Articles by Ryan Guina

Ryan is the founder and editor of this site. He is a writer, small business owner, and entrepreneur. He served over 6 years in the USAF and also writes about money management, small business, and career topics at Cash Money Life.

You can find him around the web at, Ryan Guina on Twitter, The Military Wallet on Twitter, and on Google.

How to Get a Medical Waiver to Join the Military (Podcast 012)

Joining the military is not like joining any other organization. And the application process to join the military is unlike almost any other job application process. Before you can join the military, you need to fill out a host of forms and fill out dozens of documents, including your health history, a background check, and more. Today, we’re going to focus on your health history.

How to get a medical waiver to join the military

Whether you are applying to the military for the first time, or you are thinking about going back in after a break in service, you need to fill out a medical prescreen form called the 2807-2 Medical Prescreen of Medical History Report (PDF) before you can even apply to take a military physical. There are many reasons for this, but the big one is to save everyone a lot of time and money. The military has very strict health requirements to ensure that people joining the military are physically fit for service.

Do you have a Va Service-Connected Disability Rating? It may be possible to join the military with a VA disability rating, depending on your specific condition(s). Use the following process to understand how the medical waiver process works.

How to Fill Out Form 2807-2

The form is fairly self-explanatory, and it has instructions printed on it. That said, you want to take your time when filling it out. It is very in-depth and you want to ensure it is accurate before you submit it to your recruiter. Your recruiter will then submit your 2807-2 and other information to MEPS, the Military Entrance Processing Station. This is the command that processes all military entrance physicals.

Important: If you mark “Yes” on anything in section 2, you must submit supporting information. Better yet, it is highly recommended that you submit supporting documentation from a medical professional stating your condition and that you are fit for service. Failure to do so will increase the chances that your 2807-2 is kicked back to you with a medical disqualification. (You may still get medically disqualified, but including the information will help smooth the process when applying for a medical waiver).

Permanent and Temporary Disqualifications

MEPS will either accept or decline your prescreen request. If it is accepted, you will be able to process through MEPS where you will take a physical where you will either pass or fail. If your 2807-2 is declined or you fail your physical at MEPS, you will receive either a Temporary Disqualification (TDQ) or a Permanent Disqualification (PDQ). Don’t let those terms scare you away.

A Temporary Disqualification simply means the physical condition is temporary and you cannot process through MEPS because of the medical condition. This could be something as simple as a broken finger. They can’t allow you to join the military with a broken bone. But it is classified as a temporary condition because it will heal. A TDQ will delay your request to process for a military physical until your condition has healed and you can prove the condition no longer affects you.

A Permanent Disqualification is for a medical condition that is permanent. A surgery, for example, is a permanent condition because it cannot be undone. A surgery doesn’t necessarily mean you cannot serve, it just means MEPS cannot process your 2807-2 without additional information. There are other reasons for a PQD, and each situation will be unique. Some issues are eligible for a medical waiver, while others are not.

If you fail your MEPS physical or your Medical Prescreen Form (2807-2) is kicked back with a medical disqualification, then you may, or may not, have the option to apply for a waiver, depending on the reason(s) for your PDQ(s).

Applying for a Medical Waiver – Get Familiar with the DODI

Once your 2807-2 has been rejected by MEPS and you have been given a PDQ, you can start the process of applying for a medical waiver (if your condition is waiverable). Not all medical conditions are eligible for a medical waiver.

To get a head start on the waiver process, you should get familiar with the DODI (Department of Defense Instruction for Medical Standards for Appointment, Enlistment, or Induction in the Military Services), (PDF). This is the official document used by MEPS doctors to determine medical eligibility for military applicants.

If you received a PDQ, it should include a PULHES Code, which is a standardized medical code used to rate your physical condition(s). You can use these codes to look up your condition(s) in the DODI to see if the condition(s) are waiverable.

Important: This is where you need to step up and do some research. Most recruiters don’t have the time to hold your hand through the application process. Spending time on your end will make it easier for your recruiter to work with you to help you get a waiver. Remember, each recruiter is different, and most are willing to work with you if you are willing to work with them. And helping them with their job shows you are dedicated and motivated to join the military.

Unfortunately, not all medical conditions are waiverable…

Some Medical Conditions Aren’t Eligible for Waivers

I wish I could tell you that all you had to do to get a waiver approved was fill out a form, tell the military you are a hard worker, and get a couple character references. Unfortunately, that isn’t the case.

The military has some very firm standards for which types of medical waivers they will approve and will not approve. And the decision is completely out of your hands. And in many cases, you cannot appeal the decision. It is simple and final.

I won’t try to list all the medical conditions for which you cannot receive a waiver, because it is extensive. Some common maladies include having a history of asthma, ADD (if taking certain medications), diabetes, drug dependency, severe nut allergies (especially peanuts), problems with certain organs, certain skin conditions, and much more. The best thing to do is download a copy of the DODI mentioned above, and research your medical conditions.

