Your Military Money

College waiting to be paid

2009-10-31T00:30:00.000-07:00

Our son's college has really been very patient with the VA. They have charged us late payment fees of about $20 per month, but overall there haven't been any harassing phone calls or nasty letters. Our son did talk to the veterans affairs office and they advised him to continue to be patient while the processing gets done.

The issue now is registration for the spring schedule. Without his account paid, he will not be allowed to sign up for classes. We're hopeful that the VA can take care of this soon, and that they'll begin his living expense payments and pay them retroactively to August when he completed the requisite paperwork.

Eligibility Certificate Arrives!

2009-10-15T16:30:00.001-07:00

Sixty days after we submitted the VA forms, our son's benefit eligibility certificate arrived. We immediately sent that to his university as instructed on the certificate. Once they verify his enrollment, the payments will begin. His school is waiting to be paid, so the sooner they act the sooner they'll receive the money.

I'll keep you informed of our progress, so keep an eye out.

VA Check arrives!

2009-10-13T05:25:00.001-07:00

Our son received his first VA check today, the $3,000 advanced payment while they complete his initial claim. He will take the check to the registrar and pay his first installment. It's great to see this actually happening.

Kiplinger's Military Money Site

2009-10-09T15:20:00.000-07:00

Kiplinger.com has done a service for military members by building a web site just for us. The information on their site offers a wide range of topics of interest to the military, such as preparing for deployments, investing, avoiding scams, and purchasing a home.

One particularly helpful area is a list of 28 web sites that you can reference for even more information. Unfortunately you won't find "Your Military Money" there yet, but we'll keep working on it.

Request for immediate GI Bill Payment

2009-10-09T06:53:00.000-07:00

My son used the online form to request his initial $3,000 payment. The VA is supposed to cut the check and mail it within three days of the request, so he should have the money next week.

I also sent a letter to the OK VA office requesting their action to obtain his eligibility certificate. No words back from them yet.

More soonest...

Homeowners Assistance Program

2009-10-05T04:11:00.001-07:00

Many of my colleges found themselves PCS'd overseas with a home in the CONUS that they couldn't sell or rent for enough to cover their mortgage. They've been looking for assistance from the DoD Homeowners' Assistance Program. This program was designed to help military members leaving bases that were being closed, has been extended to others who are stuck with the homes because of an ordered move.

My friends are trying to cope with one significant issue right now. The benefits are apparently taxable, which for some who are underwater (owe more than their home is worth at fair market value), they won't have enough at closing to release the title to the new owners. Congress has excused the taxes for families that have gone through a foreclosure (loan forgiveness results in a 1099 which was previously taxed as ordinary income). We encourage veterans support groups to lobby congress to make the Homeowners' Assistance Program proceeds tax free.

VA offers interim $3,000 payment because processing is so slow

2009-10-01T16:17:00.000-07:00

If you're like I am, you're frustrated that it's taken so long for the VA to process your VA educational benefits. If you've applied for your benefit and haven't received the payment for the Fall 2009 term, you can log onto the VA website beginning at 12:00 AM ET on Friday, October 2. The payments will be issued within 3 days of your request.

Good job Secretary Shinseki!

Changes to your TSP

2009-10-01T16:03:00.000-07:00

The TSP Web Page just announced several changes and proposed changes to the program. Three of them were interesting to me.

The first was the approval of the ROTH TSP option. Beginning in 2011, TSP will have a ROTH option that will allow military members to contribute post-tax money into their retirement account. Instead of growing tax deferred, proceeds to the ROTH TSP will be tax free when withdrawn.

Many of you have seen my posts recommending that military members fully fund their ROTH IRAs before contributing to the TSP because of the tax treatments. This option might not change that guidance, since TSP investment options are not that interesting, but it will allow you to contribute a lot more money to these tax-favored accounts.

Speaking of investment options, the second interesting bit of news is that the administrators of the TSP have been granted permission to open a “Mutual Fund Window” to give participants access to a wide variety of funds. There are concerns about the complexity and costs associated with this option, however, so we’ll have to see how this goes. I suggest that military members and organizations like the Military Officers Association of America, the American Legion, the VFW, and other military support groups send letters and e-mails supporting the Mutual Fund Window to the TSP.

