As a service member, you’ve earned financial benefits to help protect your future. Take advantage of military benefits to shore up your personal finances – for both the short term and long term.
Benefits that can help set you up financially
Basic pay is the fundamental component of military pay. All members receive basic pay, and typically, it is the largest component of a service member’s pay. A member’s grade (usually the same as rank) and years of service determines the amount of basic pay received.
Pay Raise for 2020
Military personnel are receiving a 3.1% increase in their basic pay in 2020. This raise is for both active-duty and reserve service members.
Allowances are the second-most-important element of military pay. Allowances are moneys provided for specific needs, such as food or housing. Monetary allowances are provided when the government does not provide for a specific need. For example, the quantity of government housing is not sufficient to house all military members and their families, so those who are not able to live in government housing receive allowances to assist them in obtaining commercial housing. Those who live in government housing do not receive full housing allowances.
Special and incentive pays provide the services with flexible additional pays that can be used to address specific manning needs and other force management issues that cannot be efficiently addressed through basic pay increases. Unlike basic pay and allowances, which vary by pay grade and years of service, S&I pays can be used to improve recruiting and retention by increasing compensation in key occupation specialties or critical skill areas. These pays are also used to compensate for onerous or hazardous duty assignments or conditions. In addition, S&I pays can be used to provide incentives for service members to develop certain skills that are important to national security objectives.
Savings Deposit Program. Service members deployed to a combat zone get guaranteed 10% interest on money put into a savings account, up to $10,000 for each deployment. That’s unheard of outside the military. Bonus: You keep earning 10% interest up to three months after you return.
Thrift Savings Plan. Sure, retirement seems a long way off. But your future self will thank your present self if you earmark a portion of each paycheck to retirement via the Thrift Savings Plan. It’s the easiest money you’ll likely make, thanks to compound interest. If you stash $100 in a retirement account (earning 2% interest) twice a month for the next 30 years, you’ll be looking at a balance of $102,500. You have several plans to choose from. Bonus: It’s one of the lowest cost retirement savings plans out there, charging just 40 cents per $1,000 of investment each year.
Free college. Thanks to the Post-9/11 GI Bill, you can get the full cost of in-state tuition and fees at public colleges covered for up to four academic years, or contributions for a private college education. You’ll also get a housing stipend and up to $1,000 a year for books and tutoring. Benefits cover the cost of education and training programs, including undergraduate and graduate studies, vocational schools and technical training. Learn the ins and outs of different GI Bill programs. Bonus: Benefits may be transferable to a spouse or children. If your service ended before Jan. 1, 2013, you have 15 years to use this benefit. If your service ended on or after Jan. 1, 2013, the benefit won’t expire.
Affordable housing. Service members get a tax-free housing allowance when government quarters are not provided. The size of the monthly subsidy is based on your rank, location and family size. It is intended to cover part of your rent or mortgage payment so you can live off base comparably to civilians.
Low-cost life insurance. Service members have access to some of the lowest-cost life insurance available anywhere. You can provide your family with financial security at just 6 cents per $1,000 of insurance. That means for up to $400,000 of life insurance, you pay only $24 a month, regardless of age or health. You also get traumatic injury coverage for just $1 per month.
Other ways to build wealth
Low-cost loans. As a service member, you can get a low-cost home loan via the Veterans Administration – without having to put down a down payment or pay pricy private mortgage insurance.
Different ways to save. When joining the Thrift Savings Plan, you can choose from two tax options: either make contributions to retirement on a pre-tax case and then pay taxes on the amounts at retirement, or contribute after-tax dollars, letting the amount grow over time and never paying taxes on that savings. Bonus: if you receive tax-free combat pay, you don’t have to pay any tax on Roth TSP or Roth IRA contributions.
Tax deductions. You or your spouse are eligible for numerous tax deductions, some extended to all citizens in certain situations and others exclusive to service members and their families.
Contacting Military OneSource can put you on the path to making the most of your financial benefits. Our free resources, information and personalized specialty services can help you make the most of your benefits. Call 800-342-9647 or connect via Live Chat 24/7/365. OCONUS/International? Click here for calling options.