HHHHHH p fienrasnocneal + P R E S E N T FINANCIAL reAdINess= mIssIoN reAdINess FINANCIAL F I E L D M A N U A L H H H THE pErsonal financE guidE for miliTary familiEs H H H s p o n s o r E d B y C R E D I T C O U N S E L I N G S O L U T I O N S H INTRODUCTION CoNTeNTs To U.S. Military Personnel SAVING STRATEGIES Investing in Your Future 1 and Their Families FINANCIAL FRAUD Protection From Scams e are pleased to present specializes in providing consumers That Target the Military 4 the second edition of our with information needed to make wise popular personal finance choices. BBB Military Line® specializes YOUR BENEFITS Wguide for military families. in consumer education and advocacy Take Full Advantage Renamed Kiplinger-BBB Military Line for military families. BBB is pleased that of Your Military Benefts 7 Financial Field Manual, it offers com- one of the first major initiatives of its prehensive information and advice on centennial-year celebration is the BE PREPARED critical issues facing you and your fam- Financial Field Manual. Strategies Before ily. Financial turmoil impacts many This publication would not be possi- and After Deployment 9 Americans. For military families, con- ble without our ongoing sponsors: the stant moves, deployments and other Defense Credit Union Council, Investor TAXES uncertainties make navigating the eco- Protection Trust, Investor Protection The State of Your nomic waters especially problematic. Institute and ClearPoint Credit Coun- State-Tax Situation 11 The goal of this guide is to inform your seling. Special thanks to Kimberly decision-making with solid informa- Lankford, a contributing editor to Kip- REAL ESTATE tion and helpful resources. linger’s Personal Finance magazine and Smart Home-Buying In these pages, you will find practical, Kiplinger.com (and a military spouse) (and Selling) Tactics 12 easy-to-understand information to help for her role as lead writer, and Brenda you prepare financially for deployment, Linnington, a military spouse, Army TRANSITION make the most of new GI Bill opportu- veteran and mother of a soldier, who A Smooth Return nities, protect your investments, buy directs the BBB Military Line program. to Life as a Civilian 14 (or sell) a home, minimize taxes, hold Finally, we’d like to thank The down insurance costs, avoid financial McGraw-Hill Companies for gener- AT YOUR SERVICE schemes that target military families ously providing the printing of the Financial Resources and make smart decisions when you Financial Field Manual. McGraw-Hill for Military Families 16 transition to civilian life. and BBB Military Line are working This guide is a joint effort between together to expand financial-literacy WORKSHEET two organizations that have been help- and consumer-protection programs for Organize Yourself ing consumers—including members military families as part of the White (Inside back cover) of the military—for a long time. When House “Joining Forces” initiative and the Kiplinger Magazine (now called have created an online training pro- Kiplinger’s Personal Finance) was gram for military families that can be launched in 1947, a driving motivation found at www.financiallitnow.org. was to provide sound, unbiased Thank you for all you do in the serv- Editor in Chief: Knight A. Kiplinger personal finance advice to military ice of our nation! We hope you find this Editorial Director: Kevin McCormally personnel returning to the workforce guide useful and that you will call upon Contributing Editor and Chief Writer: after World War II. The Better Busi- BBB Military Line when you need as- ness Bureau, established in 1912, sistance with marketplace issues. Kimberly Lankford Design Director: Cynthia Currie Senior Designer: Harrison Goodman Copyright © 2012 by the Kiplinger Washington Editors, Inc. All rights reserved. Knight A. Kiplinger Stephen A. Cox Published by the Kiplinger Washington Editors, Editor in Chief President and CEO 1100 13th Street, NW, Washington, DC 20005 Kiplinger’s Personal Council of Better (202-887-6400). Finance Business Bureaus Kiplinger.com Cover: Stockbyte/Getty Images istockphoto.com H SAVING STRATEGIES Investing in Your Future you are when you also escape state start setting aside income tax). funds for your future, And your contribu- the easier it will be to tions grow tax- build a healthy nest deferred until you egg. And while you’re withdraw the money in the military, there in retirement. That are special investing could provide a hefty opportunities and tax nest egg if you start breaks to help you early; $10,000 con- supercharge your sav- tributed this year ings. It’s up to you to would grow to more make the most of than $100,000 over your options. 