Personal Finance for Military Families

Financial Benefits for Military Families

For Veterans Day, we run through benefits and programs meant to offset some of the financial risks service members take on. Also, hosts David Muhlbaum and Sandy Block talk about holiday tipping in the age of COVID and the cost of ... cats.

David Muhlbaum: Veterans Day is meant to honor the service of persons who have served in United States armed forces. Today, we’re going to talk about the ways the federal government and other institutions help veterans get their due in the form of special benefits, tax breaks and legal protections. Sandy and I will also discuss holiday tipping in the time of COVID and cost of cats. That’s all ahead on this episode of Your Money’s Worth. Stick around.

Welcome to Your Money’s Worth. I’m kiplinger.com senior editor David Muhlbaum. I’m joined by senior editor Sandy Block. Sandy, how are you?

Sandy Block: I’m doing great, David.

David Muhlbaum: Just to be clear, we are aware that there was kind of a big event this week.

Sandy Block: Yeah. I think there was an election.

David Muhlbaum: Right. And the thing is, as you also know, it’s still unfolding. We literally don’t know who the next president will be right now. And so, while some races have been called, and some conclusions can be drawn, it’s too early to say how the pocketbook and economic issues that we like to stick to here will be affected.

Sandy Block: That’s right. Sometimes it’s better to say....

David Muhlbaum: Nothing.

Sandy Block: Nothing.

David Muhlbaum: Nothing at all. It’s safer for sure.

Sandy Block: So, okay, let’s talk about tipping, which can be controversial too.

David Muhlbaum: Yeah, true. One of the things I noticed at the start of the pandemic was a lot of generosity — or maybe it was guilt — from people who were realizing that by staying home and having everything delivered, groceries in particular, they were minimizing their own risk of infection, but increasing someone else’s, and I think one of the ways people were compensating was by tipping big. The Instacart driver, the person bagging up the takeout orders, that sort of thing.

Sandy Block: And here we are, seven plus months into this, and we have a more nuanced understanding of how COVID-19 is transmitted. Like, it’s not lurking in the mail, on your milk cartons, ready to jump into your eyes or something like that.

David Muhlbaum: And there’s a degree of fatigue that sets in, too. People are less likely to drop 20% tips on the pizza driver when they see him twice a week. But on the other hand, they might feel kind of stuck. Like, why should they cut back? The service didn’t get any worse. Isn’t that what we’re supposed to be tipping for? Service? Or, or was it something deeper?

Sandy Block: You sound like a decent and philosophical tipper.

David Muhlbaum: I’d like to think I’m a decent person, even. We all have our illusions.

Sandy Block: Well, I’ll tell you something about me. Because I have waited tables, I am a big tipper, so much of a big tipper that I had to cut down on deliveries because I was going broke. But not everyone is like that. And you mentioned Instacart, did you know that earlier this year they had to revamp their policies to cut down on something called tip baiting?

David Muhlbaum: What?

Sandy Block: Customers would preload their order with the promise of a fat tip. Then after their delivery was made, they would retroactively roll back the tip for the shopper. The idea was to get the shopper fired up to fill the order, but then afterward, psych! Just the minimum.

David Muhlbaum: That is seriously lame.

Sandy Block: Yeah, it is. It’s very lame. And Instacart said it wasn’t common, but it was apparently common enough that a group of senators wrote to the Federal Trade Commission asking for an investigation.

David Muhlbaum: And now we’re coming up on the end of the year which traditionally that’s the time when people want to, or are encouraged to tip something extra. So what’s the COVID spin on holiday tipping?

Sandy Block: Well, for a number of years now, Kiplinger has put out a holiday tipping guide. And one of our main sources is the Emily Post Institute, so that’s pretty good. And it’s a good resource that we’ll put in the show notes. The main COVID adaptation will probably be to consider how much business you’ve been able to give your recipient this year. Hairstylist, for example, a lot of people aren’t getting their hair cut as much, or having a house cleaner or dog walkers. If you haven’t been able to use them as much because of the pandemic, that’s a direct hit to their income. So maybe if you do get your hair cut or use a dog-walker or something at the holidays, or maybe just as a good will gesture, you might give them a little bit of a larger tip to reestablish your relationship.

