PERSONAL FINANCE GUIDE FOR MILITARY FAMILIES


Financial Strategies Before and After Deployment


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No matter how smart your investing decisions are throughout your life, an unexpected event could suddenly wipe out the savings you've taken years to build. Military personnel face unique risks -- especially when they're deployed -- but they also have access to special programs to protect their savings and their families. It's up to you to make the most of these resources.

MILITARY FAMILY MONEY GUIDE
To U.S. Military Personnel and Their Families
Savings Strategies for Military Families
Avoiding Scams That Target Military
Be Prepared for Deployment
Home-Buying Tactics for Military Families
Time to Become a Civilian Again
Financial Resources for Military Families

Life Insurance

You need life insurance if anybody is depending on you and would be in financial trouble if you could no longer provide for them. Needless to say, the need becomes much more pressing if you're about to go into a combat zone. But members of the military can't just buy any policy: Some policies have specific war exclusions or charge high rates if you plan to travel to a foreign country, making the coverage worthless or very expensive if you're about to be deployed.

At the same time, U.S. troops have access to one of the lowest-cost life insurance programs available anywhere.

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Servicemembers' Group Life Insurance (SGLI) covers all of those special needs and costs only 6.5 cents per $1,000 of coverage per month, or $312 a year for the maximum $400,000. The price is the same regardless of your age or your health. You can also get $100,000 in coverage for your spouse and up to $10,000 for each of your children. For a full price list, go to the U.S. Department of Veterans Affairs SGLI Web site. Because it's such a good deal, SGLI should be at the very top of your shopping list.

But you lose SGLI coverage when you leave the military, and you may need more than the maximum anyway -- especially if you're the sole breadwinner for a large family with young children. Use a life insurance needs calculator (available at the Kiplinger.com Insurance Center or in the insurance-tools section of the SGLI Web site) to see how much insurance you need, then search for extra coverage to fill in any gaps beyond SGLI. If you're healthy, you can usually get an inexpensive term-insurance policy with a fixed premium for 20 or 30 years.

If you're still on active duty, make sure any policy you consider does not have a war exclusion or restrictions on foreign travel. Be upfront with the insurer about your job and the fact that you may be deployed. It's much better to get turned down in the beginning than to have a claim rejected because you didn't tell the whole story. Plenty of insurers offer coverage without a war exclusion.

Review your insurance options at least six months before you leave the military, recommends June Walbert, a certified financial planner with USAA and Lieutenant Colonel in the Army reserves. You can convert your SGLI policy into a Veterans' Group Life Insurance (VGLI) policy as long as you submit your application within one year and 120 days after discharge from the military.

During the first 120 days, you can qualify for VGLI without a medical exam; after that, an exam is required. If you're healthy, you may find a much better deal on your own. But VGLI may be your best bet if you have a medical condition that would cause private insurers to hike your premiums or reject your application.

Save on Taxes

Members of the military receive special tax benefits, such as a tax-free housing allowance and tax-free combat pay. Those breaks come automatically. But there is something you can do to lower your taxes even more: Take advantage of the leeway you have when it comes to choosing the state where you pay income taxes (or don't pay them, if you become a resident of an income-tax-free state).

When you're in the military, you can keep your home state as your official domicile, even when you're stationed elsewhere; or you may be able to switch your residency and benefit from lower taxes. For example, many of financial planner Patrick Beagle's colleagues who went to flight school in Florida switched their residency to that state, which doesn't have a state income tax, while they were living there. And they continued to keep Florida as their domicile -- and not pay state taxes -- as long as they remained in the military, even if they moved to another state later.


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