30 years, if your in- vestment grows at Thrift Savings Plan: an average rate of 8% Autopilot Savings per year. The same The government’s amount invested each ervicemembers face financial issues that most Thrift Savings Plan is year for the next 30 people don’t experience: They have to move a great place to start. years would grow to frequently—sometimes on short notice—and they Men and women in more than $1 million. the military can in- (Although an 8% re- Scan be deployed to combat zones for months or vest in this low-cost, turn might sound like years. But they also have access to valuable benefits and tax-advantaged re- pie in the sky, the fact tirement-savings plan is that the annual av- investing options not something. With the for federal employees, erage return of the Take charge of available to the gen- military, if you leave which is similar to a stock market since eral public. Exploiting before 20 years, you something you can private company’s 1926—a period that the opportunities can get nothing. Even if control: your own 401(k) plan. includes not only the help secure your fam- you qualify, pension You can contribute recent Great Reces- ily’s financial future. payments probably savings. While up to $17,000 to the sion but also the won’t be enough to in the military, TSP in 2012, and even Great Depression of Pension or Not cover your bills— more if you receive the 1930s—is nearly Even though those you’re usually enti- you have special tax-exempt pay while 10%.) who stay in the mili- tled to 50% or less of opportunities serving in a combat The TSP makes it tary for 20 years or your base salary if and tax breaks to zone—up to a total of easy to put paying more can qualify for you retire at 20 years $50,000 in 2012. Be- yourself first on auto- a pension, it’s still im- (and more if you stay supercharge your cause contributions pilot. Contributions portant to save on beyond two decades). savings. Make from your regular pay are deducted from your own. In truth, See http://militarypay escape taxes, they each paycheck, and few people actually .defense.gov for op- the most of your don’t lower your pay- steady investing can stay in the military tions based on when options. check nearly as much pay off big-time. Say long enough to claim you joined the service. as you might expect: you contribute $300 a pension, and, unlike Instead of worrying Contributing $10,000 every paycheck, civilian pensions, about what might cuts your take-home which lowers your there’s no “partial happen, take charge pay by just $7,500 if take-home pay by just vesting” to guarantee of something you can you’re in the 25% tax $225 in the 25% tax that workers who control: your own bracket (and even less bracket. Do that twice leave “early” get savings. The younger if your contributions a month and you’ll The Personal Finance Guide for Military Families // Financial Field Manual // 1 istockphoto.com H SAVING STRATEGIES save $7,200 for the investing options face an immediate tax offer no instant grati- out tax-free, a sweet year. If you start at available. For a bill and, if you’re fication. But the de- tax benefit. If you age 25 and contribute $100,000 portfolio, younger than 55 in layed gratification earn income but your for the next 30 years, for example, you’d the year you leave the of doing without to- spouse doesn’t, you you could end up with pay just $25 a year in military and tap the day’s tax deduction can also contribute more than $900,000 investment-manage- account, you’ll gener- is sweet: All with- $5,000 to an IRA in by the time you’re 55, ment fees. ally pay a 10% pen- drawals from a Roth his or her name. if your investments The TSP is a tax alty, too. For more in retirement will be You can open a Roth return 8% per year. shelter, so you don’t information about the tax-free, whereas IRA with a brokerage And even if you owe tax on earnings rules, visit www.tsp withdrawals from firm, mutual fund or leave the military at until you withdraw .gov. You’ll also find a regular IRA are insurance company, age 40 after 15 years the money, and you a calculator there to taxed in your top tax credit union or bank. of contributions and won’t ever be taxed help you project your bracket. Another ad- When selecting an never add another on contributions from future account bal- vantage of the Roth IRA administrator, dime to your TSP ac- tax-exempt combat- ance and see the is that you can with- look for low