Financial Field Manual: Personal Finance Guide for Military Families

20 Pages·2012·2.95 MB·English

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H H H THE pErsonal financE guidE for miliTary familiEs H H H
s p o n s o r E d B y
C R E D I T C O U N S E L I N G S O L U T I O N S
H INTRODUCTION
CoNTeNTs
To U.S. Military Personnel
SAVING STRATEGIES
Investing in Your Future 1
and Their Families
FINANCIAL FRAUD
Protection From Scams
e are pleased to present specializes in providing consumers That Target the Military 4
the second edition of our with information needed to make wise
popular personal finance choices. BBB Military Line® specializes YOUR BENEFITS
Wguide for military families. in consumer education and advocacy Take Full Advantage
Renamed Kiplinger-BBB Military Line for military families. BBB is pleased that of Your Military Benefts 7
Financial Field Manual, it offers com- one of the first major initiatives of its
prehensive information and advice on centennial-year celebration is the BE PREPARED
critical issues facing you and your fam- Financial Field Manual. Strategies Before
ily. Financial turmoil impacts many This publication would not be possi- and After Deployment 9
Americans. For military families, con- ble without our ongoing sponsors: the
stant moves, deployments and other Defense Credit Union Council, Investor TAXES
uncertainties make navigating the eco- Protection Trust, Investor Protection The State of Your
nomic waters especially problematic. Institute and ClearPoint Credit Coun- State-Tax Situation 11
The goal of this guide is to inform your seling. Special thanks to Kimberly
decision-making with solid informa- Lankford, a contributing editor to Kip- REAL ESTATE
tion and helpful resources. linger’s Personal Finance magazine and Smart Home-Buying
In these pages, you will find practical, Kiplinger.com (and a military spouse) (and Selling) Tactics 12
easy-to-understand information to help for her role as lead writer, and Brenda
you prepare financially for deployment, Linnington, a military spouse, Army TRANSITION
make the most of new GI Bill opportu- veteran and mother of a soldier, who A Smooth Return
nities, protect your investments, buy directs the BBB Military Line program. to Life as a Civilian 14
(or sell) a home, minimize taxes, hold Finally, we’d like to thank The
down insurance costs, avoid financial McGraw-Hill Companies for gener- AT YOUR SERVICE
schemes that target military families ously providing the printing of the Financial Resources
and make smart decisions when you Financial Field Manual. McGraw-Hill for Military Families 16
transition to civilian life. and BBB Military Line are working
This guide is a joint effort between together to expand financial-literacy WORKSHEET
two organizations that have been help- and consumer-protection programs for Organize Yourself
ing consumers—including members military families as part of the White (Inside back cover)
of the military—for a long time. When House “Joining Forces” initiative and
the Kiplinger Magazine (now called have created an online training pro-
Kiplinger’s Personal Finance) was gram for military families that can be
launched in 1947, a driving motivation found at www.financiallitnow.org.
was to provide sound, unbiased Thank you for all you do in the serv- Editor in Chief: Knight A. Kiplinger
personal finance advice to military ice of our nation! We hope you find this Editorial Director: Kevin McCormally
personnel returning to the workforce guide useful and that you will call upon
Contributing Editor and Chief Writer:
after World War II. The Better Busi- BBB Military Line when you need as-
ness Bureau, established in 1912, sistance with marketplace issues. Kimberly Lankford

Design Director: Cynthia Currie
Senior Designer: Harrison Goodman

Copyright © 2012 by the Kiplinger Washington
Editors, Inc. All rights reserved.
Knight A. Kiplinger Stephen A. Cox
Published by the Kiplinger Washington Editors,
Editor in Chief President and CEO 1100 13th Street, NW, Washington, DC 20005
Kiplinger’s Personal Council of Better (202-887-6400).
