If you serve Having served the military – or in the past – you have special financial benefits for yourself and your family. And the new rules make these programs more valuable. But many people do not make the most of these important financial perks and may not even feel they are eligible. The following strategies can help you reap special military benefits save for later, Protect your income, pay for college for yourself and your children, save money on mortgages, reduce interest rates on your loans and make the most of legal protection for the military.
- New rules for retirement savings.
- 10% interest guarantee for deployed service members.
- Lower life insurance costs.
- Long term education benefits for you and your family.
- Large mortgages with no down payment.
- Legal protection for service members.
New rules for retirement savings
Army members have one of the lowest cost methods Save for retirement – Savings Savings Scheme – and new rules make TSP even better. If you are receiving tax-free income in a war zone, you can contribute from $ 19,500 to TSP in 2020 (or $ 26,000 for 50 or more) or $ 57,000.
TSP has never provided an employer match for service members in the past, but that changed in 2018. Those who join the military in 2018 or later, or who joined from 2006 to 2018 and were elected into the mixed retirement system, can now make matching contributions from the Department of Defense. To get a full match, you must contribute 5% of your income to TSP. It is free money. And TSP can still be a valuable way to save, even if you’re not in a blended retirement system and don’t match. “It’s such a well-managed, low-cost way to save retirement,” says Ted Digges, captain of the Retired Navy and executive director of the Penn Mutual Center for Veterans Affairs of the American College of Financial Services. “Everyone on active duty should consider putting money in the TSP.”
You can either make tax-deductible contributions to TSPs, which are tax-deferred and taxable upon withdrawal, or you can make Roth TSP contributions, which no longer reduce your taxable income , But can be tax-free in retirement. Many longtime service members do not realize they are eligible to contribute Roth, which became an option in 2012.
“I feel strongly that our servicemen should consider Roth,” says Digiz. “You pay tax now, but you will be thankful in the future because most people on active duty are in the lower tax bracket right now, as they will be later and all of that increase will be tax free.” Different Roth Ira, There is no income limit to be able to contribute Roth TSP.
You can choose from six investment options in your TSP, including funds investing in large or small companies, international companies, bonds, government securities, or a lifecycle fund that creates a diversified portfolio based on your investment timeframe .
Scheff Cook says, “Some of the most common misconceptions I see are people not contributing to their TSPs, not contributing enough to get a full match or leaving all their money to the G Fund , ”Financial Readiness Manager for the Finara Investor Education Foundation. The G fund invests in government securities and has the lowest risk, but stock funds reduce the potential for long-term growth. The Cook Life Cycle Fund (L Fund) gives priority to Target date fund With a portfolio based on your investment time frame. The L fund starts with most of the money in the stock fund when you are young, and gradually becomes more conservative as you get older and closer to retirement.
TSP recently changed its rules to provide more L fund options. You select the fund closest to the plan to start withdrawing money in retirement, which may be much less than the year when you take a civilian job before you stop working. In the past, TSP only offered L funds in 10-year increments, such as L2050, L2040, L2030 and L2020, which may make it difficult to match the fund with your deadline. Beginning July 1, 2020, you now have L Fund Options for every five years.
TSP withdrawal options were also recently changed. In the past, withdrawal rules for TSPs were much more limited than those for 401 (k) and other retirement-savings plans. After taking a partial withdrawal, you must either cash the entire account or convert the money into an income stream. Many people may roll their TSPs onto an IRA when they get close to retirement. But the rule changed in September 2019 to make TSP withdrawals more flexible, removing restrictions on partial withdrawals and making withdrawal options much like 401 (k) s.
10% interest guarantee for appointed service members
Service members who are deployed to the war zone can contribute to the savings deposit program, which sounds great: it is true that you can deposit up to $ 10,000 in this account while you are stationed and on your return. Up to 90 days, which earns 10% annual interest. Patrick Beagle, a retired Marine helicopter pilot who is now a Certified Financial Planner in Springfield, Virginia, has worked with a number of young service members who knew they would be stationed in the Persian Gulf within a year and Working toward making up to $ 10,000 in savings. One can avail maximum investment in this program.
The process of getting started is tricky as you will have to deposit through cash, check or allocation after deploying the money. The finance office in the theater can help you set up an account. See Savings deposit program Fact sheet for more information.
