Recently, a financial planner highlighted for Forbes.com five financial planning tips for military members and veterans. While there are strict rules about how financial professionals work with members and veterans of the Armed Forces, she provides some general, thoughtful and valuable advice.
1. GI Bill. These education benefits can be used by either a veteran or family member and cover up to 36 months of in-state tuition or a capped amount for private institutions. The most important thing to know there is that a military member must serve another four years after requesting this benefit, so it’s best to ensure you request it sooner rather than later.
2. Maximize Your Residency. We all know that different states have different taxes, but if you are active-duty armed forces personnel, there are some loopholes. If transferred from one state to another, an active-duty military employee may retain legal residence in another state. If you’re thinking about using GI Bill education benefits or merely looking to claim residency in a more tax-friendly state, that can be a huge advantage.
3. Think Through Your Investment Options. The Thrift Savings Plan offers military members one of the lowest-cost retirement savings plans available. Any contributions reduce your taxable income, and there are added benefits for deployed personnel. Deployed personnel can also take advantage of the Savings Deposit Program, investing up to $10,000 per deployment with a 10% annual interest rate compounded quarterly. If you’re deployed and receiving combat pay, you should also think about a Roth IRA. While tax laws can change at any time, for now at least, all contributions to a Roth IRA are tax-free and even withdrawals can be tax-free, as long as they are qualified withdrawals. For either option, ensure you speak with a qualified professional to discuss your options.
4. Maximize Debt Relief Tools. The Service Member’s Civil Relief Act caps interest rates for service members’ loans taken out prior to active service. Additionally, if a service member is transferred to a new station, they have the option, unlike civilians, to terminate a house or apartment rental agreement. There are certain exceptions, so make sure you know and understand the rules.
5. VA Home-Loan Program. The VA has one of the best programs available for home loans. For veterans or military members, competitive loan rates are made available and because the VA guarantees up to 25% of the loan payment, it’s one of the only ways to purchase a home without mortgage insurance or a down payment.
There are many ways to maximize the benefits provided for military service members. These are just some of your options. Ensure that you speak with a qualified, knowledgeable representative to maximize your benefits.
Reference: Forbes.com (July 3, 2016) “Six Financial Planning Tips for US Veterans And Those Who Serve”