By Alexander Canacci, Alonso Munoz
When starting my Army career with Cadet Basic Training at the United States Military Academy at the age of 18 years old, the last thing on my mind was my finances. I was more concerned with surviving the rigors of West Point than I was setting up my retirement account or planning for the future. As graduation drew closer, conversations about financial responsibility and budgeting became more frequent with our superior officers. It was clear however, that most of us preparing for military service did not emphasize diligent financial literacy and planning.
Fast forward to my first job in the Army, a Heavy Weapons Platoon Leader stationed in Vicenza, Italy. A young Soldier sat across from me explaining his financial struggles and asked for recommendations, including basics like opening a bank account and saving for retirement. This became a common theme.
Assisting my Soldiers with their finances and advising them on programs that they qualified for continued throughout my Army career and grew more complex over time. Although I now spend my time consulting and advising in the private sector, I always look back on my prior experiences to highlight the importance of basic financial knowledge. With that in mind, we wrote a short brief on benefits offered to service members and veterans.
The benefits we discuss are not specific to one branch of service, nor are they reserved specifically for officers or enlisted service members and veterans:
Retirement Benefits
The Blended Retirement System became mandatory for all service members that joined the military from January 2018 forward. With this new plan, the Department of Defense automatically contributes 1% of the service member’s base pay to their Thrift Savings Plan (TSP) after 60 days of service and will match contributions to the service member’s TSP up to 5% of the respective base pay until the end of their 26th year of service.[1] While the Blended Retirement System is relatively new, the Thrift Savings Plan became available to service members on October 9th, 2001 with the approval of the National Defense Authorization Act for Fiscal Year 2001.[2] The TSP is a federally sponsored retirement savings and investment plan that operates similarly to a 401(k) Plan offered by many civilian companies. Furthermore, participants in the TSP are eligible to roll over distributions to an eligible retirement plan or qualified trust – a great option for veterans that seek another career after exiting the military. The TSP benefits are offered in addition to the retirement pay provided to service members who have served at least 20 years of active-duty service. The starting retirement pay is 40% of the service member’s base pay at retirement and an additional 2% of said base pay for every year of active-duty service over 20 years.[3]
Tax Benefits
Numerous tax benefits exist for both active-duty service members and veterans. While VA disability payments are not considered taxable income, most military retirement payments are still subject to taxes. That said, 25 states currently do not tax military retirement payments, with many more only partially taxing military retirement payments.[4] Furthermore, many states also offer exemptions or deductions for active duty, reserve, and National Guard servicemembers, but these exemptions and deductions vary significantly from state to state.[5] It is also important to keep in mind that while on active duty, state taxes are paid to the state listed as the service member’s “home of record” (home state at the beginning of service) and not necessarily the state that the service member is currently stationed, unless specifically changed. Other tax benefits include property tax deductions based on disability rating (state/county/locality dependent) and federal income tax exemptions for service members while deployed to a combat zone recognized by the IRS.[6]
Education Benefits
The G.I. Bill is one of the most known benefits veterans and service members utilize during and after their military career. While the G.I. Bill has seen a few iterations since its inception, the most recent is the “Post 9/11 G.I. Bill” that is available to those who have served on active duty from September 11th, 2001, and on. This benefit is multi-faceted and provides up to 36 months of financial assistance with tuition, fees, books, and living expenses; and in some instances, these benefits can be transferred to a spouse or children of the service member / veteran. The financial assistance for tuition is up to $27,120 per academic year based on the program they are enrolled in and percentage of assistance that a veteran or service member has earned. These eligibility percentages are as follows:
| Days of Active-Duty Service | Eligibility Percentage |
| 90-179 days (90 days – 5 months) | 50% of the full benefit |
| 180-544 days (6-17 months) | 60% of the full benefit |
| 545-729 days (18-23 months) | 70% of the full benefit |
| 730-909 days (24-29 months) | 80% of the full benefit |
| 910-1,094 days (30-35 months) | 90% of the full benefit |
| 1,095+ days (36 months) | 100% of the full benefit |
Additional monetary G.I. Bill benefits exist and can include a monthly housing allowance calculated based on the location of the school and up to $1,000 each academic year for books and supplies. There are also nuanced benefits to the G.I. Bill that are available to individuals with unique situations. Of the many out there, possibly the most monetarily beneficial is the Yellow Ribbon Program. The Yellow Ribbon Program is a voluntary program that universities and colleges can elect to participate in and assists with paying tuition for schools that cost more per year than the standard amount provided by the G.I. Bill. The school and the government come to an agreement as to how much the school will contribute and the government agrees to match said amount. This amount is different for each school and can differ between the various academic programs offered by said school. To qualify for the Yellow Ribbon Program, a student must be eligible for 100% of their Post 9/11 G.I. Bill and be enrolled in a full-time academic program.[7] Other veteran education benefits to consider are tuition discounts for disabled veterans and their spouses/children, the Military Tuition Assistance Program, and the Veteran Readiness and Employment Program (VR&E).