Low life insurance cost
Army members have access to low cost Life insurance Servicemembers’ group life insurance, or SGLI, and through premiums were further reduced in July 2019. Now you can get life insurance of $ 400,000 for 6 cents per month for coverage of $ 1,000 per month, which will reduce the annual income for maximum coverage. From $ 336 to $ 288. These premiums apply regardless of your health and risk. See VA’s Life Insurance Page For details
Service members may also receive coverage of $ 100,000 for their spouse, a premium of $ 54 per year for spouses under 35, and higher for older spouses.
You can only keep SGLI while in the army, but after you leave you can sign up for Veterans Group Life Insurance. As you get older, the premium for this coverage increases greatly and increases. It is a good idea to compare the costs of purchasing coverage on your own before leaving the military. If you are healthy, you can get a better deal with private insurance, but if you have health issues, VGLI can be a good option. See VGLI page For eligibility and deadlines.
Long term education benefits for you and your family
Post-9/11 GI bill included Full cost of state tuition and fees Up to 36 months in public colleges, or up to $ 25,162 for the 2020-21 school year for private colleges. It also provides money for books and supplies, and you can get a housing allowance if you go to school for more than half the time. You can use the funds for undergraduate and postgraduate degrees, vocational and technical training and other qualified programs. (Use GI Bill Comparison Tool Seeing qualified schools and estimating profit.)
“There is impressive flexibility in the way you are able to reap the benefits of the GI bill,” says Didi Dorsett, a retired Naval Intelligence Officer who is now a Certified Financial Planner in Ocuwon, Virginia. A few years after leaving the military, she used her GI Bill benefits to pay for the Financial Planning Certificate Program at Georgetown University. She says the benefits of the GI bill may also be timely for veterans who have lost their jobs this year. “Former or retired service members, who may lose jobs due to the economic upheaval caused by the COVID-19 epidemic, take training in a different career field or take some refresher courses to build their resume Can start applying for. Again, “she says.
To qualify for maximum benefits, you must serve for at least 36 months on active duty (or if you have been discharged for a service-connected disability). Service members and veterans were originally supposed to use their post-9/11 GI bill benefits within 15 years of leaving service. However, the 2017 Forever GI Bill eliminated this deadline for those whose service was terminated in 2013 or later. See va Post-9/11 GI Bill Page for more information.
Long-term members receive a special benefit: they can transfer post-9/11 GI bill benefits to their spouse or children. To qualify for transferring your benefits, you must generally serve for at least six years and agree to serve four more. Spouses can use the transferred benefits immediately, but children should wait until you have served at least 10 years. Children must use the benefit before the age of 26. For more information, see V.A. Transfer Your Post-9/11 GI Bill Benefit Guide.
Also, many colleges participate in the Yellow Ribbon Program, which provides scholarships to supplement GI bill benefits for out-of-state or private colleges with tuition above the maximum. The Yellow Ribbon Program is currently only available to the elderly and children who are using transferred benefits, but will be extended to active duty service members and spouses starting August 1, 2022. See va Yellow ribbon program page for more information.
Larger mortgage with no down payment
VA loans have a long history of providing competitive mortgage rates for service members and veterans, and enable them to purchase homes with no down payment to purchase private mortgage insurance. Maximum VA loan size has increased significantly over the last several years – see VA Buy loan page for more information. If you have a service-connected disability, you may not have to pay VA funding fees.
If you already have a VA loan, you may be able to lower your mortgage rate with your interest rate reduction refinance refinance loan, Shaye says. See VA’s factsheet for more information.
Legal protection for service members
The Servicemembers Civil Relief Act, or SCRA, provides valuable legal protection for service members. The most important is the 6% interest rate cap The loan Withdrawals before military service – Mortgages, credit cards, car loans, student loans, home-equity lines of credit and business loans. The cap only applies to loans you took before you were on active duty, so it could be particularly helpful for new service members who had high-interest loans before joining service, or reserves. Members of which are called active duty. This rate is reduced to 6% while on active duty, and not just by delay.
You will need to contact your lender to reduce the loan rate, but the process is usually simple. Most lenders have a SCRA form to submit with your military orders. For example, the Navy Federal Credit Union SCRA page and benefit request form.
SCRA also gives you the right to terminate a residential lease if you receive a permanent change of station orders or if you receive deployment orders for 90 days or longer. You can terminate a car lease in many circumstances, such as if you receive orders to deploy for 180 days or longer. These lease termination provisions helped a lot of military families whose plans were changed earlier this year due to stop-move orders.