Finally, there was news on “Automatic Enrollments” into the TSP. Here’s the quote on the topic from the TSP News:

"Automatic Enrollment
The original impetus of the new law was the automatic enrollment provision that was studied and subsequently recommended for legistlative action by the members of the Federal Retirement Thrift Investment Board. The new law authorizes automatic enrollment for new Federal vicilian employees. In deference to concerns within the Department of Defense, the final legislation was amended by the Congress to exclude members of the uniformed services from the automatic enrollment provision..."

I personally believe that automatic enrollment would be an excellent move for the uniformed services to implement. I’ve read that people are usually not inclined to turn down enrollment if it’s automatic, but often do not enroll if they must actively “enroll.” For 18-24 year olds, a 1 – 3% allotment to the TSP account tied to the government insured “G-Fund” would be painless, and provides them with a foundation for future savings. Now many veterans leave the service after one or two tours of duty with no retirement savings at all.

I believe that the DoD should allow automatic enrollment, but that it should also include a bonus for first and second term enlistees/officers equal to amount of the automatic enrollment amount. For example, if the automatic enrollment is for 3%, then the government should match all of that.

This powerful program would dramatically improve the number of military members participating in TSP and provide all of them a real opportunity to save for retirement outside of waiting 20-years to be vested in the program.

Where you can live cheap...

2009-09-27T00:47:00.000-07:00

If you are thinking about retiring on your military pension, minimizing your housing costs might be the make-or-break decision. BusinessWeek online just posted a list of 20 American Cities where the cost to own a home is lower than or just a little more expensive than renting.

It's interesting that cities like Tampa, Phoenix, and Las Vegas that were so popular just a few years ago are so out of favor today. As I've said elsewhere, military retirees can now live in more areas than they ever could have before, but here's the key. Soon inflation will go up, maybe way up. You definitely want to own real estate in inflationary times. Landlords will have to raise rents in that environment just to cover their costs. If you buy your retirement home now you'll lock in rock-bottom interest rates, have many many homes to choose from, and at the lowest sales prices in years. Plus, if your ready to move into that home soon, and you're a first-time buyer, you can get a no-downpayment VA loan, finance for 15 or 30 years, and get a check back from the government for $8,000.

What a country!

My son called the VA...

2009-09-27T00:45:00.000-07:00

My son's college hopes to get paid soon, and since the VA won't talk to me about his benefit because I've filled out all the requisite paperwork, he gave them a call ten days ago. They repeated that they are taking about 8 weeks to process the requests and to contact them if he doesn't hear back from them by about October 6th.

As long as the University continues to be understanding, they can take as long as they need.

More soonest...

GI Bill update...

2009-09-19T06:26:00.000-07:00

I called the VA 10 days ago to check on the status of our paperwork to transfer my benefit to my son. I guess things are coming along because they had it on file that the benefit was transferred, and because now the benefit belongs to him they would not discuss it with me further. The last time this happened, my son was with me. Now of course, school has started and he's there.

He called them last week. They had all the required paperwork on 6 August. They told him that because of the massive volume of submissions that it could take 8 weeks to get his eligibility certificate. After he gets that he has to take it to the veterans affairs officer at his school who then sends it back to VA. The school is charging us interest now, so I really need the VA to take care of their part of the tranfer.

More soon...(I hope!)

The VA is working on my case...

2009-08-22T15:22:00.000-07:00

Second in the series.

I contacted the VA this week to get an update on our application. The VA rep picked up in less than 3 minutes, and had access to our information at his fingertips. My son, to whom I am transferring my benefit, was with me at the time, which became important. The rep needed to verify that he was speaking to me with my son's approval, since his social security number is now associated with the benefit.

Lesson 1: When transferring your benefit, in order to then get information about the application make sure your child is available to approve the release of information.

Question: Can I put a Power of Attorney on file?

The agent reviewed the application and assured me that all necessary information had been received. He asked if I had gone on the Dept of Defense web page to transfer the benefit. I told him I had, but apparently he could not see that side of the application.

Lesson 2: You must transfer your benefit with both the DoD and the VA, and they can't both see each other.

(Need the web page at DoD? It's best to use your CAC card to do this, but it takes only a few minutes.)

After just a few questions he let me know that everything I need to do has been done and that I can anticipate getting a response back soon. I asked if I should provide my certificate of eligibility to my son's school to verify that the process is underway. He advised me to do so.

More soon...