Finance Business Bureaus
Kiplinger.com Cover: Stockbyte/Getty Images

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H SAVING STRATEGIES
Investing in Your Future
you are when you also escape state
start setting aside income tax).
funds for your future, And your contribu-
the easier it will be to tions grow tax-
build a healthy nest deferred until you
egg. And while you’re withdraw the money
in the military, there in retirement. That
are special investing could provide a hefty
opportunities and tax nest egg if you start
breaks to help you early; $10,000 con-
supercharge your sav- tributed this year
ings. It’s up to you to would grow to more
make the most of than $100,000 over
your options. 30 years, if your in-
vestment grows at
Thrift Savings Plan: an average rate of 8%
Autopilot Savings per year. The same
The government’s amount invested each
ervicemembers face financial issues that most Thrift Savings Plan is year for the next 30
people don’t experience: They have to move a great place to start. years would grow to
frequently—sometimes on short notice—and they Men and women in more than $1 million.
the military can in- (Although an 8% re-
Scan be deployed to combat zones for months or
vest in this low-cost, turn might sound like
years. But they also have access to valuable benefits and tax-advantaged re- pie in the sky, the fact
tirement-savings plan is that the annual av-
investing options not something. With the for federal employees, erage return of the
Take charge of
available to the gen- military, if you leave which is similar to a stock market since
eral public. Exploiting before 20 years, you something you can private company’s 1926—a period that
the opportunities can get nothing. Even if control: your own 401(k) plan. includes not only the
help secure your fam- you qualify, pension You can contribute recent Great Reces-
ily’s financial future. payments probably savings. While up to $17,000 to the sion but also the
won’t be enough to in the military, TSP in 2012, and even Great Depression of
Pension or Not cover your bills— more if you receive the 1930s—is nearly
Even though those you’re usually enti- you have special tax-exempt pay while 10%.)
who stay in the mili- tled to 50% or less of opportunities serving in a combat The TSP makes it
tary for 20 years or your base salary if and tax breaks to zone—up to a total of easy to put paying
more can qualify for you retire at 20 years $50,000 in 2012. Be- yourself first on auto-
a pension, it’s still im- (and more if you stay supercharge your cause contributions pilot. Contributions
portant to save on beyond two decades). savings. Make from your regular pay are deducted from
your own. In truth, See http://militarypay escape taxes, they each paycheck, and
few people actually .defense.gov for op- the most of your don’t lower your pay- steady investing can
stay in the military tions based on when options. check nearly as much pay off big-time. Say
long enough to claim you joined the service. as you might expect: you contribute $300
a pension, and, unlike Instead of worrying Contributing $10,000 every paycheck,
civilian pensions, about what might cuts your take-home which lowers your
there’s no “partial happen, take charge pay by just $7,500 if take-home pay by just
vesting” to guarantee of something you can you’re in the 25% tax $225 in the 25% tax
that workers who control: your own bracket (and even less bracket. Do that twice
leave “early” get savings. The younger if your contributions a month and you’ll
The Personal Finance Guide for Military Families // Financial Field Manual // 1
istockphoto.com
H SAVING STRATEGIES
save $7,200 for the investing options face an immediate tax offer no instant grati- out tax-free, a sweet
year. If you start at available. For a bill and, if you’re fication. But the de- tax benefit. If you
age 25 and contribute $100,000 portfolio, younger than 55 in layed gratification earn income but your
for the next 30 years, for example, you’d the year you leave the of doing without to- spouse doesn’t, you
you could end up with pay just $25 a year in military and tap the day’s tax deduction can also contribute
more than $900,000 investment-manage- account, you’ll gener- is sweet: All with- $5,000 to an IRA in
by the time you’re 55, ment fees. ally pay a 10% pen- drawals from a Roth his or her name.
if your investments The TSP is a tax alty, too. For more in retirement will be You can open a Roth
return 8% per year. shelter, so you don’t information about the tax-free, whereas IRA with a brokerage
And even if you owe tax on earnings rules, visit www.tsp withdrawals from firm, mutual fund or
leave the military at until you withdraw .gov. You’ll also find a regular IRA are insurance company,
age 40 after 15 years the money, and you a calculator there to taxed in your top tax credit union or bank.
