Big is a relative term. If I mention big money, you might immediately think a life of luxury following a multi-state lotto win. No, military service won’t create that type of “big.” And no, I can’t see anything positive coming from an attempt to renegotiate your military base pay. However, I do think military service can create financial security for a lifetime.
Here are seven factors that could play a role in achieving financial freedom:
- Regular pay increases. Every pay increase is an opportunity to put money that’s not part of your spending routine to work. Whether you’re trying to pay down debt, build savings or invest for the future, military life provides frequent chances to get things going. Think about it: You’ve got an annual cost of employment increase in January, time-in-service pay increases every couple of years and promotions. That’s a lot of opportunities to do financial good.
- Top-notch retirement benefits. The number of folks in the civilian sector receiving inflation-adjusted pensions is minuscule. You’ve got the opportunity to earn one in the military and that could be worth hundreds of thousands of dollars (or more!) over your lifetime.
- Reasonable health care. It’s hard to celebrate health care because often we seek it out under dire circumstances. According to the Kaiser Family Foundation, the average American worker kicked in $476/month toward health care coverage in 2017. With no enrollment fees or in-network copayments using TRICARE Prime, an Active Duty family would pay a lot less. In that context, the military health care value proposition is one more step on the road to financial security.
- PCS resets. Moving, and sometimes moving a lot, is one of the significant challenges military families face. Along with regularly turning your family’s life upside down, these moves can present financial challenges. However, taking the glass-half-full perspective, a move can provide an opportunity to reinvent yourself and your money habits. Whether it’s an opportunity to make a better housing decision, tighten up your budget or add some additional income through new employment opportunities, moves can inspire a fresh start.
- Tax bennies. Tax-free housing and subsistence allowances, special capital gains rules when you sell a home, tax-free combat pay, favorable rules for deducting moving expenses, and free tax preparation assistance are all worth at least a golf clap.
- Deployments. Like the regular requirement to uproot your family and move from one duty station to another, deployments cut both ways. However, on the financial front, allowances make your paycheck a little fatter, and reduced taxes and perhaps fewer expenses at home all add up to an opportunity to make financial hay. If you’re looking to save, check out the 10%-earning DoD Savings Deposit Program. And if you’re investing for retirement, the opportunity to use the Roth TSP and/or a Roth IRA offers the very special opportunity to take tax-free combat zone income and invest it in a tax-free Roth account. Taken together, you have the potential to accumulate a big pile of money that’s never taxed. All this is worth considering and may help put a positive financial spin on deployments.
- Education benefits. My son didn’t celebrate the completion of his third year of service. However, he will be celebrating the full Post-9/11 GI Bill benefits earned through that service. And his nephew will benefit from the 529 plan funds that will be freed up to help the next generation of our family. Education benefits associated with military service change the lives of those who wear the uniform. That’s worth a full-out stadium wave.
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