Again: there are some conditions for which there are no waivers.

Applying for a Medical Waiver to Join the Military

Once you get your 2807-2 back from MEPS and you look through the TDQ(s) or PDQ(s) they gave you, you will need to prepare your case for a medical waiver. Basically, you will need to get a doctor or medical specialist to review each item for which you received a TDQ or PDQ. The doctor will need to write a note on his or her letterhead with the date, your medical history for that condition, your current condition, and whether or not you are physically capable of serving in the military, based on his or her assessment.

You will need to pay for the medical examinations our of your pocket. The military will not cover this expense.

Once you have these letters, you will need to submit them and a new 2807-2 to your recruiter. Your recruiter will then start the waiver process by sending the forms and supplemental information to the Surgeon General’s Office for your branch of service. The Surgeon Generals Bureau may or may not request additional information.

The Medical Waiver Process Can Be Time Consuming

I had to get medical waivers to join the Air National Guard – the waivers were required because I had two knee surgeries while I was on active duty. Because I had a history of surgery, I needed to get a physical from an orthopedic surgeon who looked at my health history, gave me an exam, and stated I was physically fit to serve again. The process for me to join the ANG took about 6 months from start to finish. It went like this:

  • Submit 2807-2. It was declined by MEPS with multiple PDQs.
  • Research PULHEES codes in DODI. Realize each condition was waiverable.
  • Set up medical appointments with specialists.
  • Get exams and letters from doctors on their letterhead.
  • Resubmit 2807-2 with appropriate letters from doctors.
  • 2807-2 was again declined by MEPS; my recruiter then sent in the 2807-2 and my doctors letters to the Surgeon General’s Office and requested a medical waiver to take the MEPS physical.
  • Waiver approved; scheduled for a physical at MEPS.
  • Physical declined by MEPS (this will happen almost 100% of the time, because of the PDQs). My physical was good with the exception of the items we already knew about. MEPS recommended a medical waiver based on my physical and supporting documentation.
  • MEPS forwarded my physical and all documentation to the Surgeon General’s Office for a waiver.
  • Waiver Approved.

This process can take months, depending on the complexity of your case, your medical conditions, how long it takes to get your medical exams and letters, how busy MEPS and the SG’s office are, and other factors (the summer is the worst time because this is when MEPS processes thousands of recent high school and college graduates).

There is No Appeal Process if Your Waiver is Denied

Here is the deal with waivers – you either get a medical waiver or you don’t. You can’t appeal. The Surgeon General’s office is the appeal. If they deny you the opportunity to serve, then that is the final answer. Writing to your Congressman or Senator won’t enhance your chances of joining the service. It just won’t happen.

However, depending on your medical condition, there may be other options you can try. For example, each branch of the military, including the Guard and Reserves, has a different Surgeon General’s Office. So if you have a borderline case, you might consider joining another branch of service. You might even consider a career in the Guard or Reserves instead of joining on active duty.

But be careful not to waste everyone’s time. If your condition is not waiverable, don’t go through the application process again – it wastes everyone’s time and money. The only time it is worth going through this process again is if you have medical conditions that are waiverable, but for one reason or another, the branch you applied to decided not to accept you at this time.

There are reasons this can happen. For example, if some branches of the military aren’t having trouble meeting their quotas, they may not need to take someone with a history of health conditions. All things being equal, they will take the person who doesn’t require waivers. (it’s faster, easier, and cheaper to get this person into uniform, and historically, they are more likely to finish training).

But some other branches may be having a more difficult time meeting their quotas, or they may be more open to putting prospective troops through the waiver process. So you may have luck applying to a different branch of the service, or applying to the Guard or Reserves. In fact, I have heard it can be easier to join the Guard and Reserves if you need medical waivers. Again, it’s only worth pursuing this avenue if your medical condition(s) are waiverable.

Final note: Please do not try to apply to more than one branch of the military at the same time. It will cause red flags in the system and may prevent you from being able to join. Exhaust all options with your first application before trying to apply to a different branch of the military. Best of luck!

2015 IRS Tax Refund Schedule (2014 Tax Year)

When it comes to filing a tax return, there are a few questions that people care about more than any other – how much am I paying on taxes, how much will I get back in my tax refund, and when will I receive it? Everything else, the say, is just details.

There is no quick and easy answer to the first two questions, but we can give you a rough idea of when you will receive your tax refund, but only if you file your federal taxes electronically using a software program or with the IRS E-File. Expect longer delays if you file your return on paper, because it takes longer for the IRS to process your paperwork. The tax refund chart below offers more information on when to expect tax refunds.

Learn how military members can file taxes for free.

IRS E-File Schedule for Check Refunds and Direct Deposits

where's my refund - IRS refund schedule

When you receive your refund depends on how and when you file.

