Finance Archives

Financial Planning and Benefits for Military and Veterans

Whether you are active duty, a member of the Guard or Reserve, or a veteran, financial planning is an important part of what some in the Department of Defense call “financial readiness.”

Your military pay, benefits, and retirement options are all areas to work on from the day you get your first Leave and Earnings Statement.

What does financial planning mean? Everything from managing your day-to-day expenses, monthly bills, and saving plans to retirement planning and investments. You’ll want to address multiple areas of your life at the same time to prepare for the future.

What follows is not financial advice, tax advice, or legal advice. This guide should be used as a starting point for your own research based on your specific needs. No guarantees are implied or given; your experience may vary.

Military Pay and Benefits

Financial planning means taking stock of your income, benefits, and investment opportunities. That includes anticipating your current and future pay, changes in family size, and related issues.

The first military benefit some receive is incentive pay or a bonus for signing up and accepting a job in a critically staffed career field.
Basic Pay is the first benefit you’ll get in typical cases outside of incentive pay, but these two are only the beginning.
New recruits and those who sign up as “prior service” and rejoin the military are offered various benefits, including the GI Bill, housing allowances, per diem for official travel, and much more.
Basic Pay is the foundation for the service member; all other benefits come above and beyond it.

Military pay is a specific category of compensation. Military benefits such as TRICARE are another. Military allowances are yet another category. Read more: Military Pay and Allowances Explained

Basic pay and some allowances are automatically adjusted to keep up with economic changes, but Congress commonly approves extra pay raises as part of each year’s National Defense Authorization Act or NDAA.

The DoD publishes a revised Basic Pay chart when pay raises are authorized.

VA Loan Benefits

The VA home loan is one of the most popular military benefits aside from the GI Bill.

VA loans can be used to purchase owner-occupied primary residences up to four units large, with no down payment required in typical cases, no penalty for early payoff of the VA loan, and no VA-required private mortgage insurance.

Military Credit Unions and Military Banks

Before you start receiving Basic Pay and your other allowances, you’ll need to provide a bank account number and routing number for Direct Deposit. Military pay is not delivered any other way.

Many new recruits have their preferred financial institutions, but when you join the military, you become eligible to apply at many military-oriented credit unions such as Navy Federal, USAA, or Pentagon Federal Credit Union.

The requirements to join typically include the applicant being military or military-affiliated. That means that in many cases, a military spouse or dependent may also open an account.

VA Compensation Rates

To qualify for VA disability compensation payments, you must have a medical condition that could be service-connected, and you must have served on active duty, active duty for training, or inactive duty training. In general, at least one of the below must also be true:

Your condition began while serving and is associated with military service OR;
Your condition existed before you served and military service made the condition worse OR;
You have a condition related to military service that didn’t appear until after retiring or separating from the military.

A VA representative must review your medical claim, your medical issues are assigned a percentage rating if they are deemed to be service-connected.

VA compensation rates are adjusted yearly for cost of living factors, so the numbers in one calendar year won’t match the payment rates for successive years. There are important things to remember about VA disability payments.

One is that your medical claims must be deemed service-connected as mentioned above, but there is also possible compensation for claims that involve medical issues not caused by but complicated by military service.
It’s best not to rule out any medical claim yourself; submit claims for any medical concern you may have and let the Department of Veterans Affairs decide to approve or deny your claim.
Any claim you submit should have supporting documentation from military and civilian medical care you received. You can also support your claim with letters from friends and family explaining how the condition has changed your ability to live and work.

VA compensation rates are applied to various medical issues, but not all medical problems qualify for payment, and some have caps on how much can be paid regardless of the severity of the condition.

For example, tinnitus can never receive more than a 10% disability rating no matter how severe the condition may be.

Tax Breaks for Veterans

There are a variety of tax advantages for veterans offered at the state level. Some of these tax breaks apply to specific classes of veterans such as:

Those with qualifying wartime service
Veterans who were prisoners of war
Veterans who are listed as Missing in Action
Veterans with VA disability ratings
Veterans with certain expeditionary medals

Some tax breaks are offered on property taxes, others as tax exemptions on military retirement pay or military disability retirement pay. In most cases, tax breaks for veterans are not automatic and must be applied for.

Some property tax rebates or exemptions may carry over year-to-year, but this depends greatly on the state or local policy. Tax incentives are not standardized across all 50 states; your experience may vary.

The first place to start looking for veteran tax relief, veteran tax breaks, or veteran property tax exemptions is your state-level Department of Veterans Affairs or Office of Veterans Affairs.

Different states have different names for this department, but it should not be confused with the federal-level official site for the VA. Try Googling the name of your state plus “Veteran tax breaks” or “Veteran tax exemption” to learn more at the state level.

Financial Assistance for Veterans

Veterans who need financial help may have several options from state and local agencies to help from the Department of Veterans Affairs.

You may notice that there are two basic categories of financial help for veterans; one is for emergency assistance, such as during a disaster, or the loss of a family member or loved one. Another category involves managing day-to-day living and its expenses, making ends meet, and paying the rent or mortgage on time.

Financial Planning Resources for Military and Veterans

The following is a list of resources military members, veterans, and family can use to better plan and manage their finances. Some options offered by resources listed below are counseling or advice services; some may feature apps and other self-guided options. Some may feature seminars and classes in addition to all of the above.

Military Service-Based Financial Help For Military Members

Some military members experience serious financial problems. This is where a Military Service Relief Organization can help. These agencies offer low-or-no-cost loans, grants, tuition assistance, financial counseling, and other services where available. Visit one of these agencies to learn how to get started:

There is also financial help available through the Red Cross, though it works with the agencies listed above to provide financial help; your assistance may come from one of the organizations above but with help from the Red Cross.

Federal Financial Help for Military Members and Veterans

The Department of Veterans Affairs offers financial help with VA copays and other medical-related expenses.
The National Call Center for Homeless Veterans offers free help to homeless vets
HUD-VASH, also known as Veterans Affairs Supportive Housing program, offers rental assistance to homeless veterans.
The USDA Single-Family Home Loan program offers need-based mortgages with zero-down options and lower interest rates than some conventional equivalents. This is not affiliated with the VA home loan program, which does not include need-based features.

State Financial Help for Military Members and Veterans

At the state level, many options exist for military members and veterans who need financial assistance. State-level hardship grants may help pay rent, utilities, medical expenses, and more.

These programs are typically need-based and may feature household income caps and other restrictions to receive assistance.

You can typically find these programs at your state-level Department of Veterans Affairs or state government official site. Each state has its own definition of what qualifies as a veteran, who is eligible for financial assistance, and what constitutes financial hardship.

Civilian Financial Help for Military Members and Veterans

A variety of non-profit agencies, activist groups, and lobbyist organizations work on behalf of military members, veterans, and their families. Many of these organizations offer grants, loans, legal representation, and other assistance to those in need. They include:

Budgeting for Military and Veterans

Why is it so important to have a budget as a military member? Predictability in your finances can be a major benefit when so much of your professional life depends on circumstances beyond your control.

Those who play fast and loose with their money in the military sometimes find their finances spinning out of control the moment a TDY or deployment interferes with their routines.

