Military Members Should Make These 5 Financial Moves
A military career can be rewarding on many levels. However, it is extremely important that you do not neglect your finances.
If you’re in the military, here are some things to cross off your individual checklist.
A Contribution should be made to a thrift savings plan
Thrift Savings Plan has two benefits:
One of them is getting an immediate tax break on the funds you’ve contributed. Secondly, you are given the option to invest that money at a very low cost.
The contribution limits annually for Thrift Savings Plans are similar to that of a 401(k). Up to $18,000 of tax-free money can be kept in your account for the current year if you’re under 50.
You are given a $6,000 catch-up if you’re 50 years or older. This raises the limit to $24,000. In 2018, there will be an increase of the annual contribution limit to $18,500 for younger savers, or $24,500 for those aged 50 years and above.
An opportunity to snag a little extra tax savings can be taken by contributing the max.
A Roth-style Thrift Savings Plan should be considered
Contribution to a traditional Thrift Savings Plan is beneficial because it can enable you to get an instant tax break for the money you put in. However, since the military members had already received a host of tax benefits, such as food allowances and tax-free housing, you may not require the tax break instantly.
Nonetheless, once you become older and no longer serving within the military, it’s possible for your tax bracket to escalate, this makes the act of funding a Roth Thrift Savings Plan a very sensible decision.
Though Roth contributions do not give an immediate tax break, your Thrift Savings Plan withdrawals can be taken tax-free immediately when you reach age 59-1/2.
You may have to pay taxes on those distributions with a Thrift Savings Plan.
If your taxes are not a major issue at the moment, but you wish to try to avoid paying taxes in the long run, then a Roth Thrift Savings Plan could be the perfect choice.
Estate planning is necessary
Though estate planning is vital for civilian workers, it is very important that military members get the right documentation in order.
If you do not have a will ready, be sure to draft one immediately. Ensure your beneficiary information is up to date if you already have a will.
This should also be done for beneficiary designations on your retirement accounts and life insurance policy.
Prepare for deployment
Having your present-day finances in order can help make deployment less stressful for you and your family.
If you have expectations to be deployed in the near future, your finances should be reviewed and outstanding issues you have not resolved should be tackled. For example, report an error on your credit card when noticed before leaving.
If you have bills that are outstanding, get them paid. Create an automatic payment system for your recurring expenses so would not have to worry about paying your bills late.
Finally, create a power of attorney for your spouse or another member of your family. This way, even in your absence that person will have the authority to make financial decisions.
G.I. Bill benefits should be explored
The G.I. Bill is specifically designed to enable military members to pursue a higher education. The Post-9/11 G.I. Bill offers educational benefits for military members who serve actively for ninety days or more after Sept. 10, 2001.
The total time you’ve served determines your eligibility for those benefits. However, if you stay on active duty for a period of 36 months, the full cost of in-state tuition and fees at a public college may be covered by the bill for up to four academic years, including a stipend for books and housing.
If you are a military member who has served for a long time, you may be eligible to transfer your benefits to your children or spouse. Make it a point to read the bill to know more.
There are benefits to serving your country. However, there are financial challenges you may come across in the course of your military career.
Observe your finances carefully, if you are lucky, you can enjoy the long-term stability that you deserve. If you have any questions regarding financial decisions, be sure to reach out to a financial professional.