The following tax refund table is based on previous refund tables released by the IRS to help tax payers know when they should receive their tax refund. Due to changes in the IRS auditing system, they no longer release a full schedule as they did in previous years. The following chart is based on estimates from past years.

To use the refund chart:

  • Use the left hand column to look up the date your tax refund was accepted
  • Use the middle or right column to look up when you should receive your refund (depending on how you requested your refund – direct deposit or paper check).

If you filed your taxes with E-File, you should receive a confirmation that your tax return was accepted by the IRS. This date will go in the left column. If you didn’t file your taxes electronically, then this chart may not be useful for you for two reasons: you won’t have a confirmation date regarding when your tax return was accepted, and paper tax returns are manually entered by IRS employees, so the process takes longer.

You will also note that this chart covers dates beyond the traditional filing date. If you file after April 15, 2014, then you should file a tax extension request. It’s simple, and can potentially save you a lot of money in penalties. Note: Some military members may be eligible for additional tax deadline extensions if they were deployed or served overseas during the tax year.

Tax Return Accepted By IRS before 11:00 am between… Direct Deposit Sent* Paper Check Mailed*
Jan 20, 2015 (first day IRA accepts returns) and Jan 30, 2015 Feb 4, 2015 Feb 6, 2015
Jan 30 and Feb 06, 2015 Feb 11, 2015 Feb 13, 2015
Feb 7 and Feb 13, 2015 Feb 18, 2015 Feb 20, 2015
Feb 14 and Feb 20, 2015 Feb 25, 2015 Feb 27 , 2015
Feb 21 and Feb 27, 2015 Mar 4, 2015 Mar 6, 2015
Feb 28 and Mar 06, 2015 Mar 11, 2015 Mar 13, 2015
Mar 07 and Mar 13, 2015 Mar 18, 2015 Mar 20, 2015
Mar 14 and Mar 20, 2015 Mar 25, 2015 Mar 27, 2015
Mar 21 and Mar 27, 2015 Apr 1, 2015 Apr 3, 2015
Mar 28 and Apr 03, 2015 Apr 8, 2015 Apr 10, 2015
Apr 04 and Apr 10, 2015 Apr 15, 2015 Apr 17, 2015
Apr 11 and Apr 17, 2015 Apr 22, 2015 Apr 24, 2015
Apr 18 and Apr 24, 2015 Apr 29, 2015 May 1, 2015
Apr 25 and May 01, 2015 May 6, 2015 May 8, 2015
May 02 and May08, 2015 May 13, 2015 May 15, 2015
May 09 and May 15, 2015 May 20, 2015 May 22, 2015
May 16 and May 22, 2015 May 27, 2015 May 29, 2015
May 23 and May 29, 2015 Jun 3, 2015 Jun 5, 2015
May 30 and Jun 05, 2015 Jun 10, 2015 Jun 12, 2015
Jun 06 and Jun 12, 2015 Jun 17, 2015 Jun 19, 2015
Jun 13 and Jun 19, 2015 Jun 24, 2015 Jun 26, 2015
Jun 20 and Jun 26, 2015 Jul 1, 2015 Jul 3, 2015
Jun 27 and Jul 03, 2015 Jul 8, 2015 Jul 10, 2015
Jul 04 and Jul 10, 2015 Jul 15, 2015 Jul 17, 2015
Jul 11 and Jul 17, 2015 Jul 22, 2015 Jul 24, 2015
Jul 18 and Jul 24, 2015 Jul 29, 2015 Jul 31, 2015
Jul 25 and Jul 31, 2015 Aug 5, 2015 Aug 7, 2015
Aug 01 and Aug 07, 2015 Aug 12, 2015 Aug 14, 2015
Aug 08 and Aug 14, 2015 Aug 19, 2015 Aug 21, 2015
Aug 15 and Aug 21, 2015 Aug 26, 2015 Aug 28, 2015
Aug 22 and Aug 28, 2015 Sep 2, 2015 Sep 4, 2015
Aug 29 and Sep 04, 2015 Sep 9, 2015 Sep 11, 2015
Sep 05 and Sep 11, 2015 Sep 16, 2015 Sep 18, 2015
Sep 12 and Sep 18, 2015 Sep 23, 2015 Sep 25, 2015
Sep 19 and Sep 25, 2015 Sep 30, 2015 Oct 2, 2015
Sep 26 and Oct 02, 2015 Oct 7, 2015 Oct 9, 2015
Oct 03 and Oct 09, 2015 Oct 14, 2015 Oct 16, 2015
Oct 10 and Oct 16, 2015 Oct 21, 2015 Oct 23, 2015

*Note: Again, these are estimated dates based on previous tax refund schedules released by the IRS. The IRS no longer publishes these tax refund charts, due to their auditing process.

Keep in mind it may take a few days for your financial institution to make your deposit available to you, or it may take several days for the check to arrive in the mail. Keep this in mind when planning to use your tax refund. The IRS states to allow for 5 additional days for the funds to become available to you. In almost all cases a direct deposit will get you your tax refund more quickly than 5 days, and in some cases will be available immediately.