The unexpected costs associated with permanent change of station orders is another issue; if you don’t budget for anticipated costs such as shipping a car, relocating a beloved pet, or putting your belongings in temporary storage while you are on duty at a remote location, you may find yourself scrambling to get the resources you need.

If you have a budget that includes a contingency fund for such issues, you’ll sleep better at night knowing life’s surprises won’t catch you off guard financially.

Financial Planning Resources for Military and Veterans

If you need financial planning help, including advice on how to make a budget, there are DoD-provided resources that can help. Some might be tempted to pay third parties to help them; there is nothing wrong with using a financial planner. But there ARE free resources out there.

Military OneSource is an official DoD website offering various services for military members and family members, including the opportunity to work with a trained professional financial counselor who can work with you in person, online, or by phone. These counselors are trained to help you explore various savings options, retirement planning, and investments.
The Department of Veterans Affairs offers financial counseling in a variety of specific areas, such as beneficiary counseling, mortgage delinquency, and there is a program designed to protect veterans who cannot manage their own financial affairs due to medical issues or age.
Military Consumer is a .gov website dedicated to helping military members with “financial readiness.”
The Office of Financial Readiness is an official government website with a wealth of resources for financial planning for servicemembers and their families.
Military bases have family support operations, and yours may feature free financial counseling services for those with base access. If you are registered in DEERS and have a military ID card or a dependent ID card, you may be able to take advantage of these free services. Not all installations have this option, and your experience may vary, but it’s crucial to take advantage of it if available near you.

Retirement Planning For Military and Veterans

There are plenty of misconceptions about military retirement pay. One is that there is a retirement pay chart similar to the pay charts for active duty and Reserve members.

This is not true. Your military retirement pay options depend greatly on how many years of service you have and which retirement system you were offered when you joined the military. Military retirement pay is calculated on a formula that may include multiplying the number of years served plus the amount of your final basic pay.

That formula may swap out that “final pay” number with your highest 36 months of basic pay. We examine the calculations and the military retirement options overall in more detail in our article, Military Retirement Pay Explained.

The Importance of Early Military Retirement Planning and Saving

There are some important reasons to start retirement planning early; it is easier to start saving when you are younger, compound interest earns more the longer you save, and you never know when you won’t be responsible for just yourself anymore.

The peace of mind you get by planning and saving early will be well worth the time invested.

But for military members, there are less-obvious reasons to start planning and saving early. You never know when you won’t have the luxury of having enough time to figure out what you want to do about your retirement fund.

Deployments, TDYs, professional military education, and promotion testing all demand their fair share of time, and if sitting down with a financial professional or even just on your own is one of those “I’ll get to it next week” issues? Some procrastinate a lot longer than they realize.

Social Security for Military Members

When you get close to retirement age, exploring your options for Social Security makes sense. But it is a good idea to become familiar with how Social Security Administration (SSA) benefits may affect your TRICARE benefits, VA disability payments and related issues.

Military members may qualify to draw both Social Security and other federal retirement benefits but you should know how, when, and by how much. Surviving spouses and dependent children of military members who have died may qualify for SSA death benefits and any available VA death benefit options.

Learn more: Social Security Benefits for Veterans

Managing Debt for Military and Veterans

There are multiple ways to manage debt as a military member or a veteran. If you are still serving, you and your family members may be able to take advantage of free financial counseling through the official DoD Military OneSource program.

MilitaryOneSource provides trained financial counselors who can take in-person appointments, online or by phone. These counselors can help you review options to save for retirement, manage your investments, college expenses, and other concerns. You can call Military OneSource at 800-342-9647 to get started.

If you still serve and struggle financially, Military OneSource can also connect you with Military Aid Societies and other resources. If you are a veteran struggling with medical debt, the Department of Veterans Affairs has programs that can help.

But veterans may struggle with various financial issues, not just medical debt, which is why some Veteran Service Organizations (VSO) such as the VFW, DAV, USO, and military aid societies may offer financial counseling and assistance. If you are a veteran and need help to get your finances in order, consider using a VSO to help

Learn more: What Are Veteran Service Organizations?

Servicemembers Civil Relief Act (SCRA) and Military Lending Act (MLA)

The SCRA is a federal law that governs how much service members can be charged interest on credit cards, auto loans, and related services. You may also be covered under SCRA guidelines if you have to break a lease in order to deploy or otherwise serve in the military.

The Military Lending Act includes interest rate protections for servicemembers and a credit rate cap. There are many nuances to both Acts; you’ll want to know what they are before you need them

Learn more: The SCRA and MLA: How They Help You Financially

Public Student Loan Forgiveness (PSLF) for Veterans

PSLF is a program for people who work in public service, including military members. This program is not associated with one-time student loan debt relief offered by the Biden Administration; it is not part of that student debt relief program.

This is a separate option that may be used when working for a qualifying government employer. If you have received past payment assistance, loan deferment, or student loan forbearance, it may affect your ability to qualify for PSLF.

PSLF Benefits

PSLF “forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan” while working for a federal employer. This is not offered to those with private student loans, they are for Direct Loans only.

PSLF benefits are not automatic; they must be applied for. You can start your application at the Federal Student Aid official site.

Be advised that you will need your employer’s EIN, found on your W2 forms used to file your state and federal income taxes.

Investing for Military and Veterans

This section is NOT investment advice for veterans. It is a set of descriptions of investment options military members, veterans, and family members might consider as part of an investment strategy. For best results, consult a trained professional about these options before you commit.

Investing can take many forms, from high-risk options such as commodities, volatile stocks, and day trading to more conservative options such as buy-and-hold strategies for established stocks, government bonds, mutual funds, etc.

What You Need To Know About Investing Before Getting Started

All investments carry some degree of risk. No matter how stable, you should always view investment opportunities as having a potential risk of loss. Some truisms are good to follow in the earliest days of your investment research:

If it sounds too good to be true, it probably is.
Don’t take investment advice from celebrities or people on television.
Do not borrow to invest.
Don’t invest money you can’t afford to lose.
Do not respond to unsolicited messages, texts, emails, or social media posts from third parties about investing.

There is more than one way to invest. You might not think about using your VA loan benefit as a possible investment, and there’s a good reason for that.

VA mortgages are not for investment properties but for homes, the buyers plan to live in as their primary residence. But when you buy a house, you grow equity in the property over time.

That money adds up, and when you sell or refinance the home, you may find (depending on housing market conditions) that the value has increased significantly from the first day you owned the home.

That is not always true–the home’s condition and other variables may affect the home’s value. But when it IS true, your VA loan may actually help you grow financially.

27 Apr 2327 Apr 23

Investment Basics: Options for Veterans and Military Members

There are a variety of options to explore when you’re learning how to invest. And while there are no risk-free investments, some are more suitable for the beginning investor than others.

You should research your stock options carefully; the DoD cannot help servicemembers, military families, or veterans who lose money on the stock market. Investing carries a risk of loss; know your investment options well before you commit. What follows is not investment advice.

That said, the DoD does provide investment education resources you can explore before committing.

