Strategic Financial Planning for Veterans, Federal Employees, and Military Personnel
The Clear Insight Wealth Management Team
In addition to facing challenges that differ from the average civilian, those who serve our country through the military and the federal government also have different financial planning needs. However, thanks to their service, these groups have opportunities and access to programs developed just for them.
The financial planning landscape for federal employees and military members varies a bit more than for private citizens. Are you a military member? Here’s how financial planning can help you navigate the wilderness!
Planning for Retirement
To assist with financial planning, active and veteran military personnel have access to special programs: those on active duty are eligible for the military’s defined benefit program, which sets pension amounts according to time of service and earnings, and can access the Thrift Savings Plan (TSP), a tax-advantaged investment product similar to 401(k)s.
Federal employees can qualify for the Federal Employees Retirement System (FERS) pension plan and have access to the TSP for retirement savings. The government makes a non-elective contribution of 1% to the TSP and will match up to an additional 4% of the employee’s salary.
Both military personnel and federal employees should make regular contributions to the TSP because they often have to depend on savings and investments in retirement due to:
- Differences in pension
- Abbreviated service periods
- Difficulty transitioning into civilian life
- Healthcare costs
Tax Planning
Non-civilians may qualify for quite a range of tax breaks on home sales, travel expenses, uniforms, relocation expenses, and more. Military members who have served in designated parts of the world may be able to exclude combat pay from their taxable income. Transition out of the military also requires tax planning—more income is taxed, and potentially a higher tax bracket.
Federal employees have the advantage of HSAs, public transportation benefits, educational assistance programs, home office deductions, etc, and tax-free per diem allowances are provided for work-related travel expenses.
Once we assess the overall financial situation, Clear Insight Wealth Management advises on whether to contribute to the TSP on a pre-tax or Roth basis, contribute to a Roth IRA, or if a Roth conversion is right for the situation. These strategies can significantly reduce taxes paid over the lifetime of a military member or federal employee!
Insurance
Due to the nature of their work, military members and federal employees also have special insurance considerations.
Deployment to certain areas of the globe brings elevated risks, which makes life insurance mandatory for active members. They may also take part in the Service members’ Group Life Insurance (SGLI), transitioning to Veterans’ Group Life Insurance (VGLI) after they retire. Also, long-term care insurance for hazards encountered in the line of duty can be obtained from the Veterans Administration.
Investment Strategies
Non-civilians may gain entry into investment strategies or products specific to them, such as the TSP, Military Savings Deposit Program (SDP), Veterans’ Affairs (VA) investments, and homeownership assistance. Federal workers may have investment opportunities for specialized education as well.
Military and federal workers with security clearances can invest in products or services specific to their work situations. These sensitive investments are not typically available to most other investing classes. There may also be chances to invest in defense contractors, cybersecurity and IT firms, government contractors on classified projects, and private equity funds. Be clear on the ethical considerations of investing, and practice discretion.
Get Help With Financial Planning
Clear Insight Wealth Management is squarely focused on financial planning in Spokane, WA, and Vancouver, WA for military families and federal employees. If you’re part of those communities and need help navigating financial issues, we’re ready to help you create a clear path to the future you want.
