Financial Independence for the Military

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Wanderer

The Wanderer retired from his engineering job at a major Silicon Valley semiconductor company at the age of 33. He now travels the world, seeking out knowledge from other wealthy people, so that he can teach people how to become Financially Independent themselves.
Wanderer
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Photo Courtesy of AAFMAA

Fun Fact: For some reason we actually have a fairly sizeable readership on this weird little blog from the Military. Specifically, the US Military.

I have a sneaking suspicion that the fact we have “Revolution” in the title, there’s a lot of red on this site, and our site’s logo is a raised fist might have inadvertently put us on some CIA database. That…would not be so good. But hey, free traffic is free traffic!

Financial Independence is a topic that we approach mostly from a civilian perspective (since that’s what we’re most familiar with) but over time and talking to our military readers I think that it totally makes sense to them too. However, they do have some unique challenges that we don’t have to think about. So to address some of those challenges, today I am joined by BG Michael J. Meese, USA, Ret., Ph. D. A retired Brigadier General from the US Army, Author of the books Armed Forces Guide to Personal Financial Planning and American National Security, and current COO of the American Armed Forces Mutual Aid Association, or AAFMAA (link to www.aafmaa.com)

Michael, thanks for being here with us at the Millennial Revolution.

Pleasure to be here.

So first question, could you tell us a little about AAFMAA?

Sure. AAFMAA is the American Armed Forces Mutual Aid Association. We are actually the oldest organization in the United States that takes care of the military and veterans. We’ve been doing it since 1879. What we do is we empower our veterans through insurance, financial planning, mortgages, and other financial tools as a non-profit to help service members, veterans, and their families.

Wow. Man, all we do is write articles and make stupid dick jokes on this blog. Your thing seems so much cooler.

Which nicely segues into my next question. Many of our readers are serving, or have served, in the military. What special things do they need to consider when planning their finances that normal civilians don’t have to worry about?

Well, I think the key difference between those in the military and civilians is that because military families have a steady income, it’s important for them to have a comprehensive financial plan that incorporates three different elements: First is effective budgeting, second is savings & investing, and the third is protecting themselves over their lifetimes so they can continue to benefit from their finances.

Totally agree. But budgeting, savings & investing, and all *those* challenges also apply for civilians. What special challenges do military people face that the rest of us don’t?

Yes, there are special considerations on all of them. On budgeting, because you have a steady income, predators will try to get them into debt. Lots of credit card offers, lots of opportunities to get themselves into trouble, and you see this around a lot of military bases. And because they’re very far from home, the advice that they’d get from friends or family members not to buy that $2000 washer/dryer even though you don’t have much to wash in it isn’t there. So that’s why being weary of getting into debt is a major concern.

The second major concern when it comes to saving & investing, and I think you all talk about on your website, is to make sure you have a well-diversified portfolio and that you’re saving on a regular basis. Especially in the military when you deploy (for example I spent 31 months over in Iraq and Afghanistan), you actually get windfalls. You get more money for family separation pay, more money for hazardous duty pay. You can save that and that’s a great way to get ahead.

And finally protecting your family is particularly important. Serving in the military is a hazardous occupation where families are dependent on a military member’s income. That is why it is important to have a good base of insurance to protect against the unexpected loss of a service member.

Do you think you can you elaborate a bit on these financial windfalls?

Sure. In the United States if you’re married, it’s a $250 per month family separation allowance, you can have $150 hazardous duty pay and if you’re in a combat zone, and most of your income is tax-free. So that can be as much as a savings of $1000 or $1500 depending on what your income is.

Wow. I didn’t know any of that. Too Canadian. And too wussy. But I’d imagine in a combat zone most of your expenses would be paid for. Obviously you wouldn’t have to pay for rent. Are there a lot of opportunities to spend money?

Uh, no. Actually, that’s another big windfall. There’s not a lot of ways to spend, so you can end up saving up a heck of a lot of money on deployment. But you have to have a plan to do that. There’s all kinds of people who will sell you all kinds of things when you get back. For spouses, it’s difficult to be separated, but they can sometimes deal with stress through “retail therapy” that can make any windfall quickly evaporate.

Oh, yeah. That’s ALSO an issue for civilians too.