of contributions and won’t ever be taxed help you project your bracket. Another ad- When selecting an
never add another on contributions from future account bal- vantage of the Roth IRA administrator,
dime to your TSP ac- tax-exempt combat- ance and see the is that you can with- look for low fees and
count, you could still zone pay. (A portion power of long-term draw contributions a range of investment
end up with about of every withdrawal compounding of at any time tax- and choices. If you have
$700,000 by age 55 will be tax-free to earnings. The power penalty-free if you 20 or 30 years until
(again, assuming an protect the tax-free of money making get in a pinch. retirement, it’s usu-
average return of 8%). status of combat pay.) money is wonderful You can contribute ally best to invest the
When it comes to You can keep money to behold. up to $5,000 to a money in a diversified
how you invest inside in the TSP after you Roth IRA in 2012 (or portfolio of mutual
the TSP, you can leave the military, or Tax-Free Earnings $6,000 if you’re 50 or funds (see the Inves-
choose among five in- you can roll it into an From a Roth IRA older) as long as your tor Protection Trust’s
dex mutual funds that IRA or another em- Unlike contributions adjusted gross income “The Basics of Saving
invest in large com- ployer’s 401(k), where to a traditional IRA, is less than $110,000 and Investing” at
panies, small firms, it will continue to which can earn a tax in 2012 if single or www.investor
international firms, grow tax-deferred. If deduction to lower to- $173,000 if married protection.org/learn
bonds or government you take the money day’s tax bill, contri- filing jointly. (The op- for more information
securities. Or you can and spend it, you’ll butions to a Roth IRA portunity to make about getting started
choose a lifecycle contributions gradu- in investing and cre-
fund (called the L ally phases out as in- ating a portfolio).
fund), which builds a eXTrA CredIT For sAVING come rises above You can invest the
diversified portfolio those levels.) maximum in both a
Need an extra incentive to save for retirement?
of the other funds to You need to have Roth IRA and the
Contributing to an IRA, the Thrift Savings Plan
match your time hori- earned income in or- Thrift Savings Plan in
or another retirement-savings plan could earn
zon; the fund starts der to qualify for a the same year. If you
you an extra tax break. The Retirement Savings
out invested primarily Roth IRA (that’s basi- can’t afford to invest
Contribution Credit can reduce your tax bill by
in stock funds when up to $1,000. To qualify for the credit in 2012, cally income from in both plans, con-
you have more than your adjusted gross income must be $28,750 or working rather than sider a Roth IRA first
a decade before you less if you’re single, $43,125 or less if you fle your from investments or if you expect your in-
plan to tap the money, tax return as head of a household, or $57,500 or gifts), and even come—and your tax
then gradually be- less if you are married and fle a joint return. though combat-zone bracket—to increase
comes more conserva- The credit is worth 10% to 50% of the pay is tax-free, it by the time you plan
frst $2,000 you contribute for the year to a
tive as your retire- counts for this pur- to withdraw the
retirement-savings plan. The tax credit lowers
ment date draws near. pose. In fact, the Roth money, especially
your tax bill dollar for dollar, in addition to the
Expenses for all can be a particularly if you had tax-free
basic tax benefts of contributing to a retire-
of the funds are ex- good deal if you have income in a combat
ment plan.
tremely low—about 25 tax-exempt combat- zone. Military per-
The lower your income, the higher the credit.
