Category Archives: Finances

7 money benefits and tips for military families

(1) Free College for Your Spouse and Children

The GI Bill provides valuable education benefits for service members, covering the full cost of in-state tuition for up to four academic years at a public college, or up to $26,042.81 per year for four academic years at private colleges (adjusted for inflation each year). And if you serve in the military for at least six years and agree to serve four more, you can transfer your GI Bill benefits to your spouse or children. Your spouse can use the transferred benefits right away, but children must wait until you’ve served for at least 10 years, and they must use these benefits before they turn age 26. For more information, see the VA’s Post 9/11 GI Bill benefits page.

(2) No-Interest Loans and Grants for Family Emergencies

Every branch of the service has a military aid society that provides no-interest loans and grants for emergency expenses, including home and car repairs, moving expenses that aren’t covered by the military and disaster relief. Several of the aid societies offered special COVID-19 relief funds over the past year, paying for unexpected expenses such as extra child care costs while schools were closed, financial help when a civilian spouse lost his or her job and emergency travel expenses to visit sick relatives. Some also offer scholarships for military spouses and children. For more information, see the Air Force Aid Society, Army Emergency Relief, Coast Guard Mutual Assistance and the Navy-Marine Corps Relief Society.

(3) Job Search Benefits for Military Spouses

It can be difficult for military spouses to find a job when they have to move frequently, and the military offers special programs to help them with education, training and their job search. “There are several benefits available to a military spouse that are often overlooked, such as the MyCAA education benefits,” said Patrick Beagle, a retired Marine helicopter pilot who is now a certified financial planner in Springfield, Virginia. The Military Career Advancement Account (MyCAA) scholarship, for example, provides up to $4,000 of tuition assistance to help military spouses pursue professional licenses, certifications or associate degree programs. The MyCAA program also offers career coaches. See the MyCAA resource page for more information.

(4) Low-Cost Life Insurance for Your Family

Members of the military can get up to $400,000 in low-cost life insurance through the Servicemembers Group Life Insurance (SGLI) program, and they can also get life insurance for their family members, including up to $100,000 of coverage for their spouses and up to $10,000 for their children. Premiums vary by age — $100,000 of coverage costs $54 for spouses under age 34. Dependents under age 18 can get up to $10,000 in life insurance for free (coverage can be extended for full-time students up to age 22). For more information, see the VA’s Family Servicemembers’ Group Life Insurance (FSGLI) page.

(5) Important Legal Protections and Documents

Members of the military can receive legal protections under the Servicemembers Civil Relief Act, and some of the provisions can help their family members, too. For example, service members can terminate a residential lease if they receive permanent change of station orders or a deployment that will last for more than 90 days. They can terminate a car lease if they receive PCS orders or are being deployed with a military unit for 180 days or more. Also, the legal affairs office on base can help service members get essential legal documents to help protect their families, such as a will and guardian for their children. They can set up a power of attorney so your spouse or another trusted family member or friend can handle your finances while you’re deployed. A healthcare proxy can also be important to designate someone to make medical decisions on your behalf if you’re unable to do so yourself. Click here to find the nearest legal assistance office.

(6) Make Sure Your Beneficiary Designations Are Up To Date

It’s important to update your will and other legal documents whenever you have major life changes, such as getting married or divorced. And it’s also important to update your beneficiary designations for your life insurance and retirement plans, such as your TSP. These accounts pass to your designated beneficiary no matter what your will says. Make sure your selected family members will inherit this money if anything happens to you. If you joined the military when you were young, you may have originally designated your parents or another relative as your beneficiary; review the designations every few years and whenever you have life changes.

(7) Build Up an Emergency Fund

Even though a military career provides job stability, there can still be unexpected expenses — especially with frequent moves and deployments. Having an emergency fund can be one of the most important financial tools to help your family cover costs they hadn’t prepared for without landing in expensive debt; whether it’s extra expenses from moving, additional child-care costs during deployment or if it takes a military spouse longer than expected to find a new job in a new city (or if it takes the service member a while to find a job after leaving the military). If you receive any extra money, such as from a bonus or tax refund, use some of it to build up your emergency fund. “I know many military families are anxious to attack their debt when they get a tax refund or a bonus of some sort, but I always stress that it’s important to have a sufficient emergency fund in place first,” said Lila Quintiliani, program director for Military Saves. “An emergency fund of $500 to $1,000 can allow you to meet unexpected financial challenges and prevent you from getting deeper into debt.”

Source: GoBankingRates, May 18, 2021

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Flush with tax revenue, some states are giving away free money

States that have surpluses in tax revenue set them aside as rainy day funds for  emergencies and future budget shortfalls.

Pew Charitable Trusts reports, May 17, 2021, that in the fiscal year that ended for most states in June 2020, in spite of the coronavirus lockdown and the start of a recession, many states’ rainy day funds were unchanged or even grew somewhat. Overall, rainy day funds nationwide totaled $71.6 billion—second only to the pre-pandemic record-setting total of $78.7 billion.