fees and count, you could still zone pay. (A portion power of long-term draw contributions a range of investment end up with about of every withdrawal compounding of at any time tax- and choices. If you have $700,000 by age 55 will be tax-free to earnings. The power penalty-free if you 20 or 30 years until (again, assuming an protect the tax-free of money making get in a pinch. retirement, it’s usu- average return of 8%). status of combat pay.) money is wonderful You can contribute ally best to invest the When it comes to You can keep money to behold. up to $5,000 to a money in a diversified how you invest inside in the TSP after you Roth IRA in 2012 (or portfolio of mutual the TSP, you can leave the military, or Tax-Free Earnings $6,000 if you’re 50 or funds (see the Inves- choose among five in- you can roll it into an From a Roth IRA older) as long as your tor Protection Trust’s dex mutual funds that IRA or another em- Unlike contributions adjusted gross income “The Basics of Saving invest in large com- ployer’s 401(k), where to a traditional IRA, is less than $110,000 and Investing” at panies, small firms, it will continue to which can earn a tax in 2012 if single or www.investor international firms, grow tax-deferred. If deduction to lower to- $173,000 if married protection.org/learn bonds or government you take the money day’s tax bill, contri- filing jointly. (The op- for more information securities. Or you can and spend it, you’ll butions to a Roth IRA portunity to make about getting started choose a lifecycle contributions gradu- in investing and cre- fund (called the L ally phases out as in- ating a portfolio). fund), which builds a eXTrA CredIT For sAVING come rises above You can invest the diversified portfolio those levels.) maximum in both a Need an extra incentive to save for retirement? of the other funds to You need to have Roth IRA and the Contributing to an IRA, the Thrift Savings Plan match your time hori- earned income in or- Thrift Savings Plan in or another retirement-savings plan could earn zon; the fund starts der to qualify for a the same year. If you you an extra tax break. The Retirement Savings out invested primarily Roth IRA (that’s basi- can’t afford to invest Contribution Credit can reduce your tax bill by in stock funds when up to $1,000. To qualify for the credit in 2012, cally income from in both plans, con- you have more than your adjusted gross income must be $28,750 or working rather than sider a Roth IRA first a decade before you less if you’re single, $43,125 or less if you fle your from investments or if you expect your in- plan to tap the money, tax return as head of a household, or $57,500 or gifts), and even come—and your tax then gradually be- less if you are married and fle a joint return. though combat-zone bracket—to increase comes more conserva- The credit is worth 10% to 50% of the pay is tax-free, it by the time you plan frst $2,000 you contribute for the year to a tive as your retire- counts for this pur- to withdraw the retirement-savings plan. The tax credit lowers ment date draws near. pose. In fact, the Roth money, especially your tax bill dollar for dollar, in addition to the Expenses for all can be a particularly if you had tax-free basic tax benefts of contributing to a retire- of the funds are ex- good deal if you have income in a combat ment plan. tremely low—about 25 tax-exempt combat- zone. Military per- The lower your income, the higher the credit. cents a year for every It’s worth $1,000 per person at the lowest zone pay. Your money sonnel are often in $1,000 invested— income levels, and drops to $200 if you are near goes in tax-free, and a lower tax bracket making the TSP one the cutof. your contributions as than they will be of the lowest-cost well as earnings come after they leave the 2 // Financial Field Manual // The Personal Finance Guide for Military Families courtesy u.s. air force /staff sgt. jamal d. sutter service, so it makes the military’s special sense to pay tax on Savings Deposit Roth contributions Program, which now and enjoy tax- guarantees a 10% free income later. return per year on up (Note that the Thrift to $10,000 while you Savings Plan will in- are deployed (and for troduce a Roth ver- up to three months sion late in 2012, after you return). You which will have the can’t contribute to the same tax benefits of a SDP until you are de- Roth IRA but without ployed. But Bowling the income limits on saved money before contributions.) he left so he could You can contribute contribute the maxi- to a Roth IRA with a mum to