How Should You Request to Receive Your Refund?

The IRS gives you three options for receiving your refund. You can choose to receive your refund in a direct deposit (you can split your refund and have it sent to up to three banks), you can have a paper check sent to your home, or you can choose to buy US Savings Bonds with your tax refund. You can also apply a refund to any future taxes owed. This is a popular choice among some small business owners who are required to pay estimated taxes. Of the three refund options available to you, the Direct Deposit option is the fastest and safest option.

*Note: Some tax software companies also offer the option of receiving a tax refund on a prepaid debit card. I’m not particularly fond of this option, but it is available to some tax filers. In this case, the refund is first sent to the tax preparation company, then they issue you the prepaid debit card.

Tax Refund Schedule for Extensions and Amended Tax Returns

The refund schedule should be the same if you filed for a tax extension, however, there is no official schedule for tax refunds for amended tax returns. The above list only includes dates for e-filing an original tax return. Amended tax returns are processed manually, and often take 8-12 weeks to process. If you do not receive an amended tax return refund within 8 weeks after you file it, then you should contact the IRS to check on the status.

How to Check the Status of Your Tax Return

You should be able to check the status of your tax refund roughly 72 hours after your receive confirmation form the IRS that they have received your tax refund via E-File. You will need to wait at least 3 weeks if you mailed in your tax return. The best way to check the status of your federal tax refund is to visit the Where’s My Refund page at the IRS website, or, call 1-800-829-1954, or 1-800-829-4477, or 1-800-829-1040 and inquire about your tax return status with an IRS a customer service representative. Note that the IRS only updates tax return statuses once a week, on Wednesdays.

Get a Larger Tax Refund Next Year

If you want a bigger tax refund next year, then there are a few ways you can increase the amount of money the government will give you as a tax refund. One of the easiest ways is by contributing to a tax-deferred retirement plan such as a 401k, the Thrift Savings Plan, or by opening a Traditional IRA, which allows you to deduct up to an additional $5,500 on your taxes each year (up to $6,500 if you are age 50 or older). You can open an IRA in a variety of locations, including banks, brokerage firms, independent advisors, and more.

Update: IRS Announces Some Tax Refunds Will Be Late

The IRS recently upgraded their computer systems to prevent tax refund fraud. This may affect people who filed early in the year. Find out if your tax refund will be late.

National Guard and Reserves Retirement Benefits Guide (Podcast 011)

The Military Wallet Podcast on iTunesToday’s article and podcast both cover National Guard and Reserve retirement benefits. Retiring from the Guard or Reserves has some similarities to an active duty retirement, but there are some very important differences, including when you will receive your military pension, how much you will receive, when you will receive health care coverage under TRICARE, and a few other important differences.

National Guard and Reserves Retirement Benefits GuideThe podcast and this guide both feature excellent information for current members of the National Guard or Reserves, Gray Area Retirees (members of the Guard or Reserves who have reached retirement, but haven’t reached age 60), and active duty servicemembers who aren’t sure if they will remain on active duty through a full retirement. Military retirements can complicated, so you might even learn something if you already a retired Reservist or Guard member!

Note: If you haven’t considered joining the Guard or Reserves, we have a previous podcast that discusses Joining the Guard or Reserves. There is a lot of great information in both that podcast and article, and this podcast and article.

In our interview, and in this guide, you will learn more about:

  • How to qualify for retirement from the Guard or Reserves
  • Why age 60 is an important birthday for Guard and Reserve retirees
  • Earning Retirement Points
  • Military retirement pension plans – 3 Types
  • How to calculate a Guard or Reserve pension
  • How your Guard or Reserve pay base can grow, even after you retire
  • The power of Cost of Living Adjustments (this is much more valuable than you think!)
  • Health care options through TRICARE
  • Base access, shopping, & activities
  • and other valuable retirement benefits.

The Military GuideFeatured Guest – Doug Nordman. Our guest for this episode is Doug Nordman, military retiree and author of The Military Guide to Financial Independence and Retirement. This book had a large impact on me and helped push me toward joining the Air National Guard after an 8 year break in service. Doug also runs a blog called The Military Guide where he writes about a variety of topics related to military benefits, veterans topics, retirement, and personal finance.

Doug retired from active duty, but his wife retired from the Reserves, giving Doug a good overview of how retirement works from both active duty, and the Guard and Reserves. He offers tips on how to maximize those benefits.

About this guide: The following article covers many of the facts in the podcast, but due to space constraints, leaves out some of the personal anecdotes, specific examples, and additional information. I recommend listening to the podcast if you have the time, and bookmarking this as a resource for future reference.