Now, that doesn’t mean that when I get back I can’t take my kids to Disneyland. After I returned from deployment, we had a great time there using part of the money I saved, but I put a heck of a lot of money towards their college savings for the future. If you don’t have a plan, that money will just fritter away. But that’s why planning is so important, and perhaps MORE important for people in the military because of the vagaries of deployment.

The other part to that, because you’re deploying, you’ve got to have a mechanism so that your spouse can manage things while you’re away so that you won’t get into trouble. And for example, I cancelled my cell phone plan with Verizon, and that saves you a heck of a lot of money each month. And also, military deployments is one of the few ways you can get out of a contract.

Ha. Yeah, I never thought about that.

So for life insurance, for us civilians, we can kinda go “eh, whatever. What are the odds?” But for military people, I’d imagine it takes on a whole level of importance. Can you talk a little about that?

Yes, it is particularly important. In the military, people tend to be married at a substantially greater rate than others. So for people in their 20’s in the United States, you’re about 30% more likely to be married if you’re in the military. And they’ll frequently have children. And because it’s a lifetime commitment, it’s a hazardous occupation, it’s particularly important to have a solid base of insurance so that if something unforeseen happens and the major breadwinner is not able to continue to earn money, that the family would be taken care of. That’s why in the current system the government provides at a relatively low cost $400k of coverage for individuals. AAFMAA does the same thing. For $33.35 a month, we provide $800k of insurance that lasts all the way until age 50.

Oh wow, that is ridiculously good value. So AAFMAA provides $800k coverage for $33 a month up to age 50, and what was the name of the government program you mentioned?

That program is called SGLI (Servicemember Group Life Insurance). It’s more expensive, at $28 a month for $400k, and it lasts as long as you’re in the military, but ends after you leave.

Wow, those rates are really low. I mean, we hear from people who are paying hundreds of dollars a month for life insurance and it’s not even close to this level of coverage. And this is only available for the military?

Yeah, and the reason why we can provide this to the military is that everybody in the military does push-ups every morning, has regular health examination, is screened before they enlist. And that’s why we have members that are generally more healthy than everybody else. And that’s why we can provide rates that are lower than what you might be able to get.

Oh, that’s interesting. I never really thought about that. You’d figure that in the military the insurance premiums would be higher because they’re in a dangerous occupation, but because the general health of everyone is way higher it’s actually the opposite. That’s kinda counter-intuitive.

Yeah I have more of an issue with 20-year-olds riding motorcycles than deploying into combat, in terms of who’s actually doing the more dangerous thing.

Interesting. And again this nicely segues into my next question. The biggest financial issue with people right now is health care. Obamacare’s going away and nobody knows what the Republicans are going to replace it with. How does health care and health insurance work with veterans or people currently in the military?

Yeah, good question. For anybody who’s in the military, the military has a robust health care system either on-base, or through TRICARE which is a civilian health care provider. So, for example, when I retired, I pay in relatively reasonable premiums to be a member of TRICARE to take care of those that are in the military and those that have retired.

Also for those that have served in the military but are short of retirement (which is normally 20 years) then they are eligible to go to the Department of Veteran’s Affairs and get care on a space-available priority basis. They can certainly get care for any service-connected disabilities, and they can also get other care on a space-available basis. They can determine eligibility at Vets.gov.

So is TRICARE a private company or is it run by the government?

TRICARE is a consortium of private insurance companies that provide for the military. Details are at tricare.mil.

Would you call TRICARE superior to what a civilian would be able to access on the Obamacare exchanges?

I would say that it’s comparable to the best health care program available under Obamacare.

And are there government subsidies that would make these more advantageous to military members?

Yes, the government subsidizes substantially for those that are on active duty, as well as those that are retired. Again, part of the reason for that is that the Nation wants people who are active duty to be healthy, and you don’t want them to have to decide “Gee, do I fix this health problem or do I save money?” We want them to be as healthy as possible because they serve a critical national security interest.

Huh interesting. So if the government WANTS you to be healthy, they will do whatever it takes to make sure you have affordable health care. I feel like there’s a political statement to be made there but OOPS we’re out of time.

This interview ended up being WAY too long for one post, so we’re going to split it up. Stay tuned next week for Part 2 of our in-depth discussion with Michael Meese on Financial Independence for the Military.

Thoughts? Feelings? Let’s hear about it in the comments below.