Types of Investments

Your investment options include, but may not be limited to, the following:

Stocks
Bonds
Municipal Bonds
Mutual Funds
Exchange-Traded Funds (ETFs)
Annuities
Certificates of Deposit (CDs)
Money Market Funds
Commodities
Hedge Funds
Real Estate Investment Trusts (REITs)

Stocks

Stocks are among the most commonly known investment types. Investing in stock means buying a share of a publicly traded company.

Those who own the stock can buy more stock or sell what they have on public trading exchanges, with the price of individual stocks rising or falling based on a variety of influences, including investor enthusiasm, company growth or lack of it, and current economic headlines.

In the past, you always needed a stock broker to execute trades on your behalf. With the rise of online trading, this has changed significantly over the decades; now, you can perform trades yourself or take advantage of automated stock trading.

Bonds

Governments and private companies alike may issue bonds as a fundraising tactic. A bond is, as the Office of Financial Readiness official site says, an IOU with a promise to pay you interest over the life of the bond and pay the principal on an agreed-upon maturity date. Bonds pay interest each year (much depends on the schedule); some bonds may even provide tax breaks to those holding them.

Bonds can be safer investments, but even these carry some risk. If a company issuing the bond goes bankrupt, for example, it may either default on the bonds it has issued or try to buy them back at face value, which cancels the bond altogether after paying off the principal.

There are corporate bonds not backed by the government, which may carry higher yields and elevated risks. States, cities, counties and local governments often issue municipal bonds for schools, highways, and other projects.

High-Yield Savings Accounts, Cash Management Accounts

Some view these savings accounts as investments. Whether or not that is true, at least some who use these accounts are attracted to the higher rates of return compared to a traditional savings or checking account.

Some sources describe cash management accounts as “a savings account-checking account hybrid,” paying interest rates similar to a savings account but with the ability to write checks or use a debit card with the account.

Mutual Funds

Investopedia describes Mutual Funds as a type of investing where many investors have their funds pooled and managed by a third party. “The professional manager for the fund invests the money in different types of assets including stocks, bonds, commodities, and even real estate.”

When you invest in a mutual fund, you buy shares which “represent an ownership interest in a portion of the assets owned by the fund.”

Mutual funds are considered a more conservative option (depending on the fund, some funds take more risks than others) because they are not meant to be traded often and the fees for doing so may discourage you from making changes to your fund often.

Exchange-Traded Funds (ETFs)

The Office of Financial Readiness describes ETFs as similar to mutual funds in some ways; ETFs let investors “pool their money when investing in stocks, bonds or other assets.”

But unlike mutual funds, ETFs are bought and sold on the national stock exchange at market prices. Investopedia notes, “ETFs will track a particular index, sector, commodity, or other assets, but unlike mutual funds, ETFs can be purchased or sold on a stock exchange the same way that a regular stock can.”

You can use ETFs to track “anything from the price of an individual commodity to a large and diverse collection of securities.” Investing in an ETF may require more research by the investor; you’ll want to read the prospectus and related information for any company you wish to invest in before committing funds.

Annuities

Annuities are described as “insurance contracts that offer the annuitant—the person who owns the annuity—a set amount of income paid at regular intervals until a specified period has ended or an event (such as the annuitant’s death) has occurred.”

Investopedia offers that description on their official site, adding that “insurance companies or financial institutions offer fixed annuities for a lump-sum payment (usually most of the annuitant’s cash and cash-equivalent savings), or they can be paid for on a periodic basis while the annuitant is still working.”
The money you invest is meant to earn a rate of return during the saving phase, and when it’s time to collect annuity payouts, (and depending on the terms of your annuity), the balance may continue to grow.
Annuities may carry a disadvantage compared to other types of investing in that when the beneficiary dies, the annuity cannot be passed to the estate or heirs.

The funds typically revert back to the company that issued the annuity. According to Investopedia, “Whether the annuitant chooses to try to avoid this outcome depends on the kind of policy purchased.”

Certificates of Deposit (CDs)

A CD is a more short-term investment (one to five-year CDs are common) and can be used to help save for an event like a wedding or vacation. You commit your money to a Certificate of Deposit with a fixed interest rate (there is often a minimum) for a fixed period of time.

The interest applied to the account grows over time, and you may have the opportunity to renew the CD when it matures. However, if you want to remove your fund before the allotted time, you may be penalized. CDs are best for cash you won’t need in the near future.

Commodities

This type of investing is complex, high-risk, and should not be attempted by beginners without a guide. There are many ways to lose money in commodities trading that have nothing at all to do with the value of what’s bought and sold; there are pitfalls to avoid that experienced commodities traders know that you do not.

All that said, there are multiple ways to enter the commodities market. You can invest in physical goods or by purchasing ETFs tracking commodity indexes. You can also invest in the stock of commodity businesses like mines, oil production, etc.

One of the inherent risks of commodities trading is something known as the margin call; an oversimplified explanation of the margin call is this:

A commodities trader may have the ability to “leverage” her account and short-term borrow more money to invest that day than she actually has in the bank. If an investment pays off, the borrower repays the money and the deal is done.

But if you have leveraged your account and the commodity performs poorly, you can’t simply hang on to the debt overnight; the firm you borrowed from can execute a margin call and have your debt collected immediately. That could result in the investments you held on to being liquidated to pay the debt.

Investopedia puts it like this: “Brokers may force a trader to sell assets, regardless of the market price, to meet the margin call if the trader doesn’t deposit funds.” That principle is true of any day trading type investment options you may encounter. Know the risks before you pay.

Hedge Funds

Another type of investing decidedly NOT for beginners operating alone and without a guide. The Securities and Exchange Commission describes hedge funds this way:

“Hedge funds pool investors’ money and invest the money in an effort to make a positive return. Hedge funds typically have more flexible investment strategies than, for example, mutual funds.”

Hedge funds are riskier because they put money into higher-risk, shorter-term options and use more speculative trading practices than some mutual funds. According to SEC.gov, “You generally must be an accredited investor, which means having a minimum level of income or assets, to invest in hedge funds.”

What is considered a typical hedge fund investor? They may include “institutional investors, such as pension funds and insurance companies, and wealthy individuals.”

Real Estate Investment Trusts (REITs)

Investor.gov defines REITs as “a way for individual investors to earn a share of the income produced through commercial real estate ownership – without actually having to go out and buy commercial real estate.”

These options are a way to add real estate options to your investment portfolio, and they may pay more than some other investments. The trade-off is that there are some pitfalls to avoid. One is a lack of liquidity, so if you need to get money fast you won’t be satisfied with your options under REITs.

Investor.gov warns, “Unlike publicly-traded REITs, however, non-traded REITs frequently pay distributions in excess of their funds from operations. To do so, they may use offering proceeds and borrowings.” That may result in lower share values. It’s best to avoid this option as a newcomer unless you have an experienced investor helping you out along the way.

20 Apr 2320 Apr 23

Basics of Budgeting for Military Families

Basics of Budgeting For First-Time Budgeters

Have you ever wondered where all your monthly income went? We work hard every week and can’t seem to save anything or invest in our future. Some don’t have a budget and don’t keep track of how they spend over time.