How to Qualify for Retirement from the Guard or Reserves

In general, you need to serve 20 years to be eligible for military retirement benefits. This is true for those who serve on active duty, or in the National Guard or Reserves. Members of the Guard and Reserves need 20 “Good” years, or “Satisfactory” years to qualify for a military retirement. A Good Year is defined as earning 50 or more points in a year. We will cover earning points in just a moment.

Exceptions to the 20 year rule: There are some situations when you may be eligible to retire a little early. One example is the Temporary Early Retirement Authority, or TERA, which is often used during periods of Force Shaping and Reductions in Force (RIF). Under TERA, some servicemembers are eligible to retire with as few as 15 years of active duty service. However, they also receive a smaller pension, both based on years served, and because there is a multiplier used that decreases the final pension calculation. Other exceptions for early retirement can be made for medical reasons, or under some other limitations. But in general, we are working with the assumption that it takes 20 or more years of service to be eligible for a military retirement.

The Importance of Reaching Age 60

Turning 60 is an important birthday for Guard and Reserve retirees. This is the age when Reserve Component retirees become eligible for all military retirement benefits, including pay and health care. Prior to age 60, retired Guard and Reserve members are only eligible for certain retirement benefits, including base access, shopping at the Commissary and Exchanges, and certain other benefits. These retirees are often referred to as “Gray Area” Retirees. You will hear this term often.

Here are some important age-based notes for National Guard and Reserve retirees:

  • Gray Area Retirees – Under Age 60. Retired members of the Guard or Reserves who are not yet eligible for full military retirement benefits, most notably the pension and health care benefits.
  • Full retirement benefits – Age 60+. Once you reach age 60, you are eligible for all retirement benefits. This includes the military pension and health care benefits.
  • Early Guard or Reserve Retirement Pay. Some members of the Guard or Reserves are eligible to receive their retirement pay earlier than age 60. However, they still have to wait until age 60 to begin receiving health care benefits through TRICARE Prime (see below for more information about health care in retirement).
  • Early Retirement Eligibility. Early retirement pay can be earned by serving at least 90 days on active duty during a fiscal year after January 28, 2008. You can receive your retirement pay 90 days early for each qualifying 90 day activation (but no earlier than age 55). Here is an article that explains early retirement benefits in more detail.

Earning Retirement Points

As mentioned in the previous section, members of the Reserve Corps need 50 Points in a year to earn a Good Year toward retirement.

Members of the Guard and Reserves earn 15 participation points each year and they earn points for serving: 1 Point per Drill Period, and 1 Point for each day on active duty. Each Drill Weekend actually has 4 Drill Periods. Guard and Reserve members have a morning drill, and an afternoon drill, each 4 hours long. So a typical Drill Weekend is worth 4 Points toward retirement.

Points can also be earned through AT days (two week required annual training), being called to active duty for training, being mobilized, deploying, serving in the Honor Guard for military funerals, and by completing correspondence courses. Not all activities that earn Retirement Points also earn pay at the time you earn the points. For example, completing correspondence courses might be required to progress in your career and they earn you points toward retirement, but you may or may not be paid for completing the course. However, doing so is in the best interest of your career.

In any given year, a member of the Guard or Reserves can expect to earn around 75 points or more, depending on Drill participation, annual training participation, whether you were activated, and other factors. While there is no such thing as a “normal year” in the Guard or Reserves, a “base” year might look something like this:

  • 15 Points – Annual Participation
  • 48 Points – 12 Monthly Drills (4 Drill Periods per month)
  • 15 Points – Annual Training (this can vary based on your unit)
  • Additional Points as earned (training, correspondence courses, Honor Guard, mobilizations, etc.).

All your points are maintained by your parent service and work toward calculating your retirement pension. We will cover this in a moment. First, let’s look at how types of military pension plans and other factors used in your retirement calculations.

Military Retirement Pension Plan Types

National Guard and Reserve retirement pay is almost always referred to as “Reserve Retirement Pay” regardless of whether you served in the Guard or Reserves. It is also sometimes referred to as “Non-Regular Retirement Pay. That said, the Reserves use the same retirement plans as active duty servicemembers. The only difference is how the pay is computed. Let’s look through the different types of retirement plans, then discuss how to calculate a Guard or Reserve pension.

There are 3 Main Types of Military Retirement Pay Plans:

  • Final Pay / High Pay – for servicemembers who entered the military before Sep. 8, 1980. Final Pay uses your last pay grade to calculate your retirement pension.
  • High 3 – for servicemembers who entered the military after Sep. 8, 1980. High 3 pay takes the average of your highest three years of base pay.
  • REDUX – an elective retirement option for servicemembers who entered the military after Sep. 8, 1980. REDUX offers servicemembers a $30,000 Career Status Bonus at year 15, in exchange for a lower retirement multiple and lower COLA.

We focus almost exclusively on the High 3 Retirement Plan in the podcast because most current servicemembers and recent retirees are eligible for this plan. REDUX is not discussed other than to say not to take it (REDUX is almost never a good idea).

