Financial Planning for Military Families

Military families sacrifice a lot for their country, and they face many challenges. One challenge that many may not foresee is the challenge of managing family finances. We sat down with Michael J. Meese, Chief Operating Officer of the American Armed Forces Mutual Aid Association (AAFMAA), which provides life insurance, survivor assistance, financial advice, and other benefits for the American military community, to talk about these challenges.

How are the financial planning needs of military families different from those of civilians?

Although many needs are similar, military families must deal with their finances in the context of military duties, which include moves, deployments, family separations, and financial decisions - often while they're far from home and have significant responsibilities at relatively young ages.

Financial planning is easier with tools and tips from


Doesn't the military provide all the life insurance and pensions that military families need?

Not usually for most families. While military compensation and benefits are good, they may not be enough to fully provide for a family if the servicemember dies or when he or she retires. For example, most in the military get government-sponsored term insurance ($400,000 of Servicemembers Group Life Insurance for $28 per month). While this is probably adequate for someone who is single, married servicemembers with children will likely need more coverage, and they will also need insurance after they leave the military.

Similarly, military retirement pay is good; but currently, it is only paid to those who serve for 20 years or more. Since most in the military do not remain for a career, they should save both for their transition from the military and for retirement. Career military personnel also need to save for college expenses, home purchases, and to military retirement supplemental income. All servicemembers are eligible to contribute to the government-sponsored Thrift Savings Plan, which is a good way to save for retirement.


What financial advice do you have for someone who is just entering the military?

There are three important lessons: avoid debt, build up savings, and use special pay to your advantage.

Avoid the debt trap. Members of the military have a steady, government-issued paycheck, which means they often qualify for loans and credit cards. As a result, many business are eager to "help" servicemembers purchase expensive items with their credit - often with exceptionally high interest rates. Military pay and allowances should cover all necessary expenses, so servicemembers should live within their income and not take on expensive consumer debt.

Save half; spend half. Servicemembers benefit from annual cost-of-living increases and well-deserved raises for longevity and promotions. They should put at least half of each raise into long-term savings before spending the other half. By implementing this simple savings strategy throughout a career, military families can build substantial long-term savings for things like buying a home, paying for college, or transitioning out of the military - while still steadily improving their quality of life.

Use special pay. The military compensates servicemembers for the extraordinary risks and stresses of deployments with special pay. Combat zone pay and tax exemptions while deployed can provide the extra funds needed to get out of debt, set up an emergency fund, or boost long-term savings. Military families should resist the short-term temptation to spend those funds; rather, they should save that windfall to promote long-term financial security.


What advice would you give to someone who is about to retire from the military?

Most importantly, plan early. There are lots of decisions to make, all of which can have a financial impact. These include:

• Choosing when to retire, because the longer that you wait, generally the greater long-term pension you will receive.
• Deciding whether or not to participate in the Survivor Benefit Plan, which is a program in which a widow can receive an annuity after a retiree's death to help provide financial support.
• Deciding how to continue life insurance after the military. Retirees are eligible for Veterans Group Life Insurance, but for anyone of reasonable health, checking with AAFMAA or other providers can save a lot of money.
• Getting all the required physicals for any service-connected conditions. All servicemembers should take the time to document everything that is physically wrong with them (if you don't remember it all, just ask your spouse!) so that they can get treatment or compensation for those conditions from the Veterans Administration if necessary.


Do you have advice for someone who is retiring from the military but will pursue a career in the private sector?

Use the many resources that are available. Each military service has a Transition Assistance Program, which is designed to help servicemembers transition. In the Army, for example, it is Soldier for Life, and provides a vast array of helpful resources. Similarly, the Department of Labor Veterans' Employment and Training Service has many resources to help servicemembers and their spouses find employment when they transition.

Military and civilian families alike can simplify their financial planning by using the tools available at