BG Michael J. Meese, USA, Ret., PhD is a retired Army Brigadier General and is the Chief Operating Officer of the American Armed Forces Mutual Aid Association (AAFMAA).

Mike joined AAFMAA as Chief Operating Officer in 2013. He retired from the United States Army as a Brigadier General having concluded his 32-year career as the Professor and Head of the Department of Social Sciences at the U.S. Military Academy.

At West Point, he taught economics and national security courses and was the Director of the Economics program. He has written numerous articles and two books: the Armed Forces Guide to Personal Financial Planning and American National Security. He has served in a variety of strategic political-military positions including deployments to Afghanistan, Iraq, and Bosnia for a total of 31 months and was the Executive Director of the Secretary of the Army’s Transition Team in 2005 and the co-director of the Department of Defense Panel on Commercialization. He is a graduate of the National War College, U.S. Military Academy, and earned his Ph.D., MPA and an M.A. from Princeton University.

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15 thoughts on “Financial Independence for the Military”

  1. I’m not military, but this was entertaining and interesting nonetheless. Was it tricky to balance your normal irreverent tone (or, why you’re so popular!) with straight-laced responses from a one-star general?

  2. Drilling Reservists and National Guardsmen are also eligible for Tricare since 2007 at a cost of $217 for a family and I think $54 a month per individual. That’s why I’m still in after 30 years!

  3. You guys are definitely on some list. Don’t be surprised if you get a few nights free stay at the ICE Ramada next time you enter the US 🙂 I mean how un-American can you get? Travel the world, see foreign lands, criticize homeownership? 🙂

  4. Thanks for posting this! I’m an Army brat myself, and I know how financially challenging life in the service is. So many service members get into financial trouble. But if you play your cards right, you can really save up a lot of cash, especially with housing allowances, separation pay, etc.
    Oh, TRICARE. I do not miss you, lol.

  5. 25+ year US Army veteran here (and ~4 months away from civilian mega-corp retirement). My years were split about equally between active (full time) and reservist (part time – also affectionately known as a weekend warrior). But don’t be fooled – reservist’s bore a great burden of the wars in Iraq and Afghanistan.

    Anyway, the retirement pay that I’ve earned, along with the medical care (for my WIFE as well) that kicks in age 60 were instrumental components of our ability to retire a little early. The pay, imputed value of the medical care, plus a few other “soft bennies” (ie, ability to stay at low cost lodging across the US and in many parts of the globe) easily add around $4-5000 value to our retirement portfolio. For us, it ain’t chicken feed!

    Wanderer and FIREcracker – I’m not surprised by your large military following. I see a lot of the same attributes on display in your articles – like:
    Intelligence
    Discipline
    Courage
    Intuition
    When appropriate – a F U! attitude

    Well, time to head out to the hawker stalls here in Singapore and fatten up a tad (I might NEVER have known about these AWESOME eateries if not for your blog – so thanks for that).

    More importantly, sincere thanks and gratitude for your blog (and by extension, MMM. JLC aka Godfather, GCC, etc). Had I discovered the FIRE community earlier, I could have shaved a few more years off the ol’ career. As it is, I’ve still knocked off 5-7 years just by adopting passive, low cost index funds, cutting lifestyle inflation shit, and understanding that “you need xx% (usually 80-100%) of your working income in retirement is a Big Fat Lie perpetrated by a slime ball syndicate professing to be financial advisors (FA’s), or most often, F-ing A-holes!

    US Army Master Sergeant – Retired

  6. Good read. I was a prior US Naval Officer. I can tell you I didn’t save nearly enough on my deployment as I should. IDK where all my money went. (beer during port calls). It is a huge windfall. For your next interview can you ask him more questions about saving, programs, etc for people that have left the military. It seems I find out new things each and every day. One of them is the HAVEN program. They give you grants to fix/modify/buy houses if you are a disabled vet. NEVER knew that until 3 years after I left active service. Something the VA didn’t tell me about.

  7. Lol it was my husband who introduced me to your blog back when you guys just started and he serves in the Canadian military! I got interested because you’re also Waterloo alumni like me and wandered the halls of SLC and DC library like I did a few years ago :). Small world. Love your blog :). I actually have a few questions for you guys related to finances. Should I email you separately or post in your comments section?

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