cents a year for every It’s worth $1,000 per person at the lowest zone pay. Your money sonnel are often in
$1,000 invested— income levels, and drops to $200 if you are near goes in tax-free, and a lower tax bracket
making the TSP one the cutof. your contributions as than they will be
of the lowest-cost well as earnings come after they leave the
2 // Financial Field Manual // The Personal Finance Guide for Military Families
courtesy u.s. air force /staff sgt. jamal d. sutter
service, so it makes the military’s special
sense to pay tax on Savings Deposit
Roth contributions Program, which
now and enjoy tax- guarantees a 10%
free income later. return per year on up
(Note that the Thrift to $10,000 while you
Savings Plan will in- are deployed (and for
troduce a Roth ver- up to three months
sion late in 2012, after you return). You
which will have the can’t contribute to the
same tax benefits of a SDP until you are de-
Roth IRA but without ployed. But Bowling
the income limits on saved money before
contributions.) he left so he could
You can contribute contribute the maxi-
to a Roth IRA with a mum to the SDP as
single payment or sign soon as he arrived in
up to have money au- Iraq. Your take-home
tomatically shifted pay increases while
from your bank ac- you’re receiving tax-
count or paycheck. during his seven- not believe that I have free income during
You have until
Investing $416.66 per month deployment the time or where- deployment, which
month will get you to to Northern Iraq as April 15 of the withal to beat the can help you afford to
the $5,000 annual an infantry platoon market or search out stash extra money in
following year
limit. You have until leader last year. “In the few money man- the SDP. Bowling
April 15 of the follow- my opinion, the Roth to make an IRA agers that can,” he plans to use the SDP
ing year to make an is the best retirement- contribution, but says. earnings to help max
IRA contribution— account option for a He also saves time— out his 2012 Roth IRA
the sooner the
April 15, 2013, is the young investor,” he and takes the emotion contributions.
deadline for 2012 con- says, “especially con- money is tucked out of investing — As a platoon leader,
tributions, for exam- sidering the years of by having money Bowling is very famil-
into the account,
ple—but the sooner untaxed growth and transferred directly iar with the financial
the money is tucked my low tax bracket, the sooner tax- from his paycheck issues facing today’s
into the account, the which was even lower to his Roth and soldiers and the im-
deferred earnings
sooner tax-free earn- during deployment,” TSP accounts every portance of setting fi-
ings begin to grow. he says. begin to grow. If month. “It allows nancial priorities. It’s
He also diverts part you use a Roth me to create growth important to pay off
Making the Most of his salary each and proper allocation high-interest credit-
IRA, earnings are
of Your Opportunities month into the Thrift without having to card debt and build
Alex Bowling is a first Savings Plan, where tax-free when think about it. This an emergency fund in
lieutenant in the in- the money grows tax- ensures everything addition to saving for
withdrawn in
fantry stationed at deferred. And he in- continues to happen the future. Bowling
Fort Hood, Tex. Just vests in mutual funds retirement. regardless of time keeps two months’
24 years old, he’s in taxable accounts, in the field or deploy- worth of pay in an ac-
already a savvy and too. That’s money ment,” he says. “No cessible fund to cover
experienced saver. he can access before one has time to come personal expenses,
Bowling has been retirement. off patrol and manage and a separate ac-
maxing out his Roth Bowling invests investments.” count for emergen-
IRA for several years, long-term money in He embraced an- cies. The last thing he
and cashed in on the index funds, which other great savings wants to do is go into
double benefit of con- keeps costs low and opportunity when he debt or tap retirement
tributing tax-free simplifies his invest- was deployed last savings to cover un-
combat pay earned ing decisions. “I do year: He invested in expected bills. H
The Personal Finance Guide for Military Families // Financial Field Manual // 3
courtesy u.s. air force /staff sgt. jamal d. sutter
H FINANCIAL FRAUD
Protection From Scams
That Target the Military
outrageous interest emergencies. Contact
rates. (Would you be- the community-
lieve more than service office at your
400%?) But the Mili- base for details, or
tary Lending Act visit Army Emer-
capped payday-loan gency Relief (www
rates at 36% for mem- .aerhq.org), Navy-
bers of the military Marine Corps Relief
on active duty and Society (www.nmcrs
their dependents, .org), Air Force Aid
which led many lend- Society (www.afas
ers offering payday .org) or Coast Guard
loans to disappear. Mutual Assistance
But some lenders (www.cgmahq.org).
discovered ways Join a credit union.
around the law, offer- Credit unions on base
ing varieties of high- often offer short-term
rate loans that aren’t loans at reasonable
subject to the 36% interest rates. Some
ilitary personnel are prime targets for shady cap. For example, even offer small
sales practices of financial criminals who some car dealers near emergency loans to
want a piece of the troops’ regular paychecks bases have been members of the mili-
known to push high- tary with little or no
Mand have mastered ways to take advantage of
rate loans with big credit check.