My Post 9/11 GI Bill Story

2009-08-03T06:40:00.000-07:00

As you might know, I am in the process of transferring my GI Bill benefits to my two sons. The process is outlined on the VA website. I mailed my initial application to the VA on April 29, 2009 to make sure it reached the western office in Muskogee, OK on 1 May, the first day that the window opened. On June 9th I received my Certificate of Eligibility. I received my VA Form 22-1990E in late July, which was the application for transfer of entitlement. I completed that form, and sent it back with a VA Form 21-686C, the declaration of status of dependents.

About a month earlier I filled out the DoD web-form to transfer my benefit to my two sons. I received confirmation of the transfer about a week later.

I spoke to the Veterans' Affairs officer at my son's college, since his enrollment must be verified by the university before the VA begins making payments. I asked him about the bill I received that requested payment on August 15th. He advised me to delay making the payment until this was accomplished. I am reluctant to do this, however, since I hate missing a due date.

I'll keep posting regarding my progress. I am likely one of the first 15o,000 or so to get enrolled in the program, so I feel like a trailblazer.

More soon!

100th Post on Your Military Money

2009-07-25T00:23:00.000-07:00

I’ve been considering for a couple of weeks what to talk about on this, the 100th posting to the Your Military Money blog. I’d thought about doing a post with links to prior entries, or another about the value of military benefits. Instead I decided to write about the value to a life spent in service to others. The American people can pay us what they choose, but we serve to protect freedom. I often am surprised that I’m paid well to fly airplanes and lead smart people doing important work for others.

Proudly serving for 20 + years,

Lee

Roth TSP Option

2009-07-05T21:24:00.000-07:00

Congress has proposed a Roth TSP option, which many consider to be a "game-changer" for military families. Right now a married couple where one spouse is serving can save $16,500 (more if deployed to a combat zone in a pre-taxed account, plus an additional $10,000 in a post-tax Roth IRA. Under the new proposal, couples could save the same $16,500, but pay the tax now, and let the investments grow tax free now, and come out tax free later.

Conventional wisdom has said that military members should fully fund the Roth IRA before saving money in the TSP. Now with the Roth TSP we can do both.

One additional word. You might want to stick with the strategy of fully funding your Roth IRA first before contributing to the Roth TSP. The reason is investment choices. The TSP options, which might be expanding, currently limit your to a small basket of index-linked funds. If you go with a discount brokerage, like USAA, Schwab, or TD Ameritrade, your options are almost limitless. That makes a difference if you want to add exchange traded funds, commodities, and real estate investment trusts to your mix.

Back to Basics

2009-06-12T19:25:00.000-07:00

It's easy to read the business headlines and get out of synch with the basics. For example, military members might be fearful from contributing to the Thrift Savings plan because of stock market volatility. Others might think that because inflation is likely in the near future, they should go out and spend money now, or borrow money now to buy everything they want.

These are very dangerous choices. Now is a great time to return to fundamentals of financial planning.

1. Budget wisely. How much do you spend each month in restaurants, coffee shops, movie theaters, and other discretionary ways?
2. Pay yourself first. Put 10-15% of your income away for retirement either in Roth IRAs, the TSP, or other tax advantaged accounts.
3. Spend wisely. Consider a used vehicle, avoid a long term lease, carefully consider purchases, and avoid impulsive decisions. Carry cash and avoid credit cards whenever possible.
4. Pull your credit report. You can go to annualcreditreport.com and get your report for free. If it contains errors, report them right away.
5. Get adequate life insurance if you need it. If someone depends on you for their basic needs, you need life insurance. For many, SGLI is enough, and comes directly out of your pay. If you've been in the military more more than 10 years, you may additional coverage. I recommend you contact USAA for more information about their insurance products.
6. Learn more about taking care of your money. Pick up a book like Dave Ramsey's "Total Money Makeover" to get a good understanding of the principles.

Post 9/11 GI Bill Transfer Rules Announced

2009-05-18T04:08:00.000-07:00

The rules surrounding the transfer benefit for the Post 9/11 GI Bill are beginning to come into focus. The press release, dated April 28th, warns that the rules are in the final stages, but have not been signed. The proposed policy will give any member of the Armed Forces who is eligible for the program and meets certain criteria, will be able to transfer their entire benefit to their spouse or children.