Budgeting can be a day-to-day transformation of how you value and treat your hard-earned money. It won’t fix or solve your financial problems immediately, but it will change how you view your money and how it works for you.

Step 1 – List Income and Expenses

Know your current income. Net income calculates the amount of income you receive after taxes and deductions. Net income is the baseline you should use to standardize your budget as it simplifies your expected take-home pay.
Know your future income. Military members can view their pay charts to see what they will earn in the next higher pay grade or even in the next higher pay tier based on time in their current rank. Future budgets may depend on those numbers; it’s smart to anticipate them.
Know your future expenses. Are you planning a change in family size? Do you have a school-age child you’ll be sending to college soon? Anticipate these future costs, they will be upon you sooner than you think.
Determine your monthly fixed expenses. Fixed expenses do not change from month to month. List all fixed expenses you have whether they are essential or discretionary such as; car payments, insurance, phone bill, Netflix, rent, savings, investing, and student loan payments.
Know your variable expenses. Variable expenses can change from month to month. List all variable expenses you have, whether essential or discretionary such as; fuel, food, entertainment, clothing, and home or vehicle maintenance.

Step 2 – Subtract Expenses From Net Income

Set aside money – if your expenses are less than your net income, this presents a great opportunity to set aside more money for your financial goals.
Adjust as necessary – if your expenses exceed your net income, then you need to adjust your discretionary spending to see where you can reduce costs.
Identify roadblocks – identifying expenses allows you to better understand where you are spending your money. This will help you identify where your financial roadblocks are.
Don’t forget about your taxes – Did you buy a house recently? Have you started college courses? You may have deductions waiting for you at tax time that can help your budget. But don’t underestimate the potential for having to pay the IRS if your tax calculations didn’t include a crucial deduction or one that was permitted in years past but no longer.
Situational expenses count – Did you have to move this year? Did you get a Permanent Change of Station orders and relocate to a new base? Was your home damaged in a natural disaster? Don’t overlook such issues when it comes to your budget. It may be wise to start a contingency fund to handle unexpected costs along the way.

Step 3 – Identify Your Goals and Make Adjustments

Have a goal – having a goal behind your budget will help it succeed by increasing motivation. Review the areas where you spend money and see if they align with your new goals. You might need to eliminate or reduce some expenses if they don’t.

Examples of goals would be paying off debt, saving for retirement, paying off college, building a savings account, saving for a vacation, and saving for a down payment.

50/30/20 Rule – if you are just starting with budgeting and not sure of how much money you need to accomplish your goals but want an easy starting point, start with the 50/30/20 rule.

50% of your income should be spent on essentials, 30% should be spent on discretionary spending, and 20% for savings and investing.

Remember variable expenses like food and gas – variable expenses can be tricky to budget for, especially food. When budgeting for food, find a dollar amount per person per day that seems reasonable.

Another variable expense that gets people is fuel. Review your last few months of fuel costs and use the average amount as your monthly budgeted cost. It pays to overestimate these costs a bit if you can. It’s better to earmark a bit more upfront in your budget than to be caught short.

After completing these steps, you may be ready to set up and start your new budget. If not, you can always get financial advice from Department of Defense resources. Once you have set a budget, it’s important to review it every few months; your goals and resources can change.

20 Apr 2320 Apr 23

Blended Retirement System (BRS): An Overview

What is the Blended Retirement System (BRS)?

The Blended Retirement System (BRS) was created with the Fiscal Year 2016 National Defense Authorization Act (NDAA) and went into effect in 2018.

The new system blends the traditional legacy retirement pension with a defined contribution benefit that is applied to the service member’s Thrift Savings Plan (TSP) account.

What follows is not tax advice, and it is not investment advice. This article is for information purposes only. Before making any decision on taxable income it is advisable to speak to a trained professional.

Eligibility for Blended Retirement System

Your eligibility depends on when you joined the service. If you:

Joined on or after January 1st, 2018 – you are automatically enrolled into the BRS. That will be your retirement plan.
Served on active duty for 12+ years before December 31st, 2017, you may have been grandfathered into the legacy retirement system. Nothing will change for you.
Served on active duty for less than 12 years, as of December 31st, 2017, you are grandfathered under the legacy retirement system but had the option to select BRS. The opt-in period was from January 1st through December 31st, 2018. You were not moved to the BRS unless you requested to do so.
Are a cadet or a midshipman attending a service academy as of December 31st, 2017, or if you are in the Reserve Officer Training Program (ROTC) and have a signed contract as of December 31, 2017, you’re also grandfathered under the legacy retirement system.
If your commissioning date occurs after the 2018 opt-in window, you had 30 days upon commissioning to opt-in to the BRS. If you enter an academy or sign your service contract on or after January 1st, 2018, your retirement plan is the BRS.
Are in the Reserve or National Guard and have accrued more than 4,320 retirement points as of December 31st, 2017, you are grandfathered into the legacy retirement system, nothing changes.
Accrued fewer than the 4,320 retirement points as of December 31st, 2017, you will be grandfathered into the legacy retirement system but can choose to opt-in to the BRS.

The BRS won’t change how you accrue retirement points or when you can retire.

Defined Benefit

BRS provides a defined benefit, a monthly pension for life. You will receive this benefit after 20 years or more of active duty service. How much you receive depends on how long you have served. The longer you do, the higher your potential benefit.

BRS uses a multiplier to determine how much money you will receive; 2.0% times the years served times the average of your highest 36 months of basic pay. For example, if you have served 20 years, you would receive 40% of the average of your highest 36 months of basic pay. If you served for 25 years, you would receive 50%, and so on.

The Defined Benefit also has an annual Cost of Living Adjustment (COLA).

Defined Contribution

The Defined Contribution is a way to save for retirement, whether you plan to stay in the service for two or 20 years. The Blended Retirement System offers government benefits toward retirement through your Thrift Savings Plan. This offers a mix of investment funds through contributions to a traditional (pre-tax) retirement account, a Roth (after-tax) retirement account, or a combination of both.

If you were automatically enrolled in the BRS because you joined after January 1st, 2018, you would need to wait 60 days before the 1% Service Automatic Contribution will begin. You will start to do so immediately if you opt in instead.

If you were automatically enrolled in the BRS because you joined after January 1st, 2018, you may be required to wait two years before you start Service Matching Contributions.

You may start receiving them immediately if you elect to opt in instead. Your service will match contributions up to an additional 4% of your basic pay.
For example, if you put in 3%, you have 7%.
3% from what you put in, 1% for the Service Automatic Contribution, and 3% Service Matching Contribution.

Continuation Pay: What is Continuation Pay?

Through the Blended Retirement System, you are eligible to receive Continuation Pay. Continuation Pay is a one-time, mid-career bonus payment in exchange for an agreement to perform additional obligated service. Your service branch will determine your commitment, which will be a minimum of 3 years.

Continuation Pay is a direct cash payout to eligible members who have completed at least 8, but not more than 12 years of service. This is calculated from a servicemember’s Pay Entry Base Date (PEBD). The reason it’s offered is easily explained through retention, “as a way to encourage Service members to continue serving.”

Who’s Eligible for Continuation Pay?