their frequent moves. Troops have been exploited by upfront fees. Some Boost your emergency
payday lenders have fund. You’re best off
exorbitant-interest- and insurance. But taken to the Internet if you can avoid bor-
rate payday loans, ever-creative scam Ever-creative to continue to offer rowing for unex-
high-fee investments, artists scheme to stay scam artists expensive loans tar- pected expenses.
unsuitable life insur- a step ahead of new geting troops, outside Build an emergency
scheme to stay
ance, ID-theft laws. So, add this to the reach of regula- fund with at least six
schemes and bogus your list of assign- a step ahead of tors. And some offer months’ worth of ex-
products promoted ments: Protecting laws designed to open-ended loans penses in a safe and
with counterfeit your family from the with rates as high liquid account, such
military connections. latest generation of protect troops and as 136%, which fall as a money market
State and federal financial fraud. their families. So, through a loophole account.
regulators and the in the law. Get credit counseling.
add this to your
Department of De- Predatory Lending If you have to borrow
fense have cracked The commercial list of assignments: WhAT YOU CAN DO to cover your ex-
down on the crooks, strips around many Protecting your Get a 0% loan through a penses, you may be
and new laws and re- bases used to be lined military emergency-relief grappling with a big-
sources help protect with payday lenders. family from the fund. Each branch of ger issue than a short-
members of the mili- There you could find latest generation the military has an term emergency. Con-
tary from being pres- a short-term loan emergency-relief sider meeting with a
sured into high-fee against your next of financial fraud. fund that offers small financial-planning
loans, investments paycheck, often for interest-free loans for manager on base or a
4 // Financial Field Manual // The Personal Finance Guide for Military Families
istockphoto.com
courtesy u.s. Navy/seamaN BeNjamiN crossley
credit counselor who e-mails that purport Check your credit report. you’re deployed. To
can help you set up a to be from financial You can request a place an alert, contact
budget, pay down institutions regarding free copy of your Experian.com, Equi-
debt and prioritize a deployed service- credit report from fax.com or Trans
your spending. You member’s account. each of the three Union.com.
can find a credit major credit bureaus And you can take an
counselor through the WhAT YOU CAN DO every year through extra step to protect
National Foundation Monitor your accounts www.annualcredit yourself by putting a
for Credit Counseling online. Check your report.com. It’s a credit freeze on your
(www.nfcc.org) or the bank, credit-union good idea to stagger account, especially if
You can protect
Association of Inde- and credit-card your requests so you you’re deployed and
pendent Consumer accounts regularly, your family and get a report from one unable to monitor
Credit Counseling and have a plan for of the bureaus every your credit report
your credit by
Agencies (www yourself (or a trusted four months. regularly. The freeze
.aiccca.org). Credit family member) to re- being proactive: Put an active-duty alert prevents lenders and
unions and other fi- view accounts while Monitor your on your credit report. other companies from
nancial institutions you’re deployed so This free service noti- accessing your credit
accounts online,
on base are required that any suspicious fies creditors that report without your
to offer counseling activity is spotted take advantage you’re on active mili- permission, which
services at no charge. quickly. If you receive tary duty and asks can help stop identity
of free credit
But beware of “credit an e-mail or a call them to take extra thieves from taking
repair” firms that about any “problems,” reports, and use precautions to verify out new credit in your
charge high upfront don’t click on a link or the free service the identity of an ap- name. It generally
fees with a promise answer personal plicant before extend- costs $10 to freeze
that puts an
to get you out of debt. questions on the tele- ing credit. Include the and $10 to thaw your
As appealing as such phone; instead, call active-duty phone number of a record at each bureau
a prospect is, you may your bank or credit trusted friend or fam- (and you need to do it
alert on your
find yourself chasing union’s customer ily member for credi- at all three for the
an illusion and wind service number. credit report. tors to call while freeze to be effective).
up in even worse
financial shape.
