This is the third article in a series detailing the many financial benefits associated with service in the U.S. military. In this installment, the focus will be on benefits for veterans and how the government provides assistance to veterans and their families. Part one is Guide to Military Benefits for Retirement, Pay and Savings. Part two is Guide to Military Education Benefits and Resources.
In the realm of post-service life, military veterans often face a number of challenges as they transition from the structured environment of the armed forces to civilian society. Recognizing the sacrifices made in the line of duty, the U.S. government has established a range of financial benefits to support veterans in their civilian pursuits. This article delves into three crucial pillars of veteran financial assistance:
- U.S. Department of Veterans Affairs (VA) Home Loans
- Survivor Benefit Plan (SBP)
- VA Disability Benefits
It also touches on some other popular benefits, such as TRICARE for Life, group life insurance and the Veterans Pension program.
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These benefits are not only a testament to the nation's gratitude for the service rendered by its veterans but also serve as essential tools in helping them build stable and secure futures. They play a pivotal role in ensuring the well-being of military veterans and their families long after their uniforms are retired.
VA loans
The VA offers a range of home loan programs to help active duty and veterans achieve the dream of homeownership. VA home loans are one of the most significant financial benefits for veterans, offering low interest rates with favorable terms and down payment requirements. With a VA loan, veterans can purchase a house without a down payment, making homeownership more accessible for those who have served in the military.
Unlike many conventional loans, when putting down little to no down payment, VA loans do not require private mortgage insurance (PMI), further reducing the overall cost of homeownership and saving veterans money over the life of the loan. There is a funding fee that ranges from 1.25% to 3.30% of the loan, but that fee is waived for those with service-connected disabilities.
With more flexible credit and income requirements, it is easier for veterans to qualify for financing. Veterans with existing VA loans can take advantage of the VA’s interest rate reduction refinance loan (IRRRL) program to refinance their mortgage and potentially lower their monthly payments.
To be eligible for a VA home loan, service members and veterans must meet specific service requirements based on their length and type of service. Generally, veterans with honorable discharge status are eligible for this benefit.
Lastly, a lesser-known fact about VA home loans is that veterans can use this benefit more than once. In fact, unless somebody has an existing VA loan, the benefit can be used again. Once they meet the eligibility requirements, they have the benefit for life!
Survivor Benefit Plan
The SBP is a program that can provide pay to a service member’s eligible beneficiary upon the death of the member. There are two components: a no-cost automatic coverage for active duty and reserve members and an optional election upon retirement.
When a service member retires after at least 20 years of qualifying service, they not only receive a pension but also must decide whether to enroll in the SBP. Since the military pension pay stops at the death of the retiree, the SBP allows them to ensure a lifetime annuity for their dependents. It offers survivors a portion of the military retiree’s pension, providing financial stability and support during a difficult time. It is a cost-effective insurance plan, with premiums typically deducted from the retiree’s retirement pay so they don’t count as income.
The cost is relatively low compared to commercial life insurance policies. Veterans can choose their spouse, former spouse or other dependents as beneficiaries, ensuring that the benefit reaches those they intend to support.
The annuity payout, or series of payments, to the survivor is based on a percentage of retired pay with a maximum for a spouse being 55%. SBP payments are subject to federal income tax, but they may be partially or fully excluded from state income tax, depending on the state of residence. To be eligible for SBP, veterans must have completed at least 20 years of service, be entitled to retired pay and elect to participate in the program.
Veteran Affairs disability benefits
Veterans who have incurred service-related disabilities are eligible for VA disability compensation. This benefit offers financial support to veterans to help them cope with the physical, mental or emotional challenges resulting from their military service-related injuries or conditions. VA disability compensation is tax-free, providing veterans with a stable income that is not subject to federal or state income tax.
Veterans who qualify will receive monthly payments based on the severity of their service-connected disabilities. The amount of compensation is determined by the VA’s disability rating system. Eligible veterans also receive access to VA health care services for their service-related conditions while the children, parents and spouses of a veteran may be eligible for Dependency and Indemnity Compensation (DIC), providing them with financial support after a loved one’s passing as a result of a service-connected disability.
In addition to monetary compensation, most states have benefits for veterans based on their percentage of disability. These vary from state to state and include benefits such as free national parks passes or discounts on property taxes.
TRICARE For Life
TRICARE For Life (TFL) is a comprehensive health care program offered to military veterans in the United States who are eligible for both Medicare and military health care benefits. TFL, as a secondary payor, covers costs that Medicare does not, such as copayments, deductibles and certain services not covered by Medicare.
This program is designed to provide seamless health coverage for military retirees age 65 and older, ensuring that they receive comprehensive medical care without incurring significant out-of-pocket expenses. Participants must be a TRICARE beneficiary and have Medicare Part A and Part B to be eligible and will be automatically covered under TFL after meeting the requirements.
Also, they are not restricted to TRICARE providers. They can use any Medicare provider, which substantially increases accessibility to health care options.
Additional benefits
Other opportunities available to veterans are listed on the VA website, with some common ones included below:
The financial benefits associated with being a U.S. military veteran are designed to ensure the well-being of those who have served and their families:
- VA home loans make homeownership more accessible
- SBP provides a safety net for surviving spouses and dependents
- VA disability compensation offers support for service-related disabilities
These benefits recognize and honor the sacrifices veterans have made for their country. It is essential for veterans to be aware of these benefits and take advantage of the support available to them and their families.
To make informed decisions tailored to individual circumstances, veterans and their families should seek the guidance of a knowledgeable financial adviser. A professional adviser well-versed in these programs can provide personalized insights, helping veterans maximize their benefits and pave a smoother path toward financial security in the civilian world.
This information is for educational purposes and is not intended to provide, and should not be relied upon for, accounting, legal, tax, insurance, or investment advice. The contents are not intended to be advice tailored to any particular person or situation. We believe the information provided is accurate and reliable, but do not warrant it as to completeness or accuracy. This information may include financial planning recommendations or investment strategies; however, there is no guarantee that such recommendations or strategies will prove to be correct, and they also may change without notice. We encourage you to speak with a qualified professional regarding your scenario and the then-current applicable laws and rules.
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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.
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