Most service members may be eligible for continuation pay, but when it’s paid out and how much is given is determined through an individual’s branch of service.

Continuation Pay is open to Active Duty, National Guard, and Reservists participating in the BRS who can qualify for an extension of their current obligated service. It comes in addition to any other career field-specific incentives or retention bonuses.

You may be eligible for this if you are active duty. This includes AGR (Active Guard Reserve) and FTS (Full Time Support), National Guard and Reserves are also eligible, if they are “able to enter into an agreement to perform additional obligated service” according to Defense.gov.

Active Duty

The amount for active duty can run between 2.5 to 13 times your regular pay. Your taxable contribution pay may place you in a higher income bracket. You may be allowed to split it up into four equal payments over four years to avoid that.

National Guard or Reserve

You may also qualify for Continuation Pay in the National Guard or Reserve. This will require that you agree to perform additional obligated service. You would receive between 0.5 to 6 times the monthly basic pay of an active duty service member in the same pay grade.

These multipliers can be variable, depending upon specific needs of an individual’s branch, critically manned positions, and special skills (comparable to stipulations for re-enlistment bonuses).

TSP Investing

As with other specialty pay and bonuses, continuation pay may be diverted as an investment into a TSP, bearing in mind the IRS’s maximum amounts allowed annually.

While there are no matching contributions from the DOD specifically for invested continuation pay, this invested amount can affect other types of income that will be matched; hitting a maximum too quickly could affect other government automatic and matching contributions.

Lump Sum

Under BRS, you may be eligible to elect to receive a discounted portion of your retirement pay upfront.

If you opt for a lump sum, you must decide if you want 25 or 50% of your future payments at retirement. You may receive one lump sum or equal annual payments, one a year for up to four years. Monthly retired pay reverts to the full amount at full social security retirement age, which is usually 67 years old.

The lump sum of 25 or 50% is discounted to the present value. Therefore a lifetime of equal, personal, monthly payments is usually worth more.

The Blended Retirement System will be the new way of retirement for the military. While some are still grandfathered in, recruits will automatically be enrolled in the BRS.

Additional Information Regarding Continuation Pay

If interested in additional information about BRS and Continuation Pay, visit the following sites:

The Blended Retirement System (BRS) Continuation Pay Fact Sheet
Blended Retirement System (BRS) Overview
Blended Retirement System (BRS) Calculator
IRS Contribution Limits Facts

18 Apr 2318 Apr 23

Military Credit Unions and Banks

The first thing you’ll notice when searching for military banks and credit unions online is that many finance-related blogs and websites tend to lump civilian-oriented banks into the lists simply because they have military-friendly banking options.

This article does not include these financial institutions; it focuses on lenders who require military affiliation to use their services. A lender with a specific set of services aimed at the military community may have more for you than a civilian financial institution that counts veterans amongst a much larger customer base. That is not always true, but the differences may make you think twice when it is true.

Military Banks and Credit Unions

There are several options when searching for military-specific lending, banking, and financial planning services. They include:

USAA
Pentagon Federal Credit Union
Navy Federal Credit Union
Andrews Federal Credit Union
Security Service Federal Credit Union
Armed Forces Bank
Air Force Federal Credit Union

Some of these institutions began as military-only lenders but have since expanded their eligibility categories to include other options.

These lenders are different from other banks often included in military credit union reviews, but that are not specifically military banks. Such “civilian” lenders include:

Capital One
Bank of America
Chase Bank
Wells Fargo

These lenders may offer military-friendly options, but unlike PenFed or Navy Federal, civilian banks don’t have the same requirements for military membership or affiliation the way USAA or others do.

Related: Veteran Tax Benefits

Joining a Military Bank or Credit Union

Signing up online or in person will require you to provide a government photo ID plus documentation showing your military status as a service member, spouse, or dependent child. Other issues to be aware of:

Military ID is one form of acceptable photo identification for starting an account, but you will likely also need your driver’s license number and Social Security Number to get started.
Some may also be required to show proof of enlistment or commission with documents that show the start and dates of the military commitment. This is typically required when a military member wants to buy a home with a VA mortgage and is signing up for a new account as part of that process.
A participating VA lender, military bank or not, is required to determine how much time in service remains on the current contract and that the military member is in good standing with their unit.
When signing up for Direct Deposit, you must provide your new bank account and routing numbers. Some may have their initial Basic Pay deposited in a civilian account and open a military bank account later on.
In such cases, you must apply for a change in your Direct Deposit information and add the new military account number and routing number. This is true UNLESS you do not wish to transfer the Direct Deposit to your military bank account.

Related: Military Allowances Guide

What Military Banks and Credit Unions are Known For

Early deposit of military paychecks is one perk common across many of the military banks and lenders discussed here. Not all offer this, but many do.

Some banks may offer incentives such as interest-bearing accounts for military members and exclusive-to-the-military credit builder accounts such as secured credit cards. Some may offer special interest rates or other perks to military-affiliated account holders.

Some military lenders may offer auto loans with special provisions to help those deployed or sent on temporary duty; you may be able to negotiate delayed payments or other options when called to active duty or deployed into a combat zone.

When Researching Your Military Bank Options

When searching for these financial institutions, you’ll find a variety of websites reviewing the options. What should you know about some of these financial blogs (especially those that claim to provide you with “curated recommendations” about lenders, including military banks?

They are often written by people with little to no experience living in military communities. Your priorities and theirs (in writing the review) may differ significantly. You’ll want to read the reviews to get a general sense of what may be offered, but for best results, don’t trust these indivual reviews on the finance blogs without comparing options on the lender’s official site.

Some of these financial blogs go a long time between updates and you’ll want to know the must current options and perks, not the ones current when the reviewer looked at them three months ago.

What’s important to you? A 12-month share certificate? Or interest checking? Those are the priorities for one such website offering reviews of military lenders, but your concerns may be a lot closer to financing a car you purchased at an overseas military assignment, a VA mortgage for a home you wish to purchase stateside, or a checking account that offers protections against identity theft or fraud on your accounts.
Be sure to search the lender’s official site for the specific features you need from your military bank account. If your priority is investing and saving, a more full-service lender like USAA may be for you.
If you simply need an account for your military pay Direct Deposit, search for a military lender or credit union that provides the best terms, ATM availability, and be sure to explore your options for the overseas use of the ATM card and accounts in case you are given a new duty assignment outside CONUS.

What to Look for From a Military Bank or Credit Union

Ease of use where you are likely to be stationed stateside or overseas. How many ATMS can you access and where? Is there a fee for using the bank’s ATM outside CONUS? You’ll need to know.
If you are sent overseas, can you access most lender services online?
Are there added fees for using your ATM card at non-lender machines?
Does the lender offer military-specific services such as payment arrangements for deployments or new assignments?
Ask about lender-specific perks you may qualify for thanks to your military service/.
No-fee or low-fee checking: Check fees are bad enough for those assigned stateside, but when dealing with the expense of living overseas, the exchange rate, Cost-of-Living adjustments, and other issues, cutting your costs in every conceivable way–including check fees–is a great idea.

13 Apr 2325 May 23

Can I Use GI Bill Income for a Mortgage?

