Being money-smart doesn’t just mean having a savings account and sticking to a budget. Smart financial practices can help you build wealth for a more comfortable life while you serve and after you leave military service. Smart practices include investments, financial planning, and making the most of your military benefits.

Military Financial Benefits

There are many financial benefits of joining the military that help build your wealth, including:

• Housing Allowance: Helps cover the cost of housing to reduce personal expenses.
• Healthcare: Comprehensive health insurance lowers your medical costs
• Retirement Plans: Thrift Savings Plans (TSP) and pensions offer long-term financial security.
• Education Benefits: Programs such as the GI Bill cover education expenses and reduce student loan debt.

Maximizing Your Military Pay

Servicemembers maximize their income through special pay, bonuses, and allowances that are typically non taxable.

• Special Pay and Bonuses: Additional compensation is allotted for specific duties, skills, or assignments, such as Hazardous Duty Pay, Aviation Incentive Pay, and reenlistment bonuses.
• Allowances: The Basic Allowance for Housing (BAH) and Basic Allowance for Subsistence (BAS) cover living expenses. Make sure you understand the rates and eligibility criteria, as these can vary based on location, rank, and family status.

Savings and Investments for Financial Growth

Servicemembers looking to secure their future must start with a solid financial foundation. Well-managed savings and investments can maximize your military benefits and help you achieve long-term financial stability.

Saving Strategies for Servicemembers

Disciplined savings allow you to be ready for emergencies and handle your short-term financial goals with ease.

 

Set Financial Goals

Knowing why you’re saving can help you stay focused and motivated. Start by establishing clear and realistic financial goals to guide your savings efforts. Think about your short-term objectives, such as saving for a vacation or a new car, and of your long-term goals, such as buying a home or retiring comfortably.

 

Create an Emergency Fund

Aim to save at least three to six months' worth of living expenses for emergencies. This allows you to stay afloat and maintain your standard of living in case of unplanned expenses, medical emergencies, or other unforeseen situations.

 

Use Automatic Savings Plans

Set up automatic transfers from your checking account to a dedicated savings account with a solid interest rate. Automating your savings will ensure consistent contributions by depositing a specific dollar amount per paycheck. This approach makes saving effortless and helps you build your fund steadily over time.

Investing Your Military Benefits

Investing wisely helps you grow your wealth over the long term for a financially secure future. Opportunities to do this include:

 

Thrift Savings Plan (TSP)

The TSP is a valuable retirement savings benefit for servicemembers, offering tax advantages and low fees, and if you contribute at least 5% of your military pay, the military will match your 5% which makes it an excellent choice for long-term investment. To really maximize your retirement savings, you’ll want to contribute to your TSP regularly and as much as you reasonably can and be familiar with the different fund types so you can maximize your investment. If you are in the Blended Retirement System (BRS) be sure to understand the Service Matching Contributions so you don’t lose out on FREE money!

 

Individual Retirement Accounts (IRAs)

In addition to your TSP, consider opening a Traditional or Roth IRA. These types of accounts provide even more tax benefits and investment flexibility so you can diversify your retirement savings.

 

Employer-Sponsored Retirement Plans

If you transition to a civilian job, take advantage of employer-sponsored retirement plans such as a 401(k). Many, if not most, employers will match your contributions, effectively giving you “free” additional money for retirement.

 

The Importance of Diversification and Investment Strategies

Diversification of your investment portfolio protects your investments against market fluctuations and maximizes growth potential. Know your risk-tolerance and manage risk by adopting a long-term investment strategy and diversifying your portfolio. Regularly review and adjust your investments to ensure they stay aligned with your financial goals.

Financial Growth with the GI Bill

The GI Bill gives you access to significant educational benefits that can enhance your financial future.

You can pursue higher education, gain valuable skills, and increase your earning potential if you leverage your GI Bill benefits appropriately.

Types of Educational Programs

The GI Bill supports a variety of educational programs to suit different career goals:

• Degree Programs: The GI Bill covers tuition and fees for undergraduate, graduate, and doctoral degrees at public and private institutions.
• Certification Courses: You’ll get funding toward professional certifications and licensure.
• Vocational Training: You can use your GI Bill funding to attend technical and trade schools that prepare you for high-demand occupations, such as web developers, electricians, or radiation therapists.

Maximizing Tuition Assistance

To maximize the benefits of tuition assistance, make sure you use all available programs. Combine GI Bill benefits with military tuition assistance and scholarships to reduce out-of-pocket costs. Also, attend public in-state institutions when possible, where the GI Bill covers full tuition and fees.

The Post-9/11 GI Bill helps pay for school or job training for those who served on active duty after September 10, 2001.

Finally, the Yellow Ribbon Program can help you pay for higher out-of-state, private, foreign, or graduate school tuition and fees.

Provide for Emergencies and Future Needs

Having life and health insurance, and estate planning, can provide significant protection and peace of mind for the years ahead.

Obtain Life Insurance

Servicemembers' Group Life Insurance (SGLI) offers low-cost term life insurance to eligible servicemembers. This coverage provides financial protection for your family in the event of your death, giving them the means to cover immediate expenses and future needs at their most challenging time. Review your coverage and beneficiaries regularly, make needed changes, and develop a plan to continue life insurance coverage after you leave service with Veterans’ Group Life Insurance (VGLI), AAFMAA, or one of the other companies and organizations that provide life insurance.

Get Health Insurance

Health insurance covers essentials, including preventive care and emergency treatments. It protects you and your family from high medical costs so that you can receive necessary care without financial strain.

Create a Will

A will is a basic estate planning tool that specifies how your assets should be distributed upon your death. It can help avoid legal complications amongst your family when you’re gone. Be sure your loved ones or trusted representative know where your will is located.

Establish a Trust

Trusts provide more control over asset distribution, reduce estate taxes, and protect assets from creditors after your death. They’re especially useful for managing complex estates or providing for minors, such as your children or grandchildren.

Assign Beneficiaries

Ensure that all your insurance policies and retirement accounts have up-to-date beneficiary designations. This will direct the transfer of your assets without your loved ones having to go through probate.

Power of Attorney

Granting power of attorney to a trusted individual allows them to make financial or healthcare decisions on your behalf if you become incapacitated.

Build and Protect Your Wealth with AAFMAA

Take advantage of AAFMAA’s comprehensive range of wealth management services, including financial planning, and investment management. We also offer a wide range of life insurance policies that can help you protect your wealth for the benefit of your loved ones.

Our financial professionals are highly qualified and experienced, and have a specialized understanding of the unique financial challenges and opportunities within the military community.

Contact us today for more information on how we can help you build wealth from your military financial benefits.