If you’re a current military service member or if you’ve served in the past, you and your family are entitled to certain financial benefits. However, many military service members don’t realize all the programs that are available and how to take advantage of these great financial perks.
Read on for a quick financial guide to military benefits and see how you might be able to access these tools, services and financial products to help you save for retirement, recover from debt, send yourself or your kids to college for less money, afford a house, and lots more.
Preparing for Retirement
To help service members save smartly for retirement, the US government offers access to the Thrift Savings Plan (TSP), which is a great retirement benefit that’s also provided to other federal employees. The TSP helps military service members to set aside a portion of their paycheck to save for retirement and earn interest, in a tax-advantaged way. It’s similar to the 401(k) plans offered by most workplaces, but the TSP also has additional benefits, such as low administration fees and a 5% fund contribution match from the government. The TSP also offers accountholders the opportunity to choose whether their funds are taxed up-front or when they are withdrawn, giving accountholders more say in how they utilize their tax advantage.
A Smart Savings Account
Current military service members who are deployed to a designated combat zone have access to a special kind of savings account, known as the Department of Defense Savings Deposit Program (SDP). The SDP account accepts contributions up to $10,000 and enables earnings of up to 10% annually – well above the usual interest rate for a savings account. This is an excellent opportunity for active service members to automatically earn sizeable interest on their savings, so be sure and get in touch with a military finance officer if you believe you qualify for an SDP account.
Free (or Nearly Free) Education
Eligible service members, veterans and their immediate family have access to a number of benefits to help them access a free or nearly free college education. The Post-9/11 GI Bill provides up to 100% of in-state tuition at public colleges, vocational schools and technical training institutes, as well as a housing stipend of up to $1,000 per month and other funds to cover books, school supplies, outside tutoring and so on. Spouses and dependents are also eligible for this great benefit, which can cover both graduate and undergraduate study. Check out the program online to learn more about what funds you and your family may qualify for, depending on time served in the military.
The government offers a range of housing support for service members and veterans, including a tax-free housing allowance for current members of the military, which helps to cover the cost of off-base housing. In addition, there are also VA direct and VA-backed home loans to help service members and veterans access more affordable housing. There are many advantages of getting a VA loan, including knowing that there are good terms behind the loan and a team of people ready to assist veterans and service members with their unique financial challenges. Do be aware that borrowers will still need to meet certain standards to qualify for a loan, such as having a high enough credit score. The Department of Veteran Affairs can also support with guidance to help veterans who are facing problems in affording their mortgage payments or with other financial assistance needed by a homeowner.
Caps on Loan Interest Rates
If you took out a loan prior to beginning your military service, you may be eligible for a 6% interest rate cap, thanks to the Servicemembers Civil Relief Act (SCRA). This law can help to reduce how much interest you owe on a mortgage, credit card, car loan, student loan and so on; as long as the loan was taken out before your service began. Other benefits within this act include the right to terminate a residential lease, so be sure to speak with a military finance officer or your financial institution if you think this might apply to your situation.
One financial benefit that many military service members and veterans forget to take advantage of, is access to great financial education resources. Visit VA online to check out budgeting tips, money management tools from financial experts, important information about debt recovery, and lots more. There are also free financial counseling and service-to-civilian transition assistance courses available. Indeed, having access to these kinds of expert financial resources is even more important nowadays, as unemployment rates continue to climb and many families are facing new financial challenges due to the pandemic.
Unfortunately, service members are sometimes that target of fraudsters who pretend to be a VA employee or affiliated with another government agency. It’s important to be aware of the potential for fraud, to help yourself and family members avoid identity theft. The VA has online resources about how to recognize a fraudster versus a real VA contact, and how to take the right actions and precautions to prevent fraud.
Fortunately, VA benefits are constantly evolving, and there may be more benefits available to you that we did not cover. Visit your local VA office or website to learn more about specific resources.
Thank you to all veterans for your service.