Identity Theft
Military families are
magnets for identity
thieves because their
Social Security num-
bers are widely avail-
able (although the
Department of De-
fense is gradually re-
ducing the public use
of the identifier), and
troops can be hard-
pressed to monitor
their credit records
and bills when they’re
deployed. While
phishing is a growing
problem everywhere,
military families can
be particularly sus-
ceptible to calls or
The Personal Finance Guide for Military Families // Financial Field Manual // 5
istockphoto.com
courtesy u.s. Navy/seamaN BeNjamiN crossley
H FINANCIAL FRAUD
high-Fee in this low-fee, tax- during deployment, Scams (TAP$) and spouses, used cars
Investments deferred account in and for up to three Investor University with questionable
Over the past few 2012 and even more months afterward. on Base, offered by titles, or even fake
years, state and fed- of your tax-exempt (See the story about the state of Florida in life insurance and
eral regulators have pay while serving in a deployment on page 9 conjunction with the investments.
cracked down on combat zone, up to a for more information Investor Protection
companies that target total contribution of about the SDP.) Trust (www.investor WhAT YOU CAN DO
members of the mili- $50,000 for the year Verify a broker’s record. protection.org). Contact the base commu-
tary with high-fee (see www.tsp.gov for Before doing business Check out insurers and nity-service office. For
investments, includ- details). You can also with a broker, use agents with your state example, Army Com-
ing some that were open a Roth IRA Finra’s BrokerCheck insurance department. munity Service at
charging a whopping through a financial tool (http://broker Before you buy cover- Fort Hood, Tex., has
50% sales charge in institution. You can check.finra.org) to age, ask about licens- a database that cross-
the first year. The De- invest up to $5,000 get information on a ing, complaints and references complaints
partment of Defense in 2012 plus an extra broker’s licensing sta- disciplinary actions. made to the commu-
and several organiza- $1,000 if you’ll be at tus and any disciplin- Find links to state nity-service, legal-
tions have also made a least age 50 by the ary action he or she insurance regulators assistance and hous-
big push to help mili- end of the year. Take has faced. Also check at the National Asso- ing offices on base,
tary families identify a hard look at fees the broker through ciation of Insurance as well as the local
scams and learn more when comparing IRA your state securities Commissioners Better Business Bu-
about legitimate options. And be sure regulator (www (www.naic.org). The reau. The base’s legal-
financial-planning to take advantage of .nasaa.org). State NAIC’s www.Insure assistance office will
strategies. the military’s Savings securities regulators Uonline.org also of- also help you care-
But there are still Deposit Program. De- offer programs to fers insurance advice fully review contracts
salespeople who push ployed troops can de- help military fami- for members of the before you sign on the
exorbitantly priced posit up to $10,000 in lies, including Cali- military. And before dotted line.
investments or inap- a special account that fornia’s Troops you consider any The Armed Forces
propriate insurance pays 10% per year Against Predatory other life insurance, Disciplinary Control
near base and who max out your low- Board at each base
seem ever-ready to cost Servicemembers’ can ban certain sales-
pounce on members Group Life Insurance people or companies
of the military who (www.insurance and prohibit anyone
receive a substantial .va.gov/sgliSite/ on base from doing
windfall, whether at default.htm). business with them.
retirement, from a Just the threat of be-
reenlistment bonus or Affinity Fraud ing put on the banned
deployment pay. The Criminals have no list can help resolve
good news is that you qualms about fabri- complaints.
have plenty of solid cating an affiliation Contact the Better Busi-
and legitimate savings with the military to ness Bureau. You can
alternatives. gain a family’s trust. check a business’s
Often these are small- complaint record and
WhAT YOU CAN DO time operators who get help resolving
Take advantage of spe- go door to door using consumer problems
cial savings programs a military insignia or through the local BBB
for the military. Service- any military connec- (www.bbb.org). BBB
members have some tion to try to sell their Military Line focuses
excellent savings wares—whether it’s on providing infor-
opportunities. The burglar-alarm sys- mation and resources
Thrift Savings Plan is tems to families of de- specifically for serv-
a great way to save for ploying troops, high- icemembers and their
retirement. You can fee work-at-home families (www.bbb.