Is it possible to use GI Bill income for a mortgage? The Post-9/11 GI Bill features a payment the Montgomery GI Bill does not; the monthly housing stipend paid to students using the GI Bill who are not on active duty.

This housing stipend equals the Basic Allowance for Housing paid to an E5 with dependents, based on the zip code where students take most of their classes.

The housing allowance can be substantial, depending on where you go to school; to some, that may sound like a great addition to a monthly income that could be used to qualify for a home loan.

But as we’ll explore below, you cannot use the GI Bill as income for loan approval purposes in typical cases.

Related: Military Tuition Assistance

GI Bill Housing Stipends Typically Don’t Count as Income

When you apply for any home loan, the lender must verify your income, with the goal being to determine that your earnings are stable, reliable, and likely to continue well after your loan closes.

Not all income counts when it comes to home loan approval. If you earn money selling on eBay or Etsy, that income may be considered sporadic by the lender and not usable for loan approval.
The same applies to the GI Bill housing allowance, which is paid on a limited basis, has an expiration date depending on the student’s GI Bill program, and is not likely to continue once the benefit has been used up.
Because the GI Bill expires after you have used your full entitlement, it cannot meet lender standards. This is typically true for most government-backed mortgage loan programs, including VA home loans and FHA mortgages.

Paying for a Mortgage with the GI Bill

Just because your GI Bill housing allowance does not count as qualifying income does not mean you cannot use it to pay on a mortgage loan, even a VA mortgage.

It simply means the lender isn’t able to justify your loan using that income.

One thing that’s important to understand; your housing allowance is not intended to offset 100% of your room and board expenses while in school. The GI Bill housing stipend is a way to lower the financial impact of your education but it won’t ease the full burden.

Making a Mortgage Down Payment with GI Bill Housing Allowance Funds

Are you considering saving your GI Bill housing money and putting it toward a down payment on an FHA mortgage, a VA home loan, or a conventional mortgage?

If so, you’ll want to discuss this with your loan officer, as specific requirements for down payment funds may apply here. One in particular?

“Seasoning” requirements many lenders have; these are the bank’s rules about how long money has to remain in a bank account before using it for down payment funds. Your loan officer must verify your down payment did not come from unacceptable sources like a credit card cash advance or a payday loan.

27 Mar 2328 Mar 23

VA Life Insurance Overview

The Department of Veterans Affairs offers several types of life insurance for qualifying military members and their families.

There are options for active duty service members, family members, and veterans. VA life insurance options also exist for military members and their families in the National Guard and the Reserve.

VA Life Insurance and Your Financial Needs

When choosing any life insurance option, whether through SGLI or a commercial provider, it’s important to determine your actual amount of financial need should your family need to file a claim. SGLI covers up to $500 thousand for the servicemember.

Does that amount sound like a lot to you?

It might at first. But when calculating your family’s needs for insurance purposes, you’ll want to add up how much it takes to completely pay off a mortgage, student loans, credit card debt, and to provide for future needs like college funds for children.

Part of those calculations can include determining your overall life expectancy, for which you can use an online calculator. Don’t skip this important step.

Signing Up For VA Life Insurance

In some cases, enrollment is automatic; in others (such as VSGLI) you have a limited time to apply when you leave the military or there are other qualifying events.

These requirements may be subject to change due to legislation, alterations in the program you seek, etc. Contact the VA directly to learn how to sign up for the program you need if you aren’t sure.

Related: 5 Types of Life Insurance

Servicemembers Group Life Insurance (SGLI)

SGLI is for service members only. Family members are covered under a similar option called Family Group Life Insurance.

SGLI offers benefits such as the following:

Coverage up to $500,000, offered in $50,000 increments
120 days of additional coverage when you leave the military
Extension of free coverage for up to 2 years on leaving the military for those who are totally disabled
Part-time coverage for Reserve members

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Who Qualifies for Servicemembers’ Group Life Insurance (SGLI)

You may be eligible for full-time SGLI coverage if you meet at least 1 of the following VA requirements.

- You’re an active-duty member of the U.S. military
- You’re a commissioned member of the National Oceanic and Atmospheric Administration (NOAA)
- You’re a commissioned officer of the U.S. Public Health Service (USPHS)
- You’re a cadet or midshipman at a service academy
- You’re a member, cadet, or midshipman of the Reserve Officers Training Corps (ROTC)
- You’re a member of the Ready Reserve or National Guard, assigned to a unit, and scheduled to perform at least 12 periods of inactive training per year
- You’re in the Individual Ready Reserve (IRR) mobilization category

SGLI: NonPay Status in the Ready Reserve or National Guard

You may be eligible for full-time SGLI coverage if you are scheduled for 12 periods of inactive training for the year and you drill for points.

Those covered by SGLI under these circumstances are required to submit premium payments directly.

Family Servicemembers Group Life Insurance (FSGLI)

FSGLI offers up to 100,000 of coverage “not to exceed your service member’s SGLI coverage,” according to VA.gov. Children get $10,000 of free coverage.

Who Qualifies for Family Servicemembers’ Group Life Insurance (FSGLI)

FSGLI is for spouses and dependent children of qualifying service members. To get FSGLI, at least one of the following must apply:

- The service member is on active duty and covered by full-time SGLI
- The service member is a member of the National Guard or Ready Reserve covered by full-time SGLI

If you are married to someone eligible for SGLI coverage, you qualify “no matter if your own status is active duty, retired, or civilian,” according to VA.gov.

Servicemembers Group Life Insurance Traumatic Injury Protection (TSGLI)

This insurance is meant as “short-term financial support to help eligible service members recover from a severe injury” according to the VA.

Were you injured while covered by SGLI? You may be able to file a TSGLI claim or appeal a past rejected claim. You may qualify for $25,000 to $100,000 offered as short-term financial aid to help you in the recovery phase from what the VA describes as a traumatic injury.

If you are eligible, you may use this benefit regardless if the injury happened on duty or off.

Who Qualifies for TSGLI?

If you were insured by SGLI and had an injury the VA defines as traumatic, you may be eligible for TSGLI. All the following must apply to qualify:

- You have what the VA calls a “scheduled loss,” which is the “direct result” of a traumatic injury;
- The injury happened “before midnight on the day that you left the military;”
- You experienced a “scheduled loss” within 2 years of the injury;
- You “survived for a period of not less than 7 full days from the date of the traumatic injury.”
- You served on active duty or as a Reservist, a National Guard member, on funeral-honors duty, or 1-day muster duty

Some applicants may qualify for retroactive TSGLI if the injury happened between October 7, 2001, and November 30, 2005, and meet the TSGLI qualifications above.

Veterans’ Group Life Insurance (VGLI)

You may qualify for coverage between $10,000 and $500,000 in term life insurance benefits. Your coverage is based on how much SGLI coverage you had when you left the military. VA rules allow you to increase your VGLI coverage every 5 years until you reach a $500 thousand cap. These increases are possible until you reach age 60.