the SDP as single payment or sign soon as he arrived in up to have money au- Iraq. Your take-home tomatically shifted pay increases while from your bank ac- you’re receiving tax- count or paycheck. during his seven- not believe that I have free income during You have until Investing $416.66 per month deployment the time or where- deployment, which month will get you to to Northern Iraq as April 15 of the withal to beat the can help you afford to the $5,000 annual an infantry platoon market or search out stash extra money in following year limit. You have until leader last year. “In the few money man- the SDP. Bowling April 15 of the follow- my opinion, the Roth to make an IRA agers that can,” he plans to use the SDP ing year to make an is the best retirement- contribution, but says. earnings to help max IRA contribution— account option for a He also saves time— out his 2012 Roth IRA the sooner the April 15, 2013, is the young investor,” he and takes the emotion contributions. deadline for 2012 con- says, “especially con- money is tucked out of investing — As a platoon leader, tributions, for exam- sidering the years of by having money Bowling is very famil- into the account, ple—but the sooner untaxed growth and transferred directly iar with the financial the money is tucked my low tax bracket, the sooner tax- from his paycheck issues facing today’s into the account, the which was even lower to his Roth and soldiers and the im- deferred earnings sooner tax-free earn- during deployment,” TSP accounts every portance of setting fi- ings begin to grow. he says. begin to grow. If month. “It allows nancial priorities. It’s He also diverts part you use a Roth me to create growth important to pay off Making the Most of his salary each and proper allocation high-interest credit- IRA, earnings are of Your Opportunities month into the Thrift without having to card debt and build Alex Bowling is a first Savings Plan, where tax-free when think about it. This an emergency fund in lieutenant in the in- the money grows tax- ensures everything addition to saving for withdrawn in fantry stationed at deferred. And he in- continues to happen the future. Bowling Fort Hood, Tex. Just vests in mutual funds retirement. regardless of time keeps two months’ 24 years old, he’s in taxable accounts, in the field or deploy- worth of pay in an ac- already a savvy and too. That’s money ment,” he says. “No cessible fund to cover experienced saver. he can access before one has time to come personal expenses, Bowling has been retirement. off patrol and manage and a separate ac- maxing out his Roth Bowling invests investments.” count for emergen- IRA for several years, long-term money in He embraced an- cies. The last thing he and cashed in on the index funds, which other great savings wants to do is go into double benefit of con- keeps costs low and opportunity when he debt or tap retirement tributing tax-free simplifies his invest- was deployed last savings to cover un- combat pay earned ing decisions. “I do year: He invested in expected bills. H The Personal Finance Guide for Military Families // Financial Field Manual // 3 courtesy u.s. air force /staff sgt. jamal d. sutter H FINANCIAL FRAUD Protection From Scams That Target the Military outrageous interest emergencies. Contact rates. (Would you be- the community- lieve more than service office at your 400%?) But the Mili- base for details, or tary Lending Act visit Army Emer- capped payday-loan gency Relief (www rates at 36% for mem- .aerhq.org), Navy- bers of the military Marine Corps Relief on active duty and Society (www.nmcrs their dependents, .org), Air Force Aid which led many lend- Society (www.afas ers offering payday .org) or Coast Guard loans to disappear. Mutual Assistance But some lenders (www.cgmahq.org). discovered ways Join a credit union. around the law, offer- Credit unions on base ing varieties of high- often offer short-term rate loans that aren’t loans at reasonable subject to the 36% interest rates. Some ilitary personnel are prime targets for shady cap. For example, even offer small sales practices of financial criminals who some car dealers near emergency loans to want a piece of the troops’ regular paychecks bases have been members of the mili- known to push high- tary with little or no Mand have mastered ways to take advantage of rate loans with big credit check. their frequent moves. Troops have been exploited by upfront fees. Some Boost your emergency payday lenders have fund. You’re best off exorbitant-interest- and insurance. But taken to the Internet