Financial Planning for Veterans
It’s a sad fact of life that men and women that have served their country in the military are often targeted by predatory lenders and unethical salespeople who put them into poor investments, saddle them with needless debt and ruin their credit– or even their financial lives. If you’re leaving the military, doing some financial planning, either by yourself or with the aid of a qualified advisor, is vital for protecting yourself and getting the most from the veteran’s benefits you’ve earned. Here are some tips that ought to help.
Using and Protecting Your Veterans Benefits
If you’re a relatively young veteran, say in your 20s or 30s, or if you’re an older vet, your financial planning needs will be different. Ditto for vets who are married or unmarried, or who have kids or don’t.
One reason that veterans are attractive prey for scam artists is all the financial benefits to which they’re entitled. These are a few of the veteran’s benefits you might be eligible for and how to receive the most from them:
Your Education Benefits
Veterans are eligible for educational benefits under two current versions of the G.I. Bill: the Montgomery GI Bill– Active Duty or the Post-9/ 11 GI Bill
Montgomery GI Bill– Active Duty (MGIB-AD): To be eligible for education and training funding with the Montgomery GI Bill– Active Duty (MGIB-AD), you must have served at least two years of active duty during particular time periods and meet other criteria listed on the VA website. In most cases, you have to also have paid a total of $1,200 into the education program while you were serving.
If you qualify, you can receive as much as 36 months of financial assistance. As of October 2020, the maximum monthly benefit was $2,122 a month for full-time students or a total of $76,392 over the three years.
The Post-9/ 11 GI Bill: This version of the GI Bill is only for veterans that served after Sept. 10, 2001.3 Depending on how long you served, it will currently pay up to 100% of tuition and fees at public colleges and universities and up to $26,042.81 per academic year at private and international ones for a total of 36 months. Additionally, you might be eligible for a housing allowance and a stipend for books and supplies.
If you plan to take advantage of your GI Bill benefits, you’ll want to research potential colleges using objective resources, such as the Department of Veterans Affairs GI Bill Comparison Tool, and not rely on the sales pitches or glossy advertising materials from the colleges themselves. Some of the colleges that market themselves most aggressively to veterans are not good options. In particular, a lot of for-profit universities have been known to give degrees and other credentials that are basically worthless in the job market.5 They have also been known to encourage vets to rack up more debt by taking on student loans.
Your Medical Benefits
As a veteran, you are eligible for VA healthcare, but you need to generally register in order to take part. The VA’s Medical Benefits Package includes a wide array of services, from basic preventive care to specialized care, surgery, mental health services, and prescription drugs. This coverage is free if you meet the income requirements, although there can be copayments for certain services and medications.
Retired service members and their family members are also eligible for coverage through the Defense Health Agency’s TRICARE program. Several different plans are offered, and costs differ according to the one you choose.
Your Loan Benefits
Veterans that wish to buy, build, or repair a home to live in, or refinance an existing mortgage can be eligible for the VA’s Home Loan Guaranty program, subject to certain income, credit, and length of service criteria. This program helps veterans obtain VA loans from private lenders, such as banks, with more favorable terms than they might get elsewhere. That can consist of reduced interest rates and closing costs, no down payment, and no requirement to purchase mortgage insurance. You can get more info on this program on the VA website.
The Consumer Financial Protection Bureau advises veterans to be wary of VA home loan frauds, which often begin with an unsolicited phone call or email from somebody claiming to be associated with the VA or another government agency. The VA says if you have any questions about the legitimacy of a call to hang up and call the department directly at 1-800-827-1000.
Your Life Insurance Benefits
If you had Servicemembers’ Group Life Insurance (SGLI) prior to leaving the military, you might be qualified for Veterans’ Group Life Insurance coverage of $10,000 to $400,000, depending on the amount of your SGLI coverage. Until you reach the age of 60, you can also increase your coverage by $25,000 every five years– up to the maximum of $400,000. Premiums are based on your age and the amount of coverage.
Veterans’ Group Life Insurance is term life insurance and can be renewed for as long as you live. That is a useful feature in case you have future health issues that would make you uninsurable.
To be eligible for VGLI, you must apply within one year and 120 days of leaving the military. Keep in mind that during the first 240 days of that period, you won’t need to show that you’re in good health, but afterward, you will.
Also keep in mind that while VGLI could be your most affordable insurance option, it might not be enough to cover your family’s insurance needs. So you might want to supplement it with another policy from a private insurance company eventually.
Your Retirement Benefits
Once you reach age 65 (or sooner if you have a disability), you could be qualified for a Veterans Pension from the VA. Eligibility depends on your income, net worth, and whether you meet the active service requirements. Surviving spouses and unmarried dependent children are also qualified for VA pension benefits in certain instances.
Depending on when you entered the service you might also be eligible for pension benefits under either the military’s Blended Retirement System (for those who joined on or after Jan. 1, 2018) or the legacy High-3 system (for those that joined before Jan. 1, 2006, and didn’t switch to the blended system prior to the 2018 deadline).
The blended system, or BRS, combines a traditional defined-benefit pension with a defined-contribution plan, similar to a 401( k), called a thrift savings plan (TSP). The traditional pension becomes available after 20 years of service, while the TSP, to which both you and the government contribute while you’re serving, is totally vested after two years. You can begin to withdraw money from your TSP, without tax penalties, at age 59 1/2.
The High-3 is a defined-benefit pension plan that offers a pension benefit after 20 years of service. The benefit equals 2.5% of your average basic pay for your three highest-paid years, multiplied by the number of years you served. So, for example, if you served 20 years, you’d receive a benefit equal to half of your average highest pay (2.5% x 20 = 50%). The longer you serve, the larger your pension will be.
The Bottom Line
A lot of veterans who have served our country have spent their lives until retirement receiving financial and health benefits within a military setting. Life outside can be very different, with new possibilities and new rules. Receiving help with the transition from DOD-funded programs such as Military OneSource can be helpful.
With Mission First Capital, you can start your investment journey alongside other military members and veterans! If you have questions or would like to talk about potential partnerships or investment opportunities, don’t hesitate to reach out. Give us a call at +1 (844) 632-3863 or visit our website MissionFirstCapital.com to learn more and let’s invest today!