12 Best Financial Benefits of Being in the Military
I recently stumbled upon a cool post on Kiplinger.com about the 10 Best Financial Benefits for Military Families. I thought it was a pretty good list, and even as a senior officer I’ve used a number of these benefits myself or made them part of our charity gifting plan. Here’s a run down of the 10 benefits (plus a few extra I had to add) and how I’ve used them in my financial life:
- Low-Cost Retirement-Savings Plan – The low cost of the Thrift Savings Plan (TSP) deserves to be #1 on the list. The TSP might be the best thing the government ever created. Its investment costs are so low that even Vanguard had a hard time matching them. Now that Fidelity has introduced free index funds, they are no longer the cheapest investments in town, but they are still a major benefit for those wearing the uniform and in federal service.
- 10% Guaranteed Return on Savings – Although I’ve deployed three times, I’ve never used this benefit, called the Savings Deposit Program. It allows those who deploy to invest up to $10,000 in an account that earns a guaranteed 10% return. It continues for three months after your return.
- Tax-Free Roth Deposits – While Roth contributions are normally after-tax, if you are receiving tax-free combat-zone pay your money goes into the Roth tax-free, and your contributions as well as your earnings come out tax-free, a double tax benefit.
- Free College for Yourself or a Spouse or Kid – As I recently discussed, I’ve got two kids and two GI Bills transferred to them. The value of this benefit is huge, although they recently changed the rules regarding transfers. If you’re within four years of retirement eligibility, you’re going to want to transfer the GI Bill ASAP. You can find all the details on the VA GI Bill page.
- Inexpensive Life Insurance – While there is a lot of debate on-line about whether it is better to use Servicemembers Group Life Insurance (SGLI) or get a private policy, I use SGLI. I probably don’t need it anymore, but I figure it is an insurance policy against my death at exactly the wrong time (like a 50% stock market dive). In the past, I used purchased insurance from Navy Mutual. Here’s our guide to how to buy life insurance in the military.
- State Tax Breaks – We’ve used this benefit to avoid state taxes on our military compensation ever since leaving Pennsylvania on military orders. Here’s a list of all the states and the veterans/military benefits they offer.
- Special Legal Protections – The Servicemembers Civil Relief Act (SCRA) provides legal protection for servicemembers, including an interest-rate cap of 6% on any loans you took out before you were called to active duty. This cap is especially helpful for members of the Reserves who are called to active duty and have to take a pay cut when they leave their regular jobs. Most recently I used the SCRA to get over $200 back from American Express.
- No-Money Down Mortgages – I’ve used a VA Home Loan to put no money down and avoid private mortgage insurance (PMI), and it was great. After thinking about it, I think you should strongly consider renting vs buying if you can’t afford a 20 percent down payment, but it is a nice option to have.
- Tax-Free Housing Allowance – When my wife was active duty, we were getting double bachelors allowance for housing (BAH), a situation Congress periodically talks about changing. That was nice. Even if you are only getting one BAH, it is definitely a benefit not offered in the civilian world. Much of your military compensation is not taxed, which is something you have to remember when comparing your military compensation to that of an equivalent civilian job.
- Low-Interest Loans – If you ever find yourself in need of a cash infusion due to a family emergency, visit Army Emergency Relief, Navy-Marine Corps Relief Society, Air Force Aid Society, or Coast Guard Mutual Assistance to see if they can help you out. The Navy-Marine Corps Relief Society gave me a small, interest-free loan early in my career. As a result, they became a major benefactor whenever I spend money on Amazon. They get 1.5 percent of anything I spend due to Amazon Smile.
- BONUS #11 – TRICARE – The original article only had 10, but I had to add #11, which is access to TRICARE. You just can’t find a similar healthcare plan for this low of a cost anywhere. As a retiree, you’ll pay less for a year’s worth of coverage than most civilians will pay for a month of coverage! Just check out the comparison chart on this blog post if you need convincing.
- BONUS #12 – Inflation Adjusted Lifetime Pension – Similar to TRICARE, try to find this benefit anywhere else. You just can’t anymore! A lifetime, inflation-adjusted, government guaranteed pension is hugely valuable and is one of the reasons it is easier to achieve financial independence and retire early in the military.