Military Pensions are from Your Base Pay Only

Military pensions are calculated only from your base pay. This is important to know, because military paychecks often include benefits such as BAH and BAS, and may include other incentive or bonus pay such as flight pay, sea pay, danger pay, or other special duty pays or benefits.

This can cause some sticker shock for many active duty members when they first enter retirement because their pension checks are often much smaller than they anticipated. The sticker shock may not be as large for members of the Guard or Reserves, because they are used to seeing Drill Pay checks, which don’t usually include these other benefits at the full monthly rate, and it can often be years, or even decades before the members begin receiving their pension payments.

Calculating a Natioanl Guard or Reserve Pension

Guard and Reserve pensions are calculated slightly differently than active duty pensions. Active duty pensions are calculated by multiplying the total years of service by a multiplier of 2.5% (High-3 plan). Then you multiply that by your pay base. In the High-3 pension plan, your pay base is the average of your highest 3 years of pay (rough rule of thumb – that will equal about 95% of your final pay).

Guard and Reserve pensions are calculated in a similar manner, but there is an intermediate step that must be completed before you can calculate the final pension. We must first convert Points into years served. To do this, add up all your Points, then divide by 360. This gives you the total number of years served (the military calculates a month as 30 days to make the math easy; so each year served is 12 months at 30 days each, for a total of 360 days).

So take your total number of days served, and divide by 360, then multiply that by 2.5%. Here is a quick example: Say you have 3,150 points. Divide that by 360, then multiply by 2.5%. You get (3,150/360) * 2.5% = 21.875%. Now multiply that by your pay base (average of your high 3 years of salary).

Get a More Precise Estimate of Your Pension: Every service has an online retirement calculator that allows you to put in very granular information, including your Date of Initial Entry Into Military Service (DIEMS), your estimated retirement date, and other factors. It’s important to note that these calculators are often password protected and you need to login to your branch website get this information.

Your Guard and Reserve Pay Base Continues to Grow After Retirement

There is a little known fact about National Guard and Reserve retirement pay. Depending on how you retire from the Guard or Reserves, you can continue earning time in grade and longevity toward retirement. That means the value of your retirement can keep pace with military pay raises and inflation while you await retirement pay. But only if you choose to retire under the right classification.

Congress gives you the option of retiring awaiting pay, or resigning from the military.

Retired Awaiting Pay: Retiring Awaiting Pay is the better option from a financial perspective, but it comes with a (slight) risk. Technically, you are still eligible to be recalled to active duty in the even of a full mobilization. However, it would take a full mobilization of the entire military for you to be recalled from retirement. This is extremely rare, and didn’t even happen post-9/11.

Here is the pay off – while you are retired awaiting pay, your clock is still running on your longevity and time in service. So if you retire awaiting pay as an E-7 at 20 years, your clock keeps running to the maximum for that rank, which is 26 years of service. So you get pay increases for 6 more years in service, just for being on call. To top it off, you will receive the pay scale in effect when you turn 60, not the pay scale when you retire. So your pay has the potential to increase substantially while you wait to turn age 60.

Resigning from the Guard or Reserves: This has no risk of being recalled, however, resigning from the military will lock in your retirement check with the years of service and the pay scale in effect the year you retired. This can have a hugely negative impact on your pension, especially if you have a couple decades to wait before turning age 60!

Retired Awaiting Pay is the Way to Go! Retired members of the Reserve Corps haven’t been involuntarily recalled to active duty since WWII. Yes, it is possible to be recalled, but the odds are very small. And the financial gains can be huge.

COLA Adjustments

Your military pension is indexed for inflation through Cost of Living Adjustments (COLA). Military pensions are tied to an annual COLA based on the Consumer Price Index, or the average cost of inflation over a variety of consumer goods. This varies from year to year. In some years there is no COLA increase to retirement pay, and in other years it could 1%, 2%, or even higher.

Many people underestimate the value of these pay raises. While 1% or 2% seems like a small pay increase, these are cumulative, and they add up quickly. For example, Doug shared that his military pension has increased 27% over the last 12 years, just from COLA increases. 27% is huge!

It’s important to understand that while your pension will increase over time, it should be enough to roughly keep pace with inflation. So while the dollar amount is a lot larger, the purchasing power should be similar as when you retired. However, this is an incredibly powerful benefit, because most civilian pensions plans aren’t indexed to inflation.

Guard and Reserve Health Care in Retirement

Retired Guard and Reserve Health Care OptionsMembers of the Guard and Reserves have different health care options than active duty servicemembers and active duty retirees. While still serving in the National Guard and Reserves, members are eligible for TRICARE Reserve Select (TRS), which is a premium based health insurance program. It’s cost is very affordable, coming in at roughly $50/mo for a member, or around $205/mo for a family plan. However, you lose TRS eligibility when you retire or otherwise leave the Guard or Reserves.