Who Qualifies for VGLI

This coverage is for veterans who are of the following:

- You have SGLI and are within 1 year and 120 days of being released from an active-duty period of 31 or more days;
- You are within 1 year and 120 days of retiring or being released from the Ready Reserve or National Guard;
- You had part-time Servicemembers’ Group Life Insurance (SGLI) in the National Guard or Reserve. You must also have “suffered an injury or disability (damage to your body or mind that makes it hard for you to do everyday tasks, including meaningful work) while on duty—including direct traveling to and from duty—that disqualified you for standard premium insurance rates;”
- You’re within 1 year and 120 days of assignment to the Individual Ready Reserve or to the Inactive National Guard (ING).
- You’re within 1 year and 120 days of being put on the Temporary Disability Retirement List (TDRL).

Other circumstances may also apply.

You must apply for VGLI 1 year and 120 days after leaving the military or you will be required to prove you are in good health. You have 240 days after leaving the military to qualify for this benefit.

Veterans Affairs Life Insurance (VALife)

VA Life is described as “guaranteed acceptance” whole life insurance for disabled veterans. Those who meet program requirements are “automatically approved.” This plan offers:

Up to $40,000 in whole life insurance coverage in $10,000 increments
Cash value accruing 2 years after applying

VA.gov says this plan does not require proof that the applicant is in good health. This program is unique because full life insurance coverage starts 2 years after you apply for VALife.

Premiums must be paid during the first two years with the following caveats:

Those covered by VALife who die during the 2-year waiting period should know the VA offers to “pay your beneficiaries the total amount you paid in premiums, plus interest.”

VA.gov adds, “If you die after the 2-year waiting period, we’ll pay your beneficiaries the full coverage amount of your policy.”

Who Qualifies For VALife

If you are 80 or younger, you qualify if you have any VA disability rating, including 0%. This means you must submit a VA claim to receive a rating. There is no time limit to apply once you have gotten a VA disability rating.

If you’re age 81 or older, you may qualify if you meet all the following:

- You applied for VA disability compensation before turning 81
- You got your service-connected disability rating after you turned 81, and
- You apply for VALife within 2 years of your disability rating

Service-Disabled Veterans Life Insurance (S-DVI)

S-DVI was a VA life insurance program for those with VA-rated service-connected disabilities.VA.gov says this program “stopped taking new applications after December 31, 2022,” but those already enrolled may keep their coverage.

Who Qualified for S-DVI

The Department of Veterans Affairs removed its qualifying criteria from the official site, encouraging those who need similar coverage to apply for VALife (see above).

Veterans’ Mortgage Life Insurance (VMLI)

VMLI is a mortgage protection insurance offered to qualifying families of veterans “with severe service-connected disabilities” who adapted a house to make it more accessible.

This program offers insurance coverage up to a $200,000 cap.

This policy is paid directly to the lender when it is needed. VA.gov advises that these funds are never paid to a family member or survivor. The amount of coverage is equal to the amount of your mortgage but has no loan value or cash-out options.

You may be required to apply for and be approved to receive a VA Specially Adapted Housing Grant in order to receive approval for VMLI.

Learn more: VA Adapted Housing Grants: An Overview

Who Qualifies For VMLI

All of the following requirements apply. Applicants must be under age 70.

- You have a service-connected severe disability or a disability made worse by military duty.
- You received a Specially Adapted Housing (SAH) grant
- You own the title of the home
- You have a mortgage on the home

>> Getting affordable life insurance coverage with no medical exam or labs required is easy. Get a no-obligation, free consultation to determine your eligibility.

23 Mar 2328 Mar 23

Is SGLI Enough For Military Families?

Is SGLI enough for military families? SGLI stands for Servicemembers Group Life Insurance. One of the first things to remember about this program is that it’s for the servicemember only; spouses and dependents are insured under a program called Family Group Life Insurance or FGLI.

For this article, we’re looking only at SGLI and whether the coverage amounts for the servicemember. It may seem like a very old-fashioned approach to family finances–insurance for the “breadwinner” being the primary focus. There is also the related assumption that other family members aren’t contributing financially or aren’t able to do as much as the breadwinner. Especially in a military context.

Is the amount of insurance the servicemember carries enough to help the family deal with the financial hardship of losing a loved one?

Related: Calculate Your Insurance Needs

When SGLI was designed, “insure the breadwinner” thinking was very much in line with the culture at the time, and a lot of the advice for insurance assumes the departed spouse wanted to fully financially cover the family for things like a mortgage, student loans, and existing credit card debt.

Relieving your loved ones of financial burdens in the wake of your death is a good motivation for carrying the maximum amount of life insurance possible, regardless of your age, gender, or family status, and that’s the thinking which informs our article.

Is SGLI Enough for Military Families?

There are three basic things to remember about SGLI. One is that it does NOT continue once you leave the service, and the 120-day “grace period” expires.

You may be able to convert to Veterans Group Life Insurance, but as we will explore below, the maximum coverage amount of SGLI and related government life insurance programs might not be enough to meet the needs of a family who has lost a veteran loved one.

Take Stock of Your Finances

$500 thousand as a policy settlement sounds like a lot of money. It’s half a million dollars, after all. But imagine how fast that sum disappears once you have paid off a mortgage, student loans, and all credit card debt with the payout.

Imagine paying off a $150 thousand home, a $20 thousand debt for a vehicle, $60k in student loans, credit card debt, medical bills, and we haven’t even discussed funeral expenses. Is $500k enough?

Is $500K Enough Life Insurance?

Many financial blogs say no. One cites a publication called the Guide to Financial Readiness for Military Families, which notes a general rule of thumb used in the life insurance industry: insurance coverage should represent as much as 10 times your yearly pay.

Your coverage should anticipate paying off:

Your mortgage
All credit card debt
Current student loans for the parents
Future college costs for dependents
Outstanding debt such as tax liens, auto loans, etc.
Funeral costs

How SGLI Works

SGLI is a life insurance program the servicemember is automatically enrolled in when entering basic training.

This insurance coverage, once capped at $400 thousand but since increased to $500 thousand, is available in $50,000 increments up to the $500 thousand coverage limit. Troops can also opt out of SGLI completely, but it’s not advisable.

Why? Because SGLI is one of the least expensive forms of life insurance available. SGLI does not have an upcharge for risky career fields, hazardous duty, or other issues.

That’s unlike some civilian life insurance providers who may charge more depending on your age, the nature of your employment, your overall health, etc.

Coverage Starts In Basic Training

The service member is automatically enrolled when shipping out to basic training, but any qualifying family members (they must be listed in DEERS) may also have coverage under the Family Group Life Insurance program.

SGLI and FGLI are both term life insurance policies. Typically your coverage begins on entry into the service and ends 120 days after you leave the military.

Can I Carry Both SGLI and Private Life Insurance?

Some may mistakenly believe you can only carry SGLI or protect your family with FGLI. This may be due to a bad-but-understandable assumption.

When you become a military member, you are also enrolled in TRICARE. Active duty service members must carry TRICARE health insurance and cannot use any other health insurance program. Family members are free to get other health insurance. Is the same thing true of SGLI?

No, but you can understand why one might assume it is true. However, troops can pay for additional life insurance from a private provider anytime.

>>Explore your life insurance options

22 Mar 2328 Mar 23

5 Types of Life Insurance

There are 5 basic types of life insurance to choose from, which we will explore below. Which one is right for you depends greatly on your financial needs, future plans, and your goals for the policy if and when the time comes when it’s needed.

