Personal Finance Guide for Military Service Members and Families

Whether you're military or civilian, you need to spend less than you earn, put money aside in your emergency fund, and invest for retirement. You must also take out insurance to protect your property and your loved ones.

But there are a lot of specific things about personal finance that pertain specifically to being a military member, partner, or spouse that don't apply to others. For example, most people are not required to move frequently and do not have access to things like housing, higher education stipends, or tax-free forms of compensation.

That's why we've put together this personal finance guide for military members and their families. By following our guide, you can learn about resources that can help you solve specific problems, like deciding where to live, getting the most out of your insurance benefits, and saving for retirement.

Key takeaways

  • Military members and their families face unique financial challenges and have access to help for them.
  • A dislocation allowance is based on your rank and family situation.
  • The temporary housing allowance reimburses you for temporary housing and meals during a move.
  • The military will pay to move your household goods, including your vehicle if you are moving outside of the continental United States.
  • The IRS publishes an Armed Forces Tax Guide that covers all tax situations related to military service.

Moving costs

Moving is a big part of military life, and orders (called permanent change of station) mean packing up all your stuff, finding new housing, and moving everything there, usually just when you're starting to feel settled. your current rental. Although the military helps cover most moving costs, you still need to manage things carefully to limit or avoid out-of-pocket expenses.

You'll usually have to pay for some things yourself if you're a lower rank or end up with a lower dislocation allowance, which the military provides to help offset moving costs. Some of these additional costs include:

  • Clothes for a new climate
  • Moving costs for your pet
  • Fees associated with lost or broken goods

Home or moving insurance can cover the last item on the list, although getting reimbursed can be a challenge. On the other hand, some members claim to have taken the lead by accepting a reimbursement of 95% of what the government decision would have cost, then doing the work themselves.

Some costs are covered by the military, which we list below.

  • Dislocation allowance: Your rank and family situation determine the amount of dislocation allowance you receive. The allowance ranges from $892.96 for 2023 ($939.39 for 2024) for an E-1 without dependents to $5,595.91 for an O-10 and above with dependents for fiscal year 2023 ($5,886.90 for 2024).
  • Temporary accommodation costs: This temporary living expense allowance reimburses you for five or 10 days of temporary lodging and meals while you move to the continental United States. Up to 10 days upon departure and up to 60 days upon arrival are covered when moving outside of the continental United States.
  • Moving household items: The military pays you to move a certain weight of cargo, which depends on your rank and dependent status.
  • Daily allowances: Military members receive a maximum per diem of $157 for 2023 ($166 for 2024) for meals and lodging while relocating to the continental United States. An additional daily allowance is provided for each dependent: 75% for children aged 12 and over and 50% of the rate for children under 12.
  • Vehicles: The military reimburses you per mile if you drive while moving. If you are shipping your vehicle within the continental United States, you are responsible for the costs. For travel outside the continental United States, the military pays to ship a personal vehicle, subject to size limitations.

It's up to you to sort out the specifics of car and home insurance when you move.

Insurance

The military has your health and dental insurance covered by TRICARE and its Active Duty Dental Plan, so you won't have to worry about that when you move out of state, as civilians often do. But if you own a house or a vehicle, you have to deal with some insurance issues.

Car insurance rates vary widely by state, so you could find yourself paying much higher (or lower) premiums after moving. If you are deployed and no one will drive your vehicle, you may be able to save money by dropping your auto liability insurance if your state allows it. You may want to keep your comprehensive coverage in case your vehicle is damaged or stolen while you are away.

If your home sits vacant for an extended period of time or you plan to rent it out, you may need to adjust your home insurance policy. You should also be aware of the personal property coverage your and movers insurance provides for your items during a move and while deployed.

33%

The percentage of military spouses with a teenager at home in 2021 who were unemployed but wanted to work.

Spouse's employment

Frequent moves can be a major challenge for military spouses who want and need to work, especially when it comes to career advancement. According to Blue Star Families, up to 33% of active-duty military spouses who responded to a 2021 survey said they were unemployed but wanted or needed to work.

The high cost of child care keeps many military spouses from working, as does the unpredictability of the military's schedule. In some cases, couples end up living apart to allow the service member and their partner to work.

Being injured or disabled during combat can also be a factor. The intense caregiving responsibilities involved can make it difficult for military partners to work and advance in their careers.

Saving for retirement can be a challenge for spouses who cannot work or are underemployed. Couples may want to set up an Individual Retirement Account (IRA) for their spouse. This tax-advantaged IRA allows the active-duty military member to contribute up to $6,500 in 2023 and $7,000 in 2024 to a traditional or Roth IRA in their spouse's name. The IRS allows taxpayers to set aside an additional $1,000 catch-up contribution each year if they are 50 or older.

Taxes

Working in multiple states or countries can make filing taxes more complicated for civilians. But frequent travel, deployments and special types of pay, such as combat pay, make things even more complex for service members. The Department of Defense offers free military-specific online tax preparation and e-filing software called MilTax, available through your Military OneSource account.

As a military member, the state in which you pay income taxes depends on your domicile. The Internal Revenue Service (IRS) defines domicile as “the permanent legal home that you intend to use for an indefinite or unlimited period of time and to which, upon absence, you intend to return.” It's not always where you currently live.

The state in which you owe income taxes is also the state in which you can:

  • Register your vehicle
  • Have a driving license
  • Register to vote

Some states do not impose an income tax or tax military salaries. Military.com has a comprehensive list of domains that meet these criteria. Military spouses can claim the same domicile as their military spouse under the Military Spouses Residency Relief Act, but in some cases they may have to pay taxes from the state where they currently live.

Serving in the U.S. military can create so many tailored tax situations that the IRS devotes an entire publication to them. Publication 3, Armed Forces Tax Guide, covers military-specific topics, such as the types of pay that are not taxable. It also covers general questions, such as information about the child tax credit, the Earned Income Tax Credit (EITC), and the deductibility of moving expenses, but it aims to include all the information that the Most military personnel will need to know in a single publication. .

Can I get a financial advisor from the military?

You, your family and your survivors are eligible for free financial advice through Military OneSource, which is a program of the Department of Defense. This service is available to active duty, National Guard and Reserve members. Advisors are available to give you advice on setting and sticking to a budget, how to manage your money and how to reduce your debt.

How can I be financially stable while in the military?

Securing your financial future while in the military should be no different than if you followed any other career path. Whether you serve or not, there are some basic rules you must follow. For example, establish a monthly budget and spending plan, create an emergency/emergency fund, save for retirement, and keep your debt levels low. If your debts are high, develop a realistic repayment plan that can help you get out of debt quickly.

What retirement investment options are available to military members?

Members of the military have a variety of options for saving for retirement. Military members may choose to participate in a Thrift Savings Plan (TSP), which is similar to a 401(k). This plan allows individuals to set aside a percentage of their base salary on a pre-tax or after-tax basis.

There are two additional options for federal military retirement benefits: the Legacy Retirement System (for service members who enlisted on or before December 31, 2017) and the Blended Retirement System (for service members who enlisted on or before December 31, 2017). enlisted on or after January 1, 2018). ).

Military members can choose to invest their money in an IRA, the same way civilians invest in these accounts.

The essential

As a military service member or spouse, you will encounter personal financial challenges related to frequent and mandatory moves, ranging from moving expenses, to difficulties with spousal employment and child care, to insurance and taxes. If you arm yourself with prior knowledge, you'll learn more about how to limit hardship and achieve financial success by taking full advantage of all the wages and benefits you're entitled to, from basic training through retirement.



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