if you can avoid bor- rate payday loans, ever-creative scam Ever-creative to continue to offer rowing for unex- high-fee investments, artists scheme to stay scam artists expensive loans tar- pected expenses. unsuitable life insur- a step ahead of new geting troops, outside Build an emergency scheme to stay ance, ID-theft laws. So, add this to the reach of regula- fund with at least six schemes and bogus your list of assign- a step ahead of tors. And some offer months’ worth of ex- products promoted ments: Protecting laws designed to open-ended loans penses in a safe and with counterfeit your family from the with rates as high liquid account, such military connections. latest generation of protect troops and as 136%, which fall as a money market State and federal financial fraud. their families. So, through a loophole account. regulators and the in the law. Get credit counseling. add this to your Department of De- Predatory Lending If you have to borrow fense have cracked The commercial list of assignments: WhAT YOU CAN DO to cover your ex- down on the crooks, strips around many Protecting your Get a 0% loan through a penses, you may be and new laws and re- bases used to be lined military emergency-relief grappling with a big- sources help protect with payday lenders. family from the fund. Each branch of ger issue than a short- members of the mili- There you could find latest generation the military has an term emergency. Con- tary from being pres- a short-term loan emergency-relief sider meeting with a sured into high-fee against your next of financial fraud. fund that offers small financial-planning loans, investments paycheck, often for interest-free loans for manager on base or a 4 // Financial Field Manual // The Personal Finance Guide for Military Families istockphoto.com courtesy u.s. Navy/seamaN BeNjamiN crossley credit counselor who e-mails that purport Check your credit report. you’re deployed. To can help you set up a to be from financial You can request a place an alert, contact budget, pay down institutions regarding free copy of your Experian.com, Equi- debt and prioritize a deployed service- credit report from fax.com or Trans your spending. You member’s account. each of the three Union.com. can find a credit major credit bureaus And you can take an counselor through the WhAT YOU CAN DO every year through extra step to protect National Foundation Monitor your accounts www.annualcredit yourself by putting a for Credit Counseling online. Check your report.com. It’s a credit freeze on your (www.nfcc.org) or the bank, credit-union good idea to stagger account, especially if You can protect Association of Inde- and credit-card your requests so you you’re deployed and pendent Consumer accounts regularly, your family and get a report from one unable to monitor Credit Counseling and have a plan for of the bureaus every your credit report your credit by Agencies (www yourself (or a trusted four months. regularly. The freeze .aiccca.org). Credit family member) to re- being proactive: Put an active-duty alert prevents lenders and unions and other fi- view accounts while Monitor your on your credit report. other companies from nancial institutions you’re deployed so This free service noti- accessing your credit accounts online, on base are required that any suspicious fies creditors that report without your to offer counseling activity is spotted take advantage you’re on active mili- permission, which services at no charge. quickly. If you receive tary duty and asks can help stop identity of free credit But beware of “credit an e-mail or a call them to take extra thieves from taking repair” firms that about any “problems,” reports, and use precautions to verify out new credit in your charge high upfront don’t click on a link or the free service the identity of an ap- name. It generally fees with a promise answer personal plicant before extend- costs $10 to freeze that puts an to get you out of debt. questions on the tele- ing credit. Include the and $10 to thaw your As appealing as such phone; instead, call active-duty phone number of a record at each bureau a prospect is, you may your bank or credit trusted friend or fam- (and you need to do it alert on your find yourself chasing union’s customer ily member for credi- at all three for the an illusion and wind service number. credit report. tors to call while freeze to be effective). up in even worse financial shape. Identity Theft Military families are magnets for identity thieves because their Social Security num- bers are widely avail- able (although the Department of De- fense is gradually re- ducing the public use of the identifier), and troops can be hard- pressed to monitor their credit records and bills when they’re deployed. While phishing is a growing problem everywhere, military families can be particularly sus- ceptible to calls or The Personal Finance Guide for Military Families // Financial Field Manual // 5 istockphoto.com courtesy u.s. Navy/seamaN BeNjamiN crossley H FINANCIAL FRAUD high-Fee in this low-fee, tax- during deployment, Scams (TAP$) and spouses, used cars Investments deferred account in and for up to three Investor University with questionable Over the past few 2012 and even more months afterward. on Base, offered by titles, or even fake years, state and fed- of your tax-exempt (See the story about the state of Florida in life insurance and eral regulators have pay while serving in a deployment on page 9 conjunction with the investments. cracked down on combat zone, up to a for more information Investor Protection companies that target total contribution of about the SDP.) Trust (www.investor WhAT YOU CAN DO members of the mili- $50,000 for the year Verify a broker’s record. protection.org). Contact the base commu- tary with high-fee (see www.tsp.gov for Before doing business Check out insurers and nity-service office. For investments, includ- details). You can also with a broker, use agents with your state example, Army Com- ing some that were open a Roth IRA Finra’s BrokerCheck insurance department. munity Service at charging a whopping through a financial tool (http://broker Before you buy cover- Fort Hood, Tex., has 50% sales charge in institution. You can check.finra.org) to age, ask about licens- a database that cross- the first year. The De- invest up to $5,000 get information on a ing, complaints and references complaints partment of Defense in 2012 plus an extra broker’s licensing sta- disciplinary actions. made to the commu- and several organiza- $1,000 if you’ll be at tus and any disciplin- Find links to state nity-service, legal- tions have also made a least age 50 by the ary action he or she insurance regulators assistance and hous- big push to help mili- end of the year. Take has faced. Also check at the National Asso- ing offices on base, tary families identify a hard look at fees the broker through ciation of Insurance as well as the local scams and learn more when comparing IRA your state securities Commissioners Better Business Bu- about legitimate options. And be sure regulator (www (www.naic.org). The reau. The base’s legal- financial-planning to take advantage of .nasaa.org). State NAIC’s www.Insure assistance office will strategies. the military’s Savings securities regulators Uonline.org also of- also help you care- But there are still Deposit Program. De- offer programs to fers insurance advice fully review contracts salespeople who push ployed troops can de- help military fami- for members of the before you sign on the exorbitantly priced posit up to $10,000 in lies, including Cali- military. And before dotted line. investments or inap- a special account that fornia’s Troops you consider any The Armed Forces propriate insurance pays 10% per year Against Predatory other life insurance, Disciplinary Control near base and who max out your low- Board at each base seem ever-ready to cost Servicemembers’ can ban certain sales- pounce on members Group Life Insurance people or companies of the military who (www.insurance and prohibit anyone receive a substantial .va.gov/sgliSite/ on base from doing windfall, whether at default.htm). business with them. retirement, from a Just the threat of be- reenlistment bonus or Affinity Fraud ing put on the banned deployment pay. The Criminals have no list can help resolve good news is that you qualms about fabri- complaints. have plenty of solid cating an affiliation Contact the Better Busi- and legitimate savings with the military to ness Bureau. You can alternatives. gain a family’s trust. check a business’s Often these are small- complaint record and WhAT YOU CAN DO time operators who get help resolving Take advantage of spe- go door to door using consumer problems cial savings programs a military insignia or through the local BBB for the military. Service- any military connec- (www.bbb.org). BBB members have some tion to try to sell their Military Line focuses excellent savings wares—whether it’s on providing infor- opportunities. The burglar-alarm sys- mation and resources Thrift Savings Plan is tems to families of de- specifically for serv- a great way