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.
Read more: Military Basic Pay Chart
Once you become a military member and start earning your Basic Pay and allowances, you’ll need a place to deposit the money you have earned. While it’s true that most new recruits already have bank accounts and ATM cards, there are military-oriented financial institutions that offer perks and incentives for opening accounts.
Related: Military Military Tax Resources and Services
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.
Read more: VA Home Loan Guide
Thanks to that no-money-down option, VA loans make a lot of sense for military families, but there are some misconceptions about the program you should be aware of. One of those is the nature of VA loans in general:
- VA loans are real estate loans ONLY.
- VA loans cannot be used for any other purpose than to buy, build, renovate, or refinance single-family properties.
- You cannot use a VA loan to pay for college, you cannot use a VA loan to buy or start a business, and VA mortgage loans cannot be used to buy properties you don’t intend to live in full-time.
- VA loans cannot be used for houseboats or RVs. They cannot be used to buy things that cannot be legally classified and taxed as real estate.
Some want to know if they can apply for a VA mortgage with a loan higher than the home’s price and any approved add-ons to the loan.
They hope to take the extra cash at closing, but this is not permitted under VA home loan rules. For purchase loans, the only VA loan money back to the borrower at closing time is a refund for something paid for upfront but later financed into the loan amount.
Related: Using Your VA Loan Benefits as a Veteran
VA loans typically feature lower interest rates than some of their conventional loan equivalents. They have no penalty for early payoff of the loan, including refinancing.
These loans also feature a Streamline Refinance option when conditions are favorable to that type of refi loan (when rates have fallen lower than when you first purchased the home.)
Read more: How to Buy a Home with a VA Loan
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.
Read more: Military Credit Unions and Banks
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.
Read more: VA Compensation for Service-Connected Disabilities
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.
Read more: Education Benefits for Disabled Veterans
- 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.
Read more: 5 Tips for Applying for VA Disability Benefits
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.
Read more: Military Tax Resources and Services
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.
Read more: Veteran Tax Benefits
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.
Related: Financial Tips for Enlisted Members
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 OneSource Free Financial Counseling for Service Members
- StudentAid.gov Financial Aid for Military Families
- CareerOnestop Financial and Tax Counseling Resources
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:
- Army Emergency Relief
- Coast Guard Mutual Assistance
- Navy-Marine Corps Relief Society
- Air Force Aid Society
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:
- American Veterans Committee
- Disabled American Veterans
- AMVETS (American Veterans)
- Reserve Officers Association
- Military Order of the Purple Heart
- Blinded Veterans Association
- Paralyzed Veterans of America
- National Veterans Legal Services Program, Inc.
- Veterans of Foreign Wars
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.
Read more: Basics of Budgeting for Military Families
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.
Read more: Military Financial Preparation: An Introduction
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.
Read more: Blended Retirement System: An Overview
Read more: Thrift Savings Plan: Everything You Need to Know
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.
Read more: Military Retirement Saving and Investing Options
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 “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.
Read more: Investing Basics: Options for Military Members and Veterans