David Muhlbaum: And the delivery people, we’ve talked about some of them. What about letter carriers? The USPS?

Sandy Block: Yeah, everybody’s in love with the mailman, the mail personnel and rightfully so, but there are special rules. Your letter carrier, the one who brought you the mail-in ballot. For them, they can’t accept cash and gifts have to be worth less than $20. A gift card is a good gift.

David Muhlbaum:

Okay. I think I’ll give him some Kevlar socks, bite resistant, for the dogs.

Sandy Block: Oh, no.

David Muhlbaum: Yeah, no. When we come back, our main segment on special benefits tax breaks and legal protections meant to help military personnel and their families with the particular financial challenges they face.

David Muhlbaum: We’re back to talk about benefits for veterans and their families ahead of well, Veterans Day. And we’re not going to have a guest today because, in part, we think we know this stuff pretty well.

Sandy Block: That’s right. Kiplinger has been publishing guidance for military families for quite some time. At one point, we even had a financial field manual, the personal finance guide for military families, printed and distributed to bases all over the world. We’ve had — and have — staff with military connections, including contributing editor Lisa Gerstner, who has been a guest on here before. Her husband is an Air National Guard instructor pilot, who has flown more than 200 combat missions.

David Muhlbaum: We want to do two things today. One is to make sure that people who are in the military or veterans, or have some sort of affiliation know about the benefits available to them. And the other, I think is to help explain to people why these programs exist. It’s in part to show some appreciation for people who have served their country, but it’s also because they face particular challenges, not just bullets and shrapnel, financial challenges.

Sandy Block: That’s right. The number one problem is probably pay. This isn’t going to be a surprise to most people, but that doesn’t make things easier. Most people in the service could probably make more money in the private sector. This is true even for senior officers and those with specialized skills like doctors who get six-figure pay. Could an army orthopedist make more money fixing tennis elbows? You bet.

David Muhlbaum: Yeah. We see this phenomenon here in the Washington, D.C. area where the top brass is hanging in there at the Pentagon to make 20 years of service and jump over to Lockheed Martin and Raytheon, make the big ka-ching, maybe let your hair grow out a little and make the bucks.

Sandy Block: That’s true for a handful of people, but an awful lot of folks in the military, you never really make the big bucks. That’s kind of inside-the-beltway stuff.

David Muhlbaum: And you have to stay for 20 years to get your pension.

Sandy Block: Right. You have to stay there for a really long time. And the big payday only comes after years of service. So in the meantime, you need to think of ways to make up for mediocre pay while you’re in. And one is with better benefits basically. As in the civilian world, they tend to reward good financial behavior like saving money, but some are about debt forgiveness too.

Sandy Block: A big one that I think a lot of people don’t know about is savings accounts, which is a good, basic thing to have for everybody. But, what’s the average interest rate on a passbook savings account these days? 0.1%. Not 1%, 0.1%, which is like putting your money in a coffee can.

David Muhlbaum: Ever so slightly better than nothing. So what do they get?

Sandy Block: They got something really good. In the Defense Department Savings Deposit Program, active duty members in combat zones get 10% on up to $10,000 of savings. This being the military, there’s a range of definitions of what kind of deployment qualifies you, but that’s a hundred times better, literally a hundred times better than what a civilian would get.

David Muhlbaum: That’s a fat rate, no doubt, 10%, but you said combat zone. That’s quite a trade-off.

Sandy Block: Yeah, that is quite a trade-off. And we don’t want to minimize the danger that personnel continue to face. Casualties are real. On the other hand, the definition of combat zone actually covers plenty of deployments where the likelihood of incoming fire is really low. It seems a bit out of place for a couple of civilians to discuss the hazard level of hazard pay, but service personnel should know that a guaranteed 10% return on your money is well, exceptional.

Sandy Block: And the combat zone definitions drive a number of other benefits too. First of all, if you’re in a combat zone, your pay is federally tax-free right off the bat, all but a couple of states exempt it too. If an eligible service member is enrolled in a Roth IRA, they get to put their money in tax-free not just take it out tax-free, that’s a real nice benefit.

David Muhlbaum:. And isn’t there a retirement plan just for service members? The TSP?