to save for ploying troops, high- icemembers and their retirement. You can fee work-at-home families (www.bbb. invest up to $17,000 schemes for military org/military). H 6 // Financial Field Manual // The Personal Finance Guide for Military Families istockphoto.com kristeN kochaNski H YOUR BENEFITS Take Full Advantage of Your Military Benefits 30 continuous days your children, it’s a and be discharged good idea to apply for because of a service- the transfer as soon as connected disability. you’re eligible. The Partial benefits are four-year period be- earned if you serve at gins on the date the least 90 days on ac- transfer is approved. tive duty. So even if you’ve been And the Post 9/11 GI in the military 15 Bill offers important years, for example, flexibility: You may you would need to be able to transfer serve an additional your benefits to your four years after you spouse or your chil- elect to transfer your dren. You can gener- benefits. ally opt to transfer Col. Houman Tavaf, benefits if you’re on who has been an embers of the military have access to special active duty or se- Army surgeon for 17 benefits and legal protections that can make lected reserve, have years, transferred his a huge difference in your family’s personal served at least six GI Bill benefits to his years, and agree to son, William, in 2010. M finances. Make sure you take full advantage serve four more years. Will is just 8 years old of what’s available. (Different service now, but Tavaf trans- commitments apply ferred the benefits Free College foreign schools. In Chief writer Kim for those eligible for right after he signed for Yourself— addition, you can retirement between up to stay in the Army or for Your kids qualify for a housing Lankford (above) Aug. 1, 2009, and Aug. for another four years One of the most excit- stipend and money knows the value 1, 2013.) to start the four-year ing new benefits for for books and tutor- Spouses may use the clock ticking. For of the new GI Bill. servicemembers and ing. You can use the transferred benefits maximum flexibility, their families is the money for undergrad- Her husband, Col. right away; children the colonel trans- expansion of the GI uate or graduate pro- Houman Tavaf, must wait until you’ve ferred 35 months of Bill, which can pro- grams at colleges and served at least ten benefits to Will and vide sweet education universities, or for has passed on his years. Servicemem- one month to his benefits for yourself, certain programs at college benefits bers and veterans wife, Kim, in case she your spouse and even vocational, trade and (and their spouses) decides to return to your children. distance-learning to their 8-year-old must use the benefits grad school. Although The Post 9/11 GI Bill schools. son William. within 15 years after you can’t add benefi- can cover the full cost Eligibility is based leaving the military. ciaries after leaving of in-state tuition on the length of time Children aren’t bound the military, you can and fees for public you serve in the mili- by the 15-year limit, alter the allocation. colleges for up to 36 tary. For maximum but they must use the “This gives us such a months (four aca- benefits, you must transferred benefits great start on saving demic years), or up to serve at least 36 by age 26. for Will’s college,” $17,500 per year for months or serve on If you’d like to trans- Tavaf says. private colleges and active duty for at least fer GI Bill benefits to For more details The Personal Finance Guide for Military Families // Financial Field Manual // 7 istockphoto.com kristeN kochaNski H YOUR BENEFITS about transferring school of business, Interest-Rate on a mortgage, credit rate from 18%, say, benefits, see the GI plus varying scholar- Reductions and Other card, car loan or other to 6%—more of every Bill Transfer page ships to several other Special Legal Rights debt can be reduced payment will go to (www.defense.gov/ of its programs. See Members of the mili- to 6% if military serv- pay off principal home/features/2009/ the VA’s Yellow Rib- tary have special le- ice affects your ability rather than to inter- 0409_gibill). bon Program page gal rights that come to pay—as it may if est. You need to send If you (or your for more information into play if you have you take a pay cut the lender a written spouse or children) (www.gibill.va.gov, to move unexpect- when activated to the request for the rate are attending a pri- then click on “Yellow edly, are deployed Reserve or National reduction, which you vate college, going to Ribbon Program” in or leave