-Joe, Europe

A:  Joe, sign her up!  Your new spouse will be eligible for medical benefits after you register her in the Defense Enrollment Eligibility Reporting System (DEERS).  This registration will also allow her to get an ID card.  Don’t forget to check out your options when it comes to the Survivor Benefit Plan (SBP).  Remember, I'm a big fan of that program!  On the SBP front, your options will depend on what happened during your divorce.  Assuming your former spouse is not covered, you have up to one year to contact DFAS to update or change your old election, otherwise your old coverage and premiums will apply to your new spouse.  If the divorce decree provides for SBP coverage for your ex-wife, then your new spouse is out of luck.

-Sandra, Wester, Ohio

A:  That’s a very good and forward-thinking question. Unfortunately, you have not provided enough information for me to provide an accurate estimate. If we assume 26 years of active service (21 on Active Duty or AGR and 5 equivalent years from his time in the reserves), O-6, and 3% inflation, his monthly retirement pay check in 2013 will be approximately $7,000. You can use the calculator at the Office of the Secretary of Defense website to determine his retired pay. 

However, for you, the more important question is how much will your benefit be worth and how will it be calculated? You need to head back to your attorney to clarify the answers to these questions. It’s more complicated since you were married both during reserve and active duty service. It almost seems as if your divorce decree was written purely for reserve retirement (in which points determine retirement benefit and points earned while married divided by total points, is an easy calculation). Talking with a financial planner is a good thing and finding out exactly what you can count on are all positive steps as you plan out your retirement. I do know that you don’t want a surprise in 2013, so start knockin’ on your attorney’s and DFAS’ door for more specifics. Good luck!

-Don, Md.

A: The old saying “timing is everything” is especially relevant to your question of renting or owning.  There are definitely points in all of our lives where renting makes all the sense in the world.  To name a few, these include times when:

• employment is uncertain or job security is lacking
• you will be in a particular location only for a few years
• your proverbial ducks are not in a row (for example, when a mortgage payment doesn’t fit into your budget, you don’t have an emergency reserve, or you have no down payment or “move-in” fund)

On the other hand, owning a home is the original American dream!  In the right circumstances buying your home can allow you to build equity over time, potentially benefit from tax deductions, and ultimately know that the roof over your head is not contingent on anyone else’s whims or rent demands.  So, do I think you should use retirement vehicles like a 401(k) to build a robust nest egg for retirement—yes!!  Do I think owning a home is a good thing under the right circumstances—yes!!  The bottom line is that regardless of where you live, you should be saving for your financial security and retirement.  The decision to buy a home should be based on your own specific financial situation and outlook.  If the time is right, there’s more than enough room on your plate for a 401(k) and a home! 

-Shawn, Nampa, Idaho

 A: First off, thank you for your service. And, by the way, I am a former competitive pistol shooter. That was sure fun! Using the dictionary as our guide, as a former member of the armed forces you are clearly a veteran. So now with that cleared up, I thought it might be useful to mention a few veteran benefits for which you may or may not be qualified. For example, a quick visit to the Department of Veterans Affairs’ website would indicate that you would not be eligible for burial in a VA National Cemetery, nor would you be eligible for a VA Home Loan. The loan program requires six years of Selected Reserves or National Guard service or 90 days or more (depending on when you served) of active duty. On the other hand, your education benefits are an example of a veteran’s benefit for which you are eligible. Regardless of what benefits you do or do not qualify for, you are a veteran!

-Elijah, Hattiesburg, Miss.

A: Let’s start with the basics.  When you attempt to arrange a debt settlement you are asking your creditors to take less than you owe them.  Typically, they will only do this if they are uncertain about your ability to pay what you actually owe.  Getting something is better than nothing, in their view.  Companies that charge big bucks to settle your debts can further this uncertainty by collecting money from you and paying NOTHING to your creditors for several months.  They may see the payment you make to them as their fee while you are thinking they’re aggressively making progress on your debt.  So, you must tread carefully there and do your homework.  If debt settlement is your answer – and it is NOT a magic bullet – then consider going straight to the financial institution you owe.  I believe you can do for yourself what you pay an “expert” to do for you. 

There are downsides to debt settlement to be sure!  And you hit the nail on the head in terms of this path negatively impacting your credit report and score.   Ultimately, these debts will be noted as “settled-in-full” on your credit report, indicating that you settled the account for less than what you owed.  All future lenders will see those notations and definitely consider that information as they decide on interest rates to charge you should they decide to lend you money at all.  Another reason not to settle debt is you could be issued an IRS Form 1099c for the “forgiven” amount.  Not only are you creating a negative entry on your credit report for up to seven years, but you may also have taxable income out of the deal.  I call that a double whammy. 

So, I would consider charting a different course.  Contact a credit counselor through the National Foundation for Credit Counseling at www.nfcc.org.  They will work with you to right your financial ship, and if it is absolutely necessary, will help you implement a debt management plan (DMP).  A DMP will allow you to make one payment each month to the counselor’s agency and that payment will be distributed to your creditors (right away!).  This approach will likely take longer than a settlement, but will have less of an impact on your credit score.  It will also demonstrate to future lenders that you willing to take personal responsibility for your debts!  Good luck!