But there is a wide variation in how far each state’s rainy day funds could stretch—from enough to run government operations for almost a year in Wyoming to zero savings in Illinois, Nevada, and New Jersey. The median amount at the start of this fiscal year can cover 28.5 days’ worth of general fund spending, or 7.8%, meaning at least half of states have that much or more saved, while half have less.

Citing CNBC, GoBankingRates reports that 29 states are flush with extra cash, some of which plan to use the surplus on tax cuts or provide financial relief to residents. Those states include the following:

  • New York, New Mexico and Maryland are offering payments or tax credits to low-income families.
  • California has a surplus of $75 billion. Gov. Gavin Newsom, who is facing a recall election, has proposed sending $600 checks to residents earning up to $75,000 a year. California households struggling financially might also get relief on past-due rent, utility bills and traffic tickets.
  • Idaho, with a $500 million surplus, is providing a tax rebate to residents who filed a 2019 tax return, in amounts of either $50 per person or 9% of taxes owed, whichever is greater. The state has also authorized a lower top tax rate.
  • Other states with surpluses that have either enacted or proposed tax cuts include Montana, Oklahoma and Iowa.

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6 problems with Americans’ retirement

The average age of retirement for Americans is 66, according to a Gallup poll, up from age 60 in the 1990s. With Americans living an average of 78.7 years, that means a good 12 or more years in retirement.

If you want to keep living at or near the lifestyle you had when you were working, experts say you need between $500,000 and $1 million saved in order to finance your retirement years. That hefty chunk of change requires years to save up.

Below are six problems with the state of retirement in America:

  1. According to a TransAmerica Center survey, although 77% of American workers are saving for retirement through employer-sponsored retirement plans as well as other options, 33% of workers are without any real retirement savings plan.
  2. Of the 77% of Americans who have retirement plans, many just don’t have enough saved to actually fund their post-retirement life at the same level as their working years. The median retirement savings of Americans between ages 55 and 64 was just over $107,000, according to a 2017 report from the Government Accountability Office (GAO). While this amount may sound significant, $107,000 translates into a $310 monthly payment, and only if it’s invested in an inflation-protected annuity.
  3. Gender gap: Men have over 3 times more retirement savings than women. Women’s average total retirement savings is just $23,000, whereas men’s average total retirement savings is over three times higher at $76,000. (CNBC)
  4. We can’t count on Social Security to fund our post-retirement life because Social Security is only guaranteed to be funded through 2035, according to Business Insider, after which time it may only be three-quarters funded. That means that (a) People already taking money from it may see a drop in payments; and (b) New retirees may have trouble getting any money at all. Part of the reason for this is an increase in older adults. By 2035, the number of Americans 65 and older will increase from about 56 million today to more than 78 million. Thus, more people will be pulling money from the total fund, but fewer people will be paying into it.
  5. There’s a 70% chance that an American age 65 or older will need long-term care at some point, according to the U.S. Department of Health and Human Services, but Medicare does not cover the costs of assisted living and nursing homes:
    1. The median cost per month for an assisted living facility is $4,051.
    2. The median cost per month for a nursing home is even higher: $8,000.
    3. The above costs don’t include other healthcare costs. This is why many older adults opt for long-term care insurance in their 60s.
  6. There’s a growing trend of Americans who are dipping into their retirement funds early. The TD Ameritrade survey showed that 44% of Americans ages 40 to 79 have taken money out of a retirement plan, including as many as 53% of Americans 70 to 79. Doing so comes with financial penalties, so financial experts advise against this.

Source of the above: GoBankingRates

According to Personal Capital’s 2021 data (CNBC):

  • The top 5 states with the highest retirement balances are:
    • Connecticut: average retirement savings of $523,568
    • New Hampshire: $494,562
    • New Jersey: $489,664
    • Alaska: $489,070
    • Virginia: $468,579
  • The bottom 5 states with the lowest retirement balances are:
    • Utah: average retirement savings of $300,392
    • North Dakota: $310,766
    • Washington D.C.: $325,671
    • Oklahoma: $340,389
    • Mississippi: $340,894

What you can and should do to ensure a secure retirement, which is what people who become millionaires do (MarketWatch; CNBC):

  1. Delay gratification: The key to saving is your ability to postpone gratification. Do you really need that item or vacation?
  2. Get debt free, especially high-interest debts like unpaid credit balances.
  3. Begin saving as early as possible. The median age U.S. workers begin saving for retirement is 27. That means half of Americans begin saving when they’re 27 or older.
  4. Pay yourself first: Put money into a “Do Not Touch” Saving account before you have the chance to spend it. Conventional wisdom says to set aside 3 to 6 months’ worth of living expenses in an emergency fund, but you should save at least 20% of your gross income each month. Even putting aside $20 per week into a savings account gives you more financial independence over time.
  5. Max out tax-efficient retirement funds like IRAs and 401(k).

See also “Cost of assisted living by state”.

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