invest up to $17,000 schemes for military org/military). H
6 // Financial Field Manual // The Personal Finance Guide for Military Families
istockphoto.com
kristeN kochaNski
H YOUR BENEFITS
Take Full Advantage
of Your Military Benefits
30 continuous days your children, it’s a
and be discharged good idea to apply for
because of a service- the transfer as soon as
connected disability. you’re eligible. The
Partial benefits are four-year period be-
earned if you serve at gins on the date the
least 90 days on ac- transfer is approved.
tive duty. So even if you’ve been
And the Post 9/11 GI in the military 15
Bill offers important years, for example,
flexibility: You may you would need to
be able to transfer serve an additional
your benefits to your four years after you
spouse or your chil- elect to transfer your
dren. You can gener- benefits.
ally opt to transfer Col. Houman Tavaf,
benefits if you’re on who has been an
embers of the military have access to special active duty or se- Army surgeon for 17
benefits and legal protections that can make lected reserve, have years, transferred his
a huge difference in your family’s personal served at least six GI Bill benefits to his
years, and agree to son, William, in 2010.
M finances. Make sure you take full advantage
serve four more years. Will is just 8 years old
of what’s available. (Different service now, but Tavaf trans-
commitments apply ferred the benefits
Free College foreign schools. In Chief writer Kim for those eligible for right after he signed
for Yourself— addition, you can retirement between up to stay in the Army
or for Your kids qualify for a housing Lankford (above) Aug. 1, 2009, and Aug. for another four years
One of the most excit- stipend and money knows the value 1, 2013.) to start the four-year
ing new benefits for for books and tutor- Spouses may use the clock ticking. For
of the new GI Bill.
servicemembers and ing. You can use the transferred benefits maximum flexibility,
their families is the money for undergrad- Her husband, Col. right away; children the colonel trans-
expansion of the GI uate or graduate pro- Houman Tavaf, must wait until you’ve ferred 35 months of
Bill, which can pro- grams at colleges and served at least ten benefits to Will and
vide sweet education universities, or for has passed on his years. Servicemem- one month to his
benefits for yourself, certain programs at college benefits bers and veterans wife, Kim, in case she
your spouse and even vocational, trade and (and their spouses) decides to return to
your children. distance-learning to their 8-year-old must use the benefits grad school. Although
The Post 9/11 GI Bill schools. son William. within 15 years after you can’t add benefi-
can cover the full cost Eligibility is based leaving the military. ciaries after leaving
of in-state tuition on the length of time Children aren’t bound the military, you can
and fees for public you serve in the mili- by the 15-year limit, alter the allocation.
colleges for up to 36 tary. For maximum but they must use the “This gives us such a
months (four aca- benefits, you must transferred benefits great start on saving
demic years), or up to serve at least 36 by age 26. for Will’s college,”
$17,500 per year for months or serve on If you’d like to trans- Tavaf says.
private colleges and active duty for at least fer GI Bill benefits to For more details
The Personal Finance Guide for Military Families // Financial Field Manual // 7
istockphoto.com
kristeN kochaNski
H YOUR BENEFITS
about transferring school of business, Interest-Rate on a mortgage, credit rate from 18%, say,
benefits, see the GI plus varying scholar- Reductions and Other card, car loan or other to 6%—more of every
Bill Transfer page ships to several other Special Legal Rights debt can be reduced payment will go to
(www.defense.gov/ of its programs. See Members of the mili- to 6% if military serv- pay off principal
home/features/2009/ the VA’s Yellow Rib- tary have special le- ice affects your ability rather than to inter-
0409_gibill). bon Program page gal rights that come to pay—as it may if est. You need to send
If you (or your for more information into play if you have you take a pay cut the lender a written
spouse or children) (www.gibill.va.gov, to move unexpect- when activated to the request for the rate
are attending a pri- then click on “Yellow edly, are deployed Reserve or National reduction, which you
vate college, going to Ribbon Program” in or leave a civilian job Guard. This rule ap- can do on your own
graduate school or the Post 9/11 GI Bill to go on active duty plies only to debts or with help from an
paying out-of-state section). with the Reserves or incurred prior to mil- Armed Forces Legal
tuition at a public col- For more informa- National Guard. itary service or acti- Assistance Office
lege, your benefits tion about the Post One of the most vation, not to debts (http://legalassis
may not cover the en- 9/11 GI Bill and the valuable benefits of taken on while on ac- tance.law.af.mil).