Here is the criteria:

You must have at lease 6 years of service on the date of election and agree to serve 4 additional years.
If you have 10 years of service on the date of election, you are eligible to transfer your benefit if further service is precluded by your service, as long as you serve the maximum amount of time allowed by your service component policy, or
If you are, or become retirement eligible during the period from August 1, 2009 through August 1, 2013. If this applied to you, your retirement date is pushed back by as much as 3-years.

If you'd like to receive a copy of this document, e-mail me at leeflint3@gmail.com.

Long Term Care Insurance

2009-05-16T02:33:00.000-07:00

With so many Americans living longer, more military veterans will eventually need long term care. Deciding how to pay for this is tough, and like buying life insurance, it's a benefit that we never really have to use. You might also think that your Tricare for Life Benefit will pay for long term care. According to "The Complete Idiot's Guide to Long-Term Care Planning," by Marilee Driscoll, Tricare pays nothing for long term care expenses, and the VA is of little benefit to middle class veterans. The truth is that you will likely need to supplement your Tricare benefit with additional money.

One way to pay for this is long term care insurance. The Federal Government has a program to provide effectively group coverage for military members, civil servants, and retirees who choose to participate. The Federal Long Term Care Insurance Program website will help you get an idea of what the coverage will cost.

Experts agree that it's important to add inflation adjustments to your plan. When I ran the numbers with and without the inflation adjustment the cost was 4 times as much. When you start a program like this one you are making a conscious decision to commit to insurance for life. Years of premium payments will be money that's not piled up for retirement expenses or other uses. It's similar to car or fire insurance. You hope you don't need it, but you also never get your money back. (Return of premium coverage is available, but may not be worth the added cost. Carefully review your offers before signing up for the benefit.)

Some people are reluctant to sign up for long-term care programs because they are confident that Medicaid or Medicare will pick up their bills for care late in life. They might justify this sentiment by saying that they've paid taxes in over the years, and like Social Security, this is a benefit to which they are entitled. It has been suggested to me that facilities that accept Medicaid patients might not be the facility of choice when the time comes. You may want a wider variety of options if the need arrises.

Finally, there is one other consideration, your legacy. Your spouse might have to undergo agony twice, once during your time in long-term care, and after your death with the weight of the bills or the lack of assets. In addition, your heirs would also see their inheritance be obliterated by the costs of care in your final days. Long-term care insurance can protect you and those close to you. This fact may be enough to tip the risk scale in favor of paying for the coverage.

Real money for military spouses for school and training

2009-05-04T07:04:00.000-07:00

Military One Source, a great source of information relevant to military members and their families, has a link to the DoD "My Career Advancement Account." This program provides $6,000 of financial assistance for eligible spouses directly to participating schools or other approved training programs. This program will pay for tuition, licensing, and credentialing fees, but won't pay for computers, application, graduation, and student activity fees, childcare, or other indirect costs.

This program is real, and will take just a little bit of effort on your part to set up. But for military families considering transferring Post 9/11 GI Bill benefits so a spouse can attend school, this program will pay benefits without incurring additional active duty service commitment, and the benefit can be retained for the veteran or for children.

Quicken offers free online service

2009-04-25T23:49:00.000-07:00

If you have several bank and brokerage accounts, credit cards, a mortgage, and a retirement savings account, and you want to have a single web-site to view them all, you have a couple of great choices.

I've been using Mint.com for several months, but the ad presence has been a bit annoying to me personally. Then I read about Quicken's online service. Like Mint, it's free, and I found that it only took me about 15-minutes to enter my accounts into the system. The upload was fast, and quickly I was able to see all of my recent transactions.

I've been a Quicken customer for many years, so the interface was familiar to me. What I haven't figured out is how to enter assets to offset my liabilities. For example, I can depict my outstanding mortgage, but I haven't found a way to enter the value of the house.

Quicken will save you alot of time if you periodically monitor all your accounts. This will simplify your financial life!

Southern California Living

2009-04-18T22:04:00.001-07:00

In my previous post, I suggested a living budget of $80/day or $160/day for a couple. Military.com had listed Oceanside, CA, near Camp Pendleton, as among the top five cities for military families, so I started my search there. My budget was a monthly mortgage payment of about $1200 with a $70K down payment and annual property taxes of about $6,500 (remember, it's California!)

Here's what I found. It's a 3 bedroom, 2 bath home built in 2005 and is located just outside Oceanside in the city of Temecula. Temecula has been hammered by the financial downturn, and has lots of real-estate-owned and other foreclosure homes available right now. This house is has more than 1850 square feet of space, and is in a highly rated school district. The mortgage payment would be just a few dollars over $1200.

