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Frustrated that so much financial advice doesn't apply to them, military personnel bombard Kiplinger's with questions -- including many e-mails from members of the armed services who are serving in Iraq. As the wife of an Army doctor who has been deployed to Iraq twice in the past three years, I can appreciate that military families have unique needs when it comes to such things as tax rules, retirement and estate planning.
Patrick Beagle, a former helicopter pilot, retired from the Marines as a lieutenant colonel and opened a fee-based financial-planning practice that specializes in helping military families. Below, we offer financial advice from Beagle, along with words of wisdom from military personnel who are doing a heroic job of managing their money while serving their country.
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Taxes. When you're in the military, you can keep your home state as your official domicile, even when you're stationed elsewhere, or switch your residency to benefit from lower taxes. For example, many of Beagle's colleagues who went to flight school in Florida switched their residency to that state, which doesn't have an income tax.
Chris Carlson, who will soon retire as a major in the Marines, shifted his residency from Wisconsin to Virginia when he was stationed at the Pentagon in 2002. Virginia has a state income tax, but Carlson got a big tax break by contributing to Virginia 529 college-savings plans for his two children.
To establish residency in a state, Beagle recommends that you register to vote there, get a driver's license and register your car. One caveat: Civilian spouses who work generally must pay taxes in the state where they live.
Estate planning. Shipping out for weeks at a time or going off to war has a way of focusing your attention on your family's future. David Kless, a supply officer on the aircraft carrier U.S.S. Nimitz, based in Coronado, Cal., was deployed to the Persian Gulf from May to November last year and is away from home about 40% of the time. Before he left for the Mideast, he wrote a will to benefit his wife, Teresa, and their young children, Joshua and Katie.
Kless also gave Teresa power of attorney so she could manage the family's finances in his absence. He drafted another, special power of attorney for major transactions -- such as when Teresa sold a camping trailer titled in David's name -- and set up a special arrangement so that he could get part of his pay in cash while aboard ship. The base legal-services office will usually handle this paperwork for free.
Pension benefits. Military personnel can enjoy a retirement paycheck for life, starting as young as age 38. But it's an all-or-nothing deal, with no partial vesting. Leave just shy of 20 years and you don't get anything -- and most people don't stick around that long.
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