Sandy Block: Well, the TSP, the thrift savings plan isn’t just for service members, it’s for all federal employees, basically it’s the 401(k) for government workers, but it’s still a notable benefit because of how cheaply it operates. We love it at Kiplinger because we keep a close eye on fees. And by that standard, the TSP is a huge winner. It charges an annual expense ratio of just 0.042% of assets, whereas annual fees and expenses for 401(k) plans range on average between 1% and 2%.

David Muhlbaum: Right. Here the percentage is low, that’s good.

Sandy Block: That is good.

David Muhlbaum: As opposed to the savings plan.

Sandy Block: That’s right.

David Muhlbaum: Right. So can you tell me a little bit more about the forgiveness side that we mentioned? Because there are going to be people who say, I can’t save until I get this debt monkey off my back.

Sandy Block:

Right, and I think this is particularly important for the young folks who are going into the military. Something called the Service Members Civil Relief Act provides special legal benefits, including an interest rate cap of 6% on any loans you took out before you were called to active duty. This cap is especially helpful for members of the reserves who are called to active duty and have to take a pay cut when they leave their regular jobs.

Sandy Block: Now, you have to apply to the lender for this benefit, which is intended to help you if your ability to pay is affected by military service. The law also gives you the right to terminate an apartment lease if you have orders for a permanent change of station or are deployed to a new location for 90 days or more. The armed forces legal assistance office can help you with these requests.

David Muhlbaum: Yeah, because when I think of the relationship between lending and the armed services, I don’t tend to have a very positive reaction. I think of those storefronts you would drive by outside a big base and I would think, going in there isn’t going to turn out so well for you. Title loans and worse.

Sandy Block: There’s a long and sorry history of predatory lending on members of the military. Again, oftentimes because these are people who are maybe just out of high school and very vulnerable, and that’s why each branch of the military has an emergency relief fund that offers small, interest-free loans for emergencies. The names are the Army Emergency Relief, Navy Marines Corps, Relief Society, Air Force Aid Society, or Coast Guard Mutual Assistance.

Sandy Block: Service members can also get short term loans at reasonable interest rates from credit unions on base. They really prefer you to keep things in house.

David Muhlbaum: Okay. What else?

Sandy Block: Free college. I think this is more well known, I think, and it is, I think a powerful reason why a lot of people go into the military when you’re young, but it’s not just for you, it could be for a kid or a spouse if you put in enough years. You could also get cheap life insurance, good mortgage deals. There’s a lot of detail to these programs so please have a look at our show notes for an updated version of our slideshow, 10 best financial benefits for military families.

Sandy Block: We’re also going to put in a link to a video from our latest Kiplinger collaborator, Brandon Copeland. He’s an NFL linebacker for the New England Patriots with a degree from the University of Pennsylvania, and he has a deep interest in personal finance education. He teaches it in fact, at his alma mater.

David Muhlbaum: Cope, we had him here as a guest a few weeks ago, in fact.

Sandy Block: Yes, we did. That was cool. So if you liked what you heard then, you’ll really like what you see in this video, which covers some of what we did today, but will in a vivid way that only Professor Copeland can bring it. I hope you will check it out.

David Muhlbaum: Thank you, Sandy.

Sandy Block: Thank you, David. But more so, thank you to all who serve our country.

David Muhlbaum: Yes, that too. Thank you.

David Muhlbaum: We’re back to talk about Felis catus, a domestic species, a small carnivorous mammal. It is the only domesticated species in the family felidae in fact, although there is frequently debate about the actual degree of domestication that has been achieved. Domestication, especially when the animal in question is not ultimately consumed, can mean significant costs.

Sandy Block: Is this is Your Money’s Worth or Wild Kingdom? I got confused there.

David Muhlbaum: I’m talking about cats. Just cats. Cats, how much do they cost to keep, that is. Our colleague Rivan Stinson put together a neat feature called 13 Costs of Keeping a Cat. Basically, she put a dollar cost on all those lovable little hellions.

Sandy Block: I can’t tell. Are you team cat or team dog?

David Muhlbaum:

I’m team animal. If you force me to choose, I’m team dog.

Sandy Block: Of course.

