As a servicemember, you handle deployments, relocations, training, and other exceptional situations throughout your career. Managing your investments is another important activity that should be on that list, and you don’t have to do it alone.

As you invest for retirement, save for college, or develop a trust for your family, getting insight from a professional who provides financial advice for military families can help you stay on track as markets change and adjust.

Unique Financial Challenges Faced by Military Families

Military families face many challenges requiring specialized financial planning and flexibility, including:

Frequent Relocations

Military families are often required to move every two to three years due to Permanent Change of Station (PCS) orders. These frequent relocations can carry significant costs associated with housing transitions, including loss of home equity, real estate fees, temporary lodging expenses, and the challenge of finding new housing quickly. Additionally, spouses' careers may be disrupted, which can create income instability, making long-term financial planning difficult.

Deployment and Hazard Pay Management

Deployments can bring increased pay through hazard or combat pay, and you should be prepared to manage this extra income, no matter how temporary the deployment. Allocating it toward your long-term savings or debt repayment rather than short-term expenses is a good, strategic approach because your family may also need to budget for the unexpected, such as child care or additional household help, while one spouse is away.

Spouse Employment Instability

Military spouses face high rates of underemployment and unemployment due to frequent relocations and the associated challenges of finding work in each new location. This instability may reduce necessary household income while also limiting long-term financial security that would come from retirement savings or career advancement for the spouse.

Impact of Military Benefits on Retirement Planning

Military families have specific retirement options, such as the Thrift Savings Plan (TSP) and, for those with sufficient years of service, a pension. Planning for retirement can be complex, as military pensions require a minimum of 20 years of service, which may not be feasible for all servicemembers.

Developing Financial Literacy

Developing a deep understanding of savings, investments, and military-specific benefits can empower you to build financial resilience and achieve long-term financial stability.

Building a Strong Financial Foundation

Understanding essential financial principles, from budgeting and saving to managing debt, will enable you to make informed decisions and secure your financial future.

Creating a Realistic Budget

Tracking both fixed and variable expenses monthly allows you to adjust and plan ahead, ensuring your budget will be flexible enough to handle life’s uncertainties while allowing you to achieve your financial goals.

To set up a realistic budget that accommodates both fixed and variable expenses, start by making a list of all the things you know will remain the same month by month, such as rent, phone bills, or insurance. Next, look at your last 6 months of variable expenses, such as groceries, entertainment, or utilities, and average out how much you spend each month. This will help you figure out your monthly budget. Remember to set aside money each pay period for emergencies or unpredictable expenses or to cover extra spending on things like vacations or gifts.

Establishing an Emergency Fund

Everyone, especially military families, should include a financial safety net for unexpected expenses in their overall budget. By setting aside three to six months' worth of living expenses, you can cover immediate needs — such as temporary lodging, travel, or childcare — without relying on high-interest credit.

Managing Debt and Avoiding Common Traps

Managing debt wisely is key to maintaining financial health. Start by paying down high-interest debts, such as credit cards. Strategies such as the debt avalanche method (paying off the debt with the highest interest rate first) or the debt snowball method (tackling smaller debts first for quick wins) can help.

Avoid high-interest loans whenever possible; instead, explore low-interest options, such as military-specific programs that offer reduced interest rates, especially during deployments.

Additionally, make it a habit to pay more than the minimum monthly amount due on your credit cards, and consider setting up automatic payments to ensure consistency.

Understanding and Maximizing Military Financial Benefits

As a military family, you have access to a range of financial benefits designed to support you through all of the demands of military life. Understanding these benefits and how to maximize them will help you build a more solid financial foundation.

Tax Breaks

Any time you serve in a combat zone, you’ll receive combat pay that is either fully or partially tax-free. These additional deductions and benefits include:

• Deadline Extensions: Some servicemembers, including those serving in combat zones, can get an automatic extension on filing their tax return and paying any taxes they owe.
• Moving Expense Deduction: If you’re required to move due to a PCS, you may be able to deduct some of your unreimbursed moving costs on IRS Form 3903.
• Travel Deductions for Reservists: If your reserve-related duties require you to travel more than 100 miles from home, you can deduct any unreimbursed travel expenses on IRS Form 2106, even without itemizing your other deductions.
• Uniform Deductions: The cost of certain uniforms — including purchase costs and upkeep — can be deducted minus any allowance you receive to cover these costs.

