are just a few to check out.
Saving for retirement is usually a primary goal and planning is a must. You should know the amount of military pension you might expect to receive. Your pension, even with the addition of Social Security benefits, might not provide enough money for a comfortable retirement. Extra saving is important, and the government's Thrift Savings Plan (TSP) is the place to start doing so.
The TSP is a retirement savings plan for federal employees, including service members. Its function is very similar to the 401(k) plan offered by private-sector employers. Contributions to the plan are taken from your paycheck on a pre-tax basis, so your taxable income is lower. In addition, any earnings accumulate tax-deferred until withdrawn in retirement, and then they become taxable.
Once you leave the military, you can't continue to contribute to the TSP. However, you have the option of keeping your money in the TSP or rolling it into another type of retirement account. For more information, see www.tsp.gov.
Another financial benefit available to service members is the Defense Department's Savings Deposit Program (SDP). If you are deployed to a designated combat zone for at least 30 days, you have a chance to save for your goals at a guaranteed interest rate by participating in the SDP.
The SDP pays you a 10 percent annual interest on deposits up to $10,000 while you are deployed. You will earn this interest rate on your money for up to 90 days after you return home. You may deposit all or part of your unallocated pay. Interest compounds quarterly and is taxable.
Generally, you can withdraw funds and close your account only after you leave the combat zone and are no longer eligible to participate in the SDP. Emergency withdrawals may be allowed. Your local military financial office will have more details.
The education benefits provided by the Post-9/11 GI Bill are very lucrative. The benefit pays the full cost of in-state tuition and fees at public colleges for up to four years or up to a certain maximum per academic year if you attend a private college or foreign school. It may also provide funds to help cover the cost of certification or other vocational training programs.
Service members who make a long-term service commitment have the opportunity to transfer unused education benefits (up to 36 months' worth) to their spouses and children. To find out more, visit the website www.benefits.va.gov.
Military families also can benefit from VA loans not requiring a down payment when financing a home. Borrowers aren't required to have mortgage insurance either. While VA loans are offered through private lenders, the VA guarantees a portion of the loan, which might make it easier for you to obtain a loan or qualify for one on more favorable terms. Check around for all of your options before taking the VA loan, which comes with the drawback of funding fees. The website www.benefits.va.gov has more information.
Service members also may protect their families with term life insurance, which is available through the Servicemember's Group Life Insurance program (SGLI). Spouses and children have available a related program, Family Servicemember's Group Life Insurance (FSGI).
When you leave the military, you can apply to convert your policy to the Veterans Group Life Insurance (VGLI), which provides renewable term coverage. It may also be converted to an individual policy. Make sure to carefully review your options - premiums, costs and features - and if term insurance will meet your needs. Visit www.insurance.va.gov for more information.
Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at email@example.com. Your question and his response might appear in a future column.