David Muhlbaum: We have two dogs and we have two cats. And generally speaking, I regret the cats, but then one of them will do something endearing and all is forgiven. Well, most is forgiven.

Sandy Block: Okay. I am definitely team dog. I have had many dogs, I’ve never had a cat, but as a non-cat person, I probably underestimate the cost of owning a cat. Because you know, you don’t have to walk a cat. You can’t train a cat because they do whatever they want. So are cats cheap?

David Muhlbaum: It’s a fair thing to say that they are cheaper. I would say at the baseline, yes. Based on what Rivan put together there, they are cheaper. The upside on what you can spend if you choose to spend is really pretty nuts. But the basics are: cat, which of course you can get for very close to little by adopting.

Sandy Block: You should not pay for a cat.

David Muhlbaum: Right. But even so, there are adoption fees for the organizations that do good. Then there’s the cost of spaying it, which may or may not have been done by the adopting organization, but it’s a good thing to do. Or neutering, as the gender case might be. Ongoing medical costs, food, and here’s where they get a little looser, grooming and toys. That’s where people can spend a lot.

Sandy Block: Really? I’m new to this. How much does it cost to groom a cat or what is involved? I just thought you’d let their hair grow.

David Muhlbaum: Well, it depends. So this comes back to our cats, which are long hair and probably technically should be professionally groomed from time to time. In fact, they were professionally groomed once, because the first time I tried to do it myself and I still feel pretty bad about this. I cut the cat. I cut the cat!

Sandy Block: Oh, no

David Muhlbaum: It was right before we were leaving on vacation and I was like, "Well, I hope we see you on the other side, buddy."

Sandy Block: Oh my gosh, and cats never forget.

David Muhlbaum: I don’t think he likes me anymore or any less.

Sandy Block: How would you know? It’s a cat.

David Muhlbaum: We did spend what was well over a hundred dollars once to have someone come in, come to us because the cats won’t leave and professionally groom him. And it was a very, very astonishing, memorable and physical affair. The sort of thing that, considering how much I had to help the groomer would not go on during pandemic times. We were basically like head to head, wrestling down this cat so that she could remove its poor matted fur.

Sandy Block: Oh my gosh.

David Muhlbaum: So hundreds of dollars for grooming are not unheard of. And, if you want to fly with the cat, Rivan says she pays $125 each way to fly the cat. It’s not like it gets its own seat, that’s just the fee you pay to put it in a box and put that box under the seat. No snacks, no fizzy water.

Sandy Block: So I think some listeners, a lot of people have been adopting both cats and dogs during the pandemic because they want the company. But what’s the bottom line? What should people, if people are thinking, "Yeah, I’d like to have a cat around the house." What should they expect? What’s Rivan’s bottom line? The amount they should expect to pay per year?

David Muhlbaum: And I urge people to read the piece, which we will of course put in the show notes, because she explains pretty much how she goes about it and what the variables are. Like I said, you can spend more and you probably could spend less because she really confessed it. She gets them a few extra toys sometimes. But the bottom line for Rivan is say she’s spending about $800 to a thousand dollars a year for Nikon, her short hair. That’s the price of love.

Sandy Block: Yeah, and I’m sure it could go up much higher if you have to replace things your cat has destroyed.

David Muhlbaum: Oh yes. Actually we have a puppy who does that. She puts everything back together that the cats damage. She’s very handy that way.

Sandy Block: Well, just to keep a lookout, we are going to have in a future issue a story on pet insurance, which is something that both cat and dog owners might be interested in, and that’s a way you could sort of possibly defray some major pet costs if it turns out that your cat or dog has to have surgery. So we’re looking into that and we’ll have something on that in the very near future.

David Muhlbaum: Excellent. Thank you, Sandy.

Sandy Block:Thank you. 

David Muhlbaum: And that will just about do it for this episode of Your Money’s Worth. I hope you enjoyed it. For show notes and more great Kiplinger content on the topics we discussed on today’s show, visit kiplinger.com/podcast. You can stay connected with us on Twitter, Facebook, or by emailing us at podcast@kiplinger.com. If you like the show, please subscribe to Your Money’s Worth wherever you get your podcasts. And when you do, please give us a rating; that matters a lot. Thanks for listening.

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