Housing Allowances and Subsidies

Military families can access the Basic Allowance for Housing (BAH) or Overseas Housing Allowance (OHA), which helps cover housing costs based on your rank, location, and family size. These subsidies often cover a significant portion of your housing expenses, enabling your family to live off-base while managing rental or mortgage costs more effectively. To maximize this housing benefit, you can use either the BAH calculator or the OHA calculator provided by the Department of Defense to estimate your specific allowance and choose housing options that align with your budget.

Additionally, staying informed on housing subsidies for frequent relocations, such as Temporary Lodging Allowance (TLA), can help cover costs during transitions.

A huge benefit for Veterans also includes the zero-down, low-interest VA Home Loan. Because VA Loans have special requirements, it’s best to choose a lender that specializes in military home mortgages.

Education Benefits for Servicemembers and Families

The military provides generous education benefits that extend to both servicemembers and their families, including the GI Bill and Tuition Assistance (TA) programs.

The Post-9/11 GI Bill offers up to 36 months of education benefits for college or trade school (or up to $17,500 per year for a private college or foreign school), and eligible servicemembers can transfer unused benefits to a spouse or dependent children. You can take full advantage of these benefits by planning your education goals early and consulting with education counselors on base who can guide them through the application processes.

Additionally, the Military Spouse Career Advancement Account (MyCAA) provides up to $4,000 in scholarships for eligible spouses pursuing a degree, certification, or license, supporting career growth while managing relocations.

Retirement and Pension Plans

Military retirement benefits include the Blended Retirement System (BRS), which combines a defined pension benefit after 20 years of service with a Thrift Savings Plan (TSP), a retirement account similar to a civilian 401(k). Your military pension is based on several factors, including your rank and years of service.

Servicemembers can receive automatic and matching contributions from the military, maximizing retirement savings. To make the most of these benefits, you should contribute at least 5% of your income to receive full matching contributions in your TSP.

Healthcare Benefits and TRICARE

Through TRICARE, military families receive comprehensive healthcare coverage, including primary care, specialist visits, and emergency care, at significantly lower costs than most civilian plans.

TRICARE offers various plans (i.e., TRICARE Prime, Select, and Reserve Select) to accommodate different needs, with some plans offering no annual deductible or co-pays. Your family can maximize these benefits by choosing the plan that best fits your healthcare needs and by using on-base medical facilities when possible to save on out-of-pocket expenses.

Life Insurance and Survivor Benefits

Military families are eligible for affordable life insurance options through Servicemembers’ Group Life Insurance (SGLI), which provides up to $500,000 in coverage. A military insurance expert can help you determine if SGLI provides enough coverage to protect your family if something were to happen to you, as well as identify policies that can help you build additional savings for your future.

Keep in mind that your SGLI coverage ends when you leave the military, and it could be difficult to replace it with a civilian option at an affordable price. It can be a good idea to explore supplemental coverage while still in the military to plan ahead. AAFMAA offers life insurance options that can supplement SGLI now, and they stay with you after service.

Additionally, for retirees, the Survivor Benefit Plan (SBP) ensures that your family members will receive a percentage of your retirement pay in the event of your death. To take full advantage, military families should review their coverage annually to ensure it meets their needs and that designated beneficiaries are up to date.

Investments and Savings Tips for Military Families

Here are some effective strategies you can use to build your savings and investments, tailored to the needs of military families:

Use Military-Specific Savings Accounts

Military families can access the Savings Deposit Program (SDP) during deployments in combat zones, offering a high interest rate of 10% on deposits up to $10,000. This program is a secure way to build your savings quickly during deployments.

Invest in a Roth IRA

A Roth IRA is a versatile investment option that allows tax-free growth and withdrawals in retirement, making it ideal for military families with potentially varying income levels. Combining a Roth IRA with the TSP will help diversify your retirement savings and create more financial flexibility to cover your future needs.

AAFMAA Is Here to Help

If you have any questions or need help planning for your financial future, AAFMAA can assist you. Contact us or give us a call at 800-522-5221 to ensure your family is prepared and protected.