Your health care options in retirement depend upon your age (Gray Area Retirees are not eligible for TRICARE Prime or Standard), where you live, and other factors. Here are the basics (and we have a full-length article listed at the end of this section which gives much more information).

  • Retiree health care options – under age 60. Gray Area Retirees are eligible for TRICARE Retired Reserve (TRR), which is similar to TRICARE Reserve Select, without any subsidies. The retiree must pay 100% of the premiums if they wish to participate in the plan. TRR premiums are roughly $361/mo for the individual, and about $961/mo for a family plan. Other health care options include employer-sponsored health care plans, or an individual health care plan, such as those you might find on the health insurance exchanges. eHealthInsurance.com has a lot of great options.
  • Retiree health care options – age 60-65. Guard and Reserve retirees become eligible for TRICARE Prime at age 60. This is the same health insurance plan open to active duty military members and retirees. However, retirees are only eligible for TRICARE Prime if they live within a certain distance of a military installation or regional health care center. If the retiree lives out of the area, they would only be eligible to receive TRICARE Standard.
  • Retiree health care options – age 65+. At age 65, Reserve Corps retirees are eligible to receive TRICARE for Life, which is a Medicare Supplemental Insurance Program. There are no monthly premiums for this plan.

Which plan is the best? This is where it’s a good idea to listen to the Podcast episode. Doug goes into each of these plans in more detail, and explains the associated pros and cons of each plan. Additionally, you can contact a TRICARE Ombudsman who can help you decide which plan is best for your situation. There should be one at each Military Treatment Facility, or you can contact TRICARE, and they will have someone explain things to you and help you choose. Finally, we have a full-length article discussing Retired Guard and Reserve health care options.

Additional Health Care Info Covered in the Podcast:

  • Health care for dependents
  • What if you don’t live near a Military Health Care Facility?

Other Retirement Benefits

Doug and I discuss other military retiree benefits, including access to base facilities such as the:

  • Commissary
  • Base Exchanges
  • Gyms
  • Hobby activities where available, such as the Auto Hobby Shop, Woodworking Shop, MWR facilities, movie theater, etc.

These base activities can be a great way to save money, participate in hobbies, and continue to be a part of the military community.

Military Hops – Space-A Travel: Military hops and Space-A travel are another topic we discussed. These can be a great way to see the world on the cheap. Basically, flying Space-A allows you to jump onto a military transport if there are available seats. You pay a nominal fee (usually only a few dollars). You can often find trips going all over the world, and many of the flights go out on a regular basis. There are some downsides, however. Because you are flying on a space-available basis, you may not be able to get the flight at the day or time you want. Flexibility is the key if you use Space-A travel!

There are a few differences for Space-A availability for Guard and Reserve retirees. The member is eligible to fly Space-A if they are a Gray Area retiree, but their dependents may not be eligible until the servicemember reaches age 60, which is when their retirement is on par with an active duty retirement.

Benefits for Spouses & Dependents

Benefits for your dependents, including your spouse and children, are similar going to be similar to when you were on active duty, with the exception of your health care which will depend upon your specific situation (whether you are eligible to use TRICARE Prime, or are required to use Standard). Spouses and Dependents still maintain base access and access to the Commissary, Exchanges, MWR facilities, and other base activities.

Did we miss anything? Military retirement is a huge topic, and we tried to cover as much as we could in the 40 minutes or so that we talked. I also did my best to get the main points down on paper for those who prefer to read. Please leave a note in the comments if we missed anything and we’ll address it. Thanks!

Retired Guard and Reserve Health Care Options – TRICARE & Private Health Insurance

Retired Guard and Reserve Health Care OptionsMembers of the Guard and Reserves have different health care options than active duty servicemembers and active duty retirees. While still serving in the Guard and Reserves, members are eligible for TRICARE Reserve Select, which is a premium based health insurance program. It’s cost is very affordable, coming in at roughly $50/mo for a member, or around $205/mo for a family plan.

There are very reasonable annual deductibles, coming in at $150 for an individual, and $300 for a family. The maximum out of pocket cost (also referred to as the Catastrophic Cap) is also very reasonable, coming in at $1,000 per family, per fiscal year. These rates are much more affordable than many plans you will find through an employer, and are much lower than what you would find on one of the health care exchanges (the maximum out of pocket expenses for plans on the exchanges often range from around $6,000 for an individual, up around $12,600 for a family plan).

Unfortunately, once you retire from the Guard or Reserves, you lose access to TRICARE Reserve Select. You can still participate in a TRICARE health care plan, but you would have to transfer to another plan. Let’s take a look at some of your health care options once you retire from the Guard or Reserves.

Note: Click here to learn about your health care options after leaving active duty.