-Ronaldo, U.S. Army

A: Wow, what a great and insightful question!  I’m pleased that you’re thinking about your life together rather than just being in the moment.  Very smart.  I’m glad she’s your fiancée and not your wife…yet.  There’s still some work to be done before the big day.  The question you need to ask, discuss, and work out is whether your fiancée’s poor financial habits will jeopardize your marriage!  Because, of course, money is a major source of fights and more serious marital challenges.  I would definitely recommend frank financial discussions about spending habits, saving for goals and budgeting before you get married.  It would be wise to even consider professional counseling on this front.  It is that important. 

Now to your specific questions.  First, her bad credit score could most definitely have a negative impact when you make joint purchases.  It could result in higher interest rates, lower credit limits, and even impact the availability of credit.  In the case of a mortgage, you could pay hundreds more in interest every month due to a poor collective score!  And, I know that is hard-earned money in the Army!  See examples on www.myfico.com.  Allowing her to be an authorized user on your credit card, in and of itself, will not affect your score—that is unless she exhibits the same behaviors that might have resulted in her poor credit record. 

So, assuming that you two have that all-important financial pow-wow, and agree to be jointly responsible, I would work on building up your fiancée’s credit by taking the following steps:

• Start by having her pay down any credit card balances to 50% of the maximum allowable balance (ie., a $10,000 limit would call for a balance of $5,000 or less), then work her way to 35% with the specific goal being zeroing out her cards.  This helps to illustrate responsible use of available credit.
• Pay “charge offs” listed on her credit report. That could be an old cell phone (I have personal experience with this one!), a medical bill or any number of things.  This will help to drive up her score because she is showing financially responsibility.
• Use credit responsibly.  You will likely need credit to purchase your first home together. And you want the best score possible.  To have a good score, you need to use credit – but don’t overuse it!
• Make payments on time every time! 

You can ruin a credit score practically overnight!  But repairing it takes a lot of time.  Be patient and persistent.  It will be worth it.  Make a “Monthly Money Date” part of your lives now and especially as you marry. You both need to stay on top of your finances so that you may live within your means, pay the lowest possible interest and achieve your joint financial goals.  Good luck in your lives together!

-Robert, Liberty, Va.

A: Electing to file for early Social Security benefits will not impact your VA disability benefits—you can definitely receive both!  That’s the really good news!  However, since you were born in 1947, your normal or full retirement age is actually 66.  So, if you do decide to file for early benefits at age 62 your benefit will be reduced by approximately 25%.  That’s a pretty big pay cut!  This doesn’t mean that you shouldn’t apply this fall, but rather that you should take a close look at your finances and determine what makes the most sense.  If you need the additional income to make ends meet it probably makes sense to apply for early benefits.  On the other hand, if you can wait, your benefit will increase each month you put-off taking Social Security.  Obviously, the longer you live the more sense it would make to delay benefits.  Typically, it takes 10 or more years to break even if you start benefits at your full retirement age instead of 62.  The Social Security website is actually filled with a wealth of great information on this topic including calculators.  Thanks for your service and sacrifice.

June Walbert is a CERTIFIED FINANCIAL PLANNER™ practitioner with USAA Financial Planning Services.

Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
USAA or its affiliates do not provide tax advice.  Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor.

USAA Financial Planning Services® refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.

-Nadine, Dayton, Ohio (made up location :))

A:  As a financial planner I’m constantly asking folks what they plan to do in retirement.  It’s rare – okay it never happens – that someone says, “Have kids.”  Best wishes with that little bundle of joy! 

When your husband retired he should have been offered the option of enrolling in Tricare Prime, otherwise the default would be Tricare Standard (which, by the way, doesn’t have an annual enrollment fee).  Since you refer to that “25%” figure that would indicate to me you’re actually using Tricare Standard.  The good news is that regardless of which option you have, the maximum out-of-pocket costs are limited to $3,000.  So, that should help.  The Tricare website is chocked full of good information and contact phone numbers so that you can fully understand this valuable benefit!

Financial Planner Board of Standards, Inc. owns the certification marks CFP® and Certified Financial Planner TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.
USAA or its affiliates do not provide tax advice.  Taxpayers should seek advice based upon their own particular circumstances from an independent tax advisor.
USAA Financial Planning Services® refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.

-Brian, Los Angeles, Calif.

A:  It’s exciting to have a great idea for a new business.  Now all you need is cash!  Yes, there are monies available, but it’s a big step so be sure to think through every detail before you leap!  In recent years the government has ramped up support of our service members and veterans.  A vastly expanded GI Bill, robust incentives for service and continued service, and programs like the Patriot Express loan program through the SBA are all examples. 

And the Patriot Express may be exactly what you’re looking for.  As is true with all SBA offerings, you’ll have to work through a participating lender, but it’s a huge opportunity with loan amounts up to $500,000.  Available to veterans, disabled vets, reservists, transitioning active duty, and even spouses of all of these groups, the loans carry low interest rates and can be used for most business purposes, including: start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases.  The SBA also offers small business training.  This looks as though it might be just what the doctor ordered!  Good luck.