tire bill. But you may earlier Montgomery the Servicemembers tive duty. Loans for To prove that your
qualify for extra help GI Bill, go to the Vet- Civil Relief Act which a nonmilitary income has been re-
from the Yellow Rib- erans Affairs GI Bill (SCRA) is the inter- spouse is jointly liable duced, you may be
bon program. More page (www.gibill.va est-rate cap: In some can also qualify for asked to submit cop-
than 1,000 colleges .gov). situations, the rate the rate reduction. ies of your military
provide scholarships June Walbert, a cer- orders, earnings
for a certain number tified financial plan- statements and tax
of students each year, LoW-CosT LIFe INsUrANCe ner for USAA and returns.
and the Department member of the U.S. SCRA provisions
You need life insurance if anybody is depending
of Veterans Affairs Army Reserve, took can also help service-
on you fnancially, and, of course, the need be-
matches the school’s advantage of the law members who are
comes more pressing if you’re about to go into
contribution. when she was de- deployed or have to
a combat zone. But members of the military
To qualify for a can’t just buy any insurance: Some policies have ployed to Iraq in move. You have the
Yellow Ribbon schol- specifc war exclusions or charge high rates if 2003. She notified her right to terminate an
arship, you must be you plan to travel to a foreign country. mortgage company, apartment lease if you
eligible for maximum Fortunately, servicemembers have access to sent a copy of her of- have orders for a per-
GI Bill benefits (chil- one of the lowest-cost life insurance programs ficial orders, and had manent change of sta-
dren or spouses using available. Servicemembers’ Group Life Insurance her rate reduced from tion or are deployed
(SGLI) costs only 6.5 cents per $1,000 of cover-
transferred benefits 8% to 6% while she to a new location for
age per month, or $312 a year for the maximum
may qualify). Yellow was on active duty for 90 days or more. You
$400,000—regardless of your age, health or
Ribbon funding varies six months. That can terminate a car
likelihood of being deployed. You can also get
widely by school and shaved her mortgage lease without an
$100,000 in coverage for your spouse for as
program, and you ap- payments by about early-termination fee
little as $60 a year if he or she is under age 35.
ply for these scholar- (See www.insurance.va.gov/sgliSite for details.) $200 per month. if you are deployed
ships directly through You’ll lose SGLI coverage when you leave The rate resets for 180 days or longer.
the college. For the the military, and you may need more than the when your active And you can termi-
2011–12 school year, maximum anyway—especially if you’re the duty is over, but the nate your cell-phone
for example, Colum- sole breadwinner for a large family. Use an higher rate will only contract without pen-
bia University offered insurance-needs calculator (such as the one apply to the remain- alty if you receive or-
available at www.insurance.va.gov) to see how
300 $7,000 Yellow ing balance—the dif- ders to relocate for
much insurance you need, then search for extra
Ribbon scholarships ference between the more than 90 days
coverage to fll in any gaps beyond SGLI. You can
to its undergraduate higher and lower to an area that is not
get price quotes from dozens of life insurance
school of general rates is forgiven, not supported by the
companies at www.accuquote.com or www
studies, four $5,000 simply deferred. contract.
.lifequotes.com. Let them know upfront that
scholarships to its you’re in the military, so you won’t end up with If you qualify to re- You’ll find more
medical school, and quotes for policies with a war exclusion or high duce your credit-card about SCRA protec-
32 $2,500 scholar- rates for foreign travel. rate—imagine the tions at www.service
ships to its graduate power of slashing the members.gov. H
8 // Financial Field Manual // The Personal Finance Guide for Military Families
courtesy u.s. mariNe corps/cpl. reece e. lodder