By Brooke Goldberg, Government Relations Deputy Director, National Military Family Association
Many join the military because it provides a steady dependable paycheck. And if a service member stays in for more than 20 years, the retirement pension is guaranteed at a set and predictable rate.
However, recent events like a one percent pay raise for 2014, proposed changes to the commissaries, and cuts to the COLA in February that were later restored show how precarious those guarantees are. It only takes one congressional vote to create a change to the benefits packages offered when signed up.
Like the old adage goes, the only guarantees in life are death and taxes. For that reason, military families must prepare for the worst, and hope for the best, and that includes where your finances are concerned. A retirement pension for military service does not negate your responsibility to save for your retirement. Service members should also make sure to sign up for the Thrift Savings Plan (TSP), and utilize the Savings Deposit Program (SDP) during deployments, as well as consider opening a ROTH IRA. Using this strategy of taking out several retirement accounts, known as diversification, will ease your long term financial worries and burdens, and provide you with a more peaceful and enjoyable retirement. And don’t we all want that, especially after living a military life?
On that note, I will point out that not everyone who joins the service will stay in for 20 years or more. In fact, only 17% who serve end up making it to retirement. For this reason, you should pay yourself first by putting 10% of your income in a retirement account. The earlier you start, the more money you will have at retirement, because those first dollars grow the most.
It is also important for military spouses to save for retirement. Spouses are the ones who keep the checkbook balanced, and hold down the home front; therefore savings is also for you! There is no reason why all of the retirement and savings need to be in the service member’s name, or in connection with his or her employer, so make sure to get some savings in your name too. Unplanned events and emergencies happen, and facilitating your ability to take command of the ship if you need to, is part of having a secure family. You deserve to have assets, savings, and a nice credit score, too. These are all important factors for long-term financial success.
Military Saves has a great motto: “Set a Goal. Make a Plan. Save Automatically.” When you take the Military Saves pledge, you will receive access to tools and resources that will help you to learn how to be a smart saver and make the most of your financial power. Visit their website and learn more about how you can build your family’s wealth today!