There are, generically speaking, two basic kinds of life insurance. One is known as term life insurance, and the other is known as permanent life insurance. There are three additional categories of life insurance, which fall under the “permanent” category.

Differences Between Term Life Insurance and Permanent Life Insurance

The basic difference between these two options is that term life is more affordable but only covers you for a specified number of years (as long as you stay current on the payments) before it’s time to renew (often year-to-year) or drop the coverage.

Your rate for the plan once the term has expired may be adjusted due to age and health. Some may be able to convert a term life policy to a whole life insurance option when the term expires. Check the fine print of your policy to learn if this option is available.

Permanent life insurance applies as long as you keep making the payments. There is no term to expire.

Is SGLI Term Life Insurance or Permanent Life Insurance?

Servicemembers Group Life Insurance, Veterans Group Life Insurance, and Family Group Life Insurance are all examples of term life insurance programs offered when you join the military.

How Permanent Life Insurance Differs From Term Life Insurance

Permanent life insurance, such as whole life insurance, offers coverage for your entire lifetime, as the name implies. You must stay current on your payments to continue coverage but this type of insurance includes a fixed interest rate paid on your insurance policy that creates a cash value over time.

The cash value does not change the death benefit amount, but you will reach a point with the policy (over time) where you can apply for a life insurance loan on that cash value.

If you hold the insurance long enough that the cash value grows to equal the death benefit payout, your insurer may cancel the policy and pay you the amount in cash.

Partner Message

Simple Term Life Insurance. Easy, affordable, with no medical exam required!

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3 Other Types of Life Insurance

The following three types of life insurance all fall under the “permanent” category.

Universal life insurance
Variable life insurance
Final expense life insurance

Universal Life Insurance

Universal life insurance is another option for coverage for your entire life, as long as you continue to make payments.

This option could be marketed to you as “adjustable life insurance” because, depending on the terms of your contract, you may be allowed to change the amount of your death benefit, skip payments, and you may earn interest on your policy over time.

This type of life insurance earning isn’t quite the same as whole life insurance–the universal life insurance rate has a minimum but may be adjustable up or down over time. Your interest rate earnings could build up to the point where you have a no-cost insurance policy that remains active without requiring you to make further payments.

Your experience will vary depending on the service provider, don’t assume the terms and conditions of one policy are identical to others.

Variable Life Insurance

Variable life insurance is described by some sources as “a riskier type” of permanent life insurance.

Why? Because you agree to invest some of your life insurance funds in exchange for a policy designed to pay out more if your investment choices are profitable.

But the investments associated with the policy are not guaranteed, hence the elevated risk. Some may lose a portion of their investment funds; some may profit.

You may not be right for variable life insurance if you don’t feel you know what you’re doing where investments are concerned, or if you aren’t interested in paying closer attention to this type of policy than you would for a term life insurance option.

Funeral Insurance

This is a variation of whole life insurance offering more affordable coverage meant to offset end-of-life costs associated with the funeral, medical bills, or debt.

This type of life insurance coverage may feature fewer or no age or health criteria, making it easier for older people to apply for coverage. But this coverage may not meet larger needs often covered by term life or whole life insurance.

>> Getting affordable life insurance coverage with no medical exam or labs required is easy. Get a no-obligation, free consultation to determine your eligibility.

21 Mar 2328 Mar 23

SGLI Pros and Cons

What is SGLI?

Servicemembers Group Life Insurance or SGLI is a low-cost military life insurance benefit offered to those on active duty, with options for qualifying Guard and Reserve members and other qualifying groups.

Life insurance is meant to help the survivors of a family member who dies; SGLI offers multiple types of life insurance coverage for various circumstances.

SGLI is offered to those who meet the following criteria:

Active-duty Army, Navy, Air Force, Space Force, Marines, or Coast Guard.
Commissioned National Oceanic and Atmospheric Administration members
U.S. Public Health Service.
Cadets.
Midshipmen.
Members, cadets, and midshipmen of the Reserve Officers Training Corps.
Ready Reserve member.
National Guard member assigned to a unit and scheduled to perform at least 12 periods of inactive training per year.
Individual Ready Reserve members.
Those in non-pay status with the Guard or Reserve who are drilling for points and not pay, and who are scheduled for 12 inactive training periods in the current year.

This group life insurance option is automatic; if you qualify the Department of Veterans Affairs signs you and your family up the moment you are eligible. Benefits include:

Coverage up to the top limit of $500,000—in $50,000 increments
120 days of free coverage from the servicemember’s separation date
Extension of free coverage for up to 2 years (if you’re totally disabled) when you leave the military.
Part-time coverage for eligible Reservists

Other VA Insurance Options

VA.gov offers additional life insurance programs including:

Veterans Affairs Life Insurance (VALife): offered to veterans aged 80 or under who have a service-connected disability rating (0-100%). There are no health requirements for VALife and no time limit to apply.
Veterans’ Mortgage Life Insurance (VMLI): offered to veterans under age 70 with severe service-connected disabilities who received a VA Specially Adapted Housing (SAH) grant.

SGLI Pros and Cons

There are definite advantages and a few disadvantages to having SGLI. The pros include the $500k coverage for the service member. The cons include having a much lower coverage amount for spouses and children.

SGLI Pros

Enrollment is automatic for those who qualify.
No physical required.
Wartime coverage is not excluded.
Flat rate insurance premiums regardless of being a smoker or non-smoker.
Servicemembers are automatically covered for up to $500 thousand but you may be required to opt-in for the maximum amount.
Qualifying family members are automatically enrolled when the servicemember is enrolled.
SGLI coverage is offered in $50,000 increments.
Payments are automatically deducted from the servicemember’s paycheck.
Children are covered without charge for up to $10,000.

SGLI Cons

Family SGLI coverage for spouses is far lower than for service members.
SGLI increased to $500 thousand for service members in 2023, but no coverage was increased for spouses or children.
SGLI ends when you retire or separate from military service, though you will have extended time to find other coverage once your retirement or separation date passes.
Service members who choose to decline SGLI coverage after the automatic increase to $500,000 went into effect “no longer have spouse or dependent child coverage as of the first day of the month following their declination” according to VA.gov.
Your life insurance needs may change over time, and the options you are offered at the start of your military career may not be enough later.
Military spouses qualify for “…a maximum of $100,000 of coverage for you as a spouse, not to exceed your service member’s SGLI coverage.”
There is a coverage limit of $10,000 for each dependent child.

The problem facing most who use SGLI and the family equivalent, FGLI, is that the coverage simply may not be enough to cover industry-recommended expenses in the wake of a family member’s death.

Do You Need Extra Life Insurance?

There are three basic ways to get extra life insurance to shore up coverage for spouses and dependents.

These include using FGLI as mentioned above, getting additional coverage through an employer, or applying for coverage on your own through a commercial life insurance company.

Service members may decide they need additional coverage too. The current $500 thousand maximum benefit may not be enough to cover paying off a mortgage, future college debt, and current credit card debt on top of funeral expenses and other costs.