If you insisted on staying in Oceanside, you could live here. This older home has 4 bedrooms, 2 baths, and has more than 1750 square feet of living space. The price tag is less than $200,000 or a payment of about $1,260 per month. This amounts to about $42/day leaving you $118/day to live life the way you want to live it. I say buy a sailboat and tie it up at Camp Pendleton's marina.

Living on $80/Day

2009-04-18T17:15:00.001-07:00

I'm a fan of Paul Terhorst, who retired young, wrote a book about the experience, and now travels the world with his wife. His home page tells the story, and always offers a picture to go along with the words.

In his book, "Cashing in on the American Dream," Mr. Terhorst recommended living on a $50/day budget. The book was published by Bantam in 1988, so that $50 today would be worth about $80 (based on a 2.5% rate of inflation.) So, for a couple, could you live on $4800/month? I definitely think so! Where do you come up with that money as a military retiree? If you live like the Terhorsts do, you'll sell everything that has real value, including your house and car, convert your money to interest bearing accounts, and hit the road and never look back.

More conventional types will purchase a modest home in an inexpensive region of the country and set their budget based on the $4800. 25% will go to housing, or $1,200/month. Can you buy a house for that? That or less in many parts of the country, especially now! The rest will go to necessities like food, insurance, utilities, transportation and so on. Your health care is taken care of by Tricare for life, just remember to budget for your deductibles and co-payments. You'll still have money for plane fare for Europe!

Next time, I'll research some home purchase examples from among the areas that I'm considering for retirement, like Oceanside, CA.

Could you eat on $1 per day?

2009-04-16T18:30:00.000-07:00

If you think it's impossible, check out the recipes and ideas that were linked through military.com.

They include:
Lentil Soup
PB&B Wrap
Tuna Wrap
Oatmeal with currents, raisins, mixed nuts.

Here's the page.

One key to savings is to eat what you buy! If your routine is like mine, the shopping trip begins with throwing old dairy, fruits, and vegetables in the trash. What a waste.

In Asia, where homes, kitchens, and refrigerators are small, people shop for a day or two at a time, walk past fresh food stands to pick up their dinner ingredients, and never throw anything away. We can learn a lot through these examples.

Home sales gain exclusion on your military home even if you haven't lived there in 13 YEARS!

2009-04-12T03:12:00.001-07:00

I had written earlier that a good technique would be to buy a home at the 5-year mark, take out a 15-year mortgage, then return to the home after retiring for 2-years to gain the home sale gain exclusion and not pay capital gains tax. Well, it turns out that if moving back to the house isn't in you plan at retirement, you might not have to do it. According to the IRS web site, military members who are on orders that take them at least 50 miles away from their principle residence may suspend their occupancy test up to ten years.

Here's the example they site:

Example #1 — Lt. Green owned a house in Georgia and lived there from December 1988 until deployed overseas in January 1991. When he returned to the United States in July 1999, he was stationed 90 miles from the house. Preferring not to commute this distance, he sold the house four months later, realizing a gain of $150,000. Because he had not used the house as his principal residence during the 5 years preceding the sale, he reported this capital gain on his 1999 return. Under the new law, he can disregard both the 8½ years he was overseas and the 4 months after his return to the States, since he was stationed more than 50 miles from old residence. His five-year test period for ownership and use now consists of the 5 years before January 1991, when he went overseas. Since he owned and lived in the house for more than two years during this test period, he may exclude the gain on the sale. He must file an amended return by Nov. 10, 2004, to recover the capital gain tax paid on the 1999 return.

This law went into effect in 2003, but I just recently heard about it. It's a great tool for military families who own a home from a previous assignment.

Great cities to retire to

2009-04-02T00:22:00.001-07:00

Yahoo! finance news posted a story today about 10 great cities to retire to.

Here it is:

Here are 10 great affordable places to retire.

1. Binghamton, NY
2. Chattanooga, Tenn.
3. Cocoa, Fla.
4. Eau Claire, Wis.
5. Montgomery, Ala.
6. Omaha, Neb.
7. Pittsburgh, Penn.
8. Roswell, NM
9. San Antonio, Tex.
10. South Bend, Ind.

For military members, from this list, check out Montgomery, AL, Omaha, NE, and San Antonio, TX. They are all close to really terrific military facilities.