Being or having someone from your family in the military gives you a sense of pride. It can also be emotionally taxing as it involves being away from your family for months on end. During such times, it is important to ensure that your family is secure financially. Keeping your family financially secure would require some important steps from your end so that while you’re away from home, they can be secured in case any sort of financial emergencies. Following are some smart financial moves you can make to secure your family if you are in the military.
Use your Thrift Saving Plan to its max
Similar to the 401k, a Thrift Saving Plan (TSP) comes with a lot more benefits and much lower fees. You can add up to $18,000 to your TSP, plus an additional $6,000 if you are older than 50 years of age. If you’re deployed on duty and are serving in a combat zone, you can add as much as $54,000 annually into your TSP, which is quite a lot of money! So make the best use of your TSP to build a hefty corpus for the future.
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Opt for Roth TSP
TSP can be broken down into two main categories:
- Traditional TSP that reduces your current taxable income and grows tax deferred until the time you’ve retired.
- Roth TSP contributions, where you currently have to pay tax on what you put into your TSP account. However, once you cross the age mark of 59 and a half, all your withdrawals from this account becomes tax-free.
We lean toward choosing the latter because paying taxes when you’re younger and earning won’t pinch as much as paying taxes when you’ve retired and are not earning anymore.
Do your homework well on your TSP investments
The beauty of TSP is that it provides you with a number of investment options, all with nominal fees. You could choose to invest in five mutual funds. These funds focus on small firms, large firms, international companies, bonds, and government securities. You could, however, decide to opt for something known as the Lifecycle Fund. The Lifecycle Fund builds for you a diverse financial portfolio of other funds to be in sync with your service timeline. At the beginning, the Lifecycle Fund invests in stocks, and then as time goes by and you’re closer to retirement, it becomes less risky and more conservative in nature.
Check on your estate plan and other such benefits
Create a will, a power of attorney, healthcare proxy, and other such documents that will have to be handled by your closest family member, who handles your finances while you are deployed. This is an extremely important step every military personnel should take. Moreover, check on other benefits that military personnel are eligible for, such as the Servicemembers’ Group Life Insurance that would cost you barely 7 cents for $1,000 of coverage per month. Personnel also enjoy other benefits such as coverage of around $100,000 for your spouse (provided they are below 35 years) for as little as $60 annually.
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