VA Home Loan
The VA home loan is an excellent financial benefit that can be used multiple times throughout the lifetime of active-duty service members and veterans. Some of the key benefits of the VA home loan are no downpayment requirement, no requirement for Private Mortgage Insurance (PMI), competitively low interest rates, and limited closing costs. While utilizing the VA home loan, service members and veterans can also utilize the Interest Rate Reduction Refinance Loan (IRRRL), which helps streamline the refinancing process for lowering interest rates on existing VA home loans. It is important to keep in mind that service members and veterans can only have one active VA home loan at a time, but once a VA home loan is paid off or refinanced through a traditional mortgage, the VA home loan becomes available for use again. The VA home loan does include a VA funding fee based on how many times a service member or veteran has used the VA loan and the down payment on the property being purchased.[8] Additionally, the VA home loan can only be used for purchasing a primary residence, however, it can be used for multi-family units so long as one of said units is being utilized as the primary residence of the service member or veteran.[9]
Life Insurance
While on active-duty, service members are eligible for Servicemembers’ Group Life Insurance (SGLI). This low-premium life insurance policy offers up to $500,000 to any service member that elects to be a part of the program. A similar policy is extended to the spouses and children of active-duty service members in the form of the Family Servicemembers’ Group Life Insurance (FSGLI) for up to $100,000 for each registered dependent. As service members transition out of the military, they may find it difficult to obtain life insurance with affordable premiums due to the disabilities incurred through service. To help mitigate this issue, veterans are eligible for Veterans’ Group Life Insurance (VGLI). VGLI offers up to $500,000 in life insurance coverage and is available to those veterans who had an SGLI policy prior to separation and enroll within one year and 120 days of separation from the military. It is also important to note that veterans can convert their VGLI plan into a commercial policy at any time without having to provide proof of good health.[10]
The aforementioned financial benefits are not an exhaustive list of those that are available to veterans and service members, and many more exist at the federal, state, and local levels. Organizations like the Veterans of Foreign Wars (VFW), Disabled American Veterans (DAV), and the American Legion exist to assist service members and veterans in many ways including navigating transition, education, and retirement benefits.
Serving this country has been one of the most important pillars of my life. From my formative years at the United States Military Academy at West Point, to nearly a decade in the Army across assignments overseas and stateside, it is the ultimate privilege and honor to have done a small part for our great nation. The team at Hamilton Capital Partners and I would like to extend our upmost gratitude for the sacrifices of all of America’s service members, veterans, and their families.
Happy 4th of July!
[1] Military Blended Retirement System 101 | Military OneSource
[2] Thrift Savings Plan (defense.gov)
[4] States that Don’t Tax Military Retirement – TurboTax Tax Tips & Videos (intuit.com)
[5] Which states tax my Active Duty or Reserve military pay? | An Official Air Force Benefits Website (af.mil)
[6] Military | Internal Revenue Service (irs.gov)
[7] Yellow Ribbon Program | Veterans Affairs (va.gov)
[8] VA Home Loan Types | Veterans Affairs
[9] VA Loans and Investment Property (veteransunited.com)
[10] Veterans’ Group Life Insurance (VGLI) | Veterans Affairs (va.gov)
This commentary reflects the personal opinions, viewpoints and analyses of the Hamilton Capital Partners, LLC, a registered investment advisor, employees providing such comments, and should not be regarded as a description of advisory services provided by Hamilton Capital Partners, LLC or performance returns of any Hamilton Capital Partners, LLC client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Hamilton Capital Partners, LLC manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