a civilian job Guard. This rule ap- can do on your own graduate school or the Post 9/11 GI Bill to go on active duty plies only to debts or with help from an paying out-of-state section). with the Reserves or incurred prior to mil- Armed Forces Legal tuition at a public col- For more informa- National Guard. itary service or acti- Assistance Office lege, your benefits tion about the Post One of the most vation, not to debts (http://legalassis may not cover the en- 9/11 GI Bill and the valuable benefits of taken on while on ac- tance.law.af.mil). tire bill. But you may earlier Montgomery the Servicemembers tive duty. Loans for To prove that your qualify for extra help GI Bill, go to the Vet- Civil Relief Act which a nonmilitary income has been re- from the Yellow Rib- erans Affairs GI Bill (SCRA) is the inter- spouse is jointly liable duced, you may be bon program. More page (www.gibill.va est-rate cap: In some can also qualify for asked to submit cop- than 1,000 colleges .gov). situations, the rate the rate reduction. ies of your military provide scholarships June Walbert, a cer- orders, earnings for a certain number tified financial plan- statements and tax of students each year, LoW-CosT LIFe INsUrANCe ner for USAA and returns. and the Department member of the U.S. SCRA provisions You need life insurance if anybody is depending of Veterans Affairs Army Reserve, took can also help service- on you fnancially, and, of course, the need be- matches the school’s advantage of the law members who are comes more pressing if you’re about to go into contribution. when she was de- deployed or have to a combat zone. But members of the military To qualify for a can’t just buy any insurance: Some policies have ployed to Iraq in move. You have the Yellow Ribbon schol- specifc war exclusions or charge high rates if 2003. She notified her right to terminate an arship, you must be you plan to travel to a foreign country. mortgage company, apartment lease if you eligible for maximum Fortunately, servicemembers have access to sent a copy of her of- have orders for a per- GI Bill benefits (chil- one of the lowest-cost life insurance programs ficial orders, and had manent change of sta- dren or spouses using available. Servicemembers’ Group Life Insurance her rate reduced from tion or are deployed (SGLI) costs only 6.5 cents per $1,000 of cover- transferred benefits 8% to 6% while she to a new location for age per month, or $312 a year for the maximum may qualify). Yellow was on active duty for 90 days or more. You $400,000—regardless of your age, health or Ribbon funding varies six months. That can terminate a car likelihood of being deployed. You can also get widely by school and shaved her mortgage lease without an $100,000 in coverage for your spouse for as program, and you ap- payments by about early-termination fee little as $60 a year if he or she is under age 35. ply for these scholar- (See www.insurance.va.gov/sgliSite for details.) $200 per month. if you are deployed ships directly through You’ll lose SGLI coverage when you leave The rate resets for 180 days or longer. the college. For the the military, and you may need more than the when your active And you can termi- 2011–12 school year, maximum anyway—especially if you’re the duty is over, but the nate your cell-phone for example, Colum- sole breadwinner for a large family. Use an higher rate will only contract without pen- bia University offered insurance-needs calculator (such as the one apply to the remain- alty if you receive or- available at www.insurance.va.gov) to see how 300 $7,000 Yellow ing balance—the dif- ders to relocate for much insurance you need, then search for extra Ribbon scholarships ference between the more than 90 days coverage to fll in any gaps beyond SGLI. You can to its undergraduate higher and lower to an area that is not get price quotes from dozens of life insurance school of general rates is forgiven, not supported by the companies at www.accuquote.com or www studies, four $5,000 simply deferred. contract. .lifequotes.com. Let them know upfront that scholarships to its you’re in the military, so you won’t end up with If you qualify to re- You’ll find more medical school, and quotes for policies with a war exclusion or high duce your credit-card about SCRA protec- 32 $2,500 scholar- rates for foreign travel. rate—imagine the tions at www.service ships to its graduate power of slashing the members.gov. H 8 // Financial Field Manual // The Personal Finance Guide for Military Families courtesy u.s. mariNe corps/cpl. reece e. lodder