Smart Financial Strategies for Service Members
Discover essential financial strategies for military members to secure their family's future, including maximizing the Thrift Savings Plan, choosing the right contribution options, and planning estate documents. Learn how to leverage military benefits and stay updated on personal finance tips for a secure financial future during service deployment.
Having a family member in the military often fills you with pride, but it can also bring emotional challenges due to extended periods away. During these times, securing your family's financial stability is crucial. Taking proactive steps ensures they are protected against unexpected financial emergencies while you're deployed. Here are essential financial strategies for military personnel to safeguard their loved ones and build a strong financial foundation.
Maximize Your Thrift Savings Plan (TSP)
The TSP resembles a 401(k) but offers additional benefits with lower fees. You can contribute up to $18,000 annually, with an extra $6,000 if you're over 50 years old. If deployed in a combat zone, your contribution limit rises to $54,000—quite substantial! Utilizing your TSP wisely helps accumulate significant savings for the future.
Choose the Roth TSP Option
The TSP offers two main contributions:
Traditional TSP reduces your current taxable income, with taxes deferred until retirement.
Roth TSP involves paying taxes upfront, but withdrawals after age 59½ are tax-free.
Many prefer Roth contributions because paying taxes now, while earning, is generally more manageable than during retirement when income drops.
Research TSP Investment Options Thoroughly
The TSP provides various low-cost investment choices, including funds focused on small and large companies, international markets, bonds, and government securities. Alternatively, consider the Lifecycle Fund, which diversifies investments based on your projected retirement timeline—initially stocks and becoming more conservative as you approach retirement.
Review Estate Planning and Military Benefits
Create essential legal documents such as a will, power of attorney, and healthcare proxy, designating trusted family members to manage your affairs during deployment. Additionally, review benefits like Servicemembers’ Group Life Insurance, which offers affordable coverage at roughly 7 cents per $1,000 monthly. Spouse coverage of around $100,000 is also available for approximately $60 annually if they are under 35.
Stay Informed on Personal Finance
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