Guard and Reserve Health Care Options in Retirement

Retired members of the Guard and Reserves have several retirement plans available to them, depending upon their age, and believe it or not, where they live. Let’s break this down by age, because it isn’t until age 60 that retired members of the Reserve Corps are eligible to receive TRICARE Prime, the same military health care offered to active duty retirees. Prior to age 60, retired members of the Reserve Component are referred to as “Gray Area Retirees” because they are eligible for some military retirement benefits, but not all of them (notably the pension and TRICARE Prime).

Retiree health care options – under age 60. Once a member retires from the Reserve Component, he or she loses access to the subsidized TRICARE Reserve Select plan. They become eligible to participate in the TRICARE Retired Reserve plan, which is similar to TRICARE Reserve Select, but without any subsidies, and a higher Catastrophic Cap. The retiree must pay 100% of the premiums if they wish to participate in the plan. And it’s fairly expensive, at least compared to what you may be used to. Without subsidies, TRICARE Retired Reserve comes in at roughly $361/mo for the individual, and about $961/mo for a family plan. The Catastrophic Cap for TRICARE Retired Reserve is $3,000 per family, per fiscal year. This is more expensive than TRICARE Reserve Select, but it may or may not be more affordable than anything you can find through an employer or on one of the health insurance exchanges.

Non-military health care options – under age 60. It may pay to shop around for less-expensive health insurance if you find the premiums for TRICARE Retired Reserve to be too expensive. The obvious choice is to check with your employer if they offer health insurance. You may be also able to find a less-expensive health care option on the Health Care Exchanges. eHealthInsurance.com has a lot of great options on the Exchanges (this is where I go to find my health insurance).

Instant Health Insurance Quotes

Retiree health care options – age 60-65. Guard and Reserve retirees generally aren’t eligible to receive health care benefits until they turn age 60, at which time they would be eligible for TRICARE Prime, which is the same health insurance plan open to active duty military members and retirees. This includes access to health care at a Military Treatment Facility on a space-available basis. However, retirees are only eligible for TRICARE Prime if they live within a certain distance of a military installation or regional health care center. If the retiree lives out of the area, they would only be eligible to receive TRICARE Standard. TRICARE Prime and Standard both have monthly premiums, and associated copays, but there are some important differences.

Retiree health care options – age 65+. At age 65, Reserve Corps retirees are eligible to receive TRICARE for Life, which is a Medicare Supplemental Insurance Program. There are no monthly premiums for this plan.

*Retirees living overseas. I recommend you contact the TRICARE customer service line to find the best option for you. There are different rules and programs for retirees living overseas, and each situation is unique.

Finding the Right Plan for You

Your choice can almost be made for you, depending on your age, and where you live. The biggest question mark for most people is how to handle health insurance coverage as a Gray Area Retiree. If you find yourself in this situation, I would sit down and compare TRICARE Retired Reserve with the options available through your employer, or through one of the health care exchanges (eHealthInsurance.com lists everything you will find on the exchanges, but in my opinion has a more user-friendly interface and better tutorials that explain your options).

Once you reach age 60, it makes sense to go with TRICARE Prime or Standard. Once you reach age 65, you are no longer eligible for Prime or Standard, and must move to TRICARE for Life if you wish to continue receiving health care through the military.

More help is available: You can always contact a TRICARE Ombudsman who can help you decide which plan is best for your situation. There should be one at each Military Treatment Facility, or you can contact TRICARE, and they will have someone explain things to you and help you choose.

Here are some plan details, and links to the website:

TRICARE Reserve Select – Premiums (~$50/ mo for member; ~$205 for family plan):

TRICARE Retired Reserve – Premiums (~$391/ mo for member; ~$961 for family plan):

  • Available to Retired members or the Guard or Reserves
  • Equivalent to TRICARE Reserve Select, however, there are no premium subsidies, so you pay entire cost of premiums.
  • Available until age 60, at which time you are eligible to TRICARE Prime or Standard
  • Link to TRICARE Retired Reserve website.

TRICARE Prime – Premiums ($50/ mo for member & dependent):

  • $12 copay off-base
  • MTF – space available, but no Copay
  • Prescriptions
    • Formulary – free
    • Local pharmacy – variable
  • Only available until age
  • Only available within 40 miles or 30 minutes from a military base (cost-cutting measure) There are waivers for this.
  • Link to TRICARE Prime website.

TRICARE Standard:

TRICARE for Life age 65:

Hopefully this helps you understand your options and points you in the right direction!

Surviving a Military Paycheck Error

No system is perfect. Especially complex systems managing hundreds of thousands of unique inputs and outputs on a biweekly basis. Inputs and outputs that frequently change based on dozens of different factors that can change at a moment’s notice. Of course, the system I’m referring to is the military pay system. I’m sure you guessed that by the title of this article.

Unfortunately, the military pay system isn’t perfect. Errors can and do happen. And that’s not good when people need their paychecks to pay for basic living essentials such as food, housing, transportation, utilities, etc.

Military Paycheck Error

In most cases, military paycheck errors are minor, and quickly rectified. I served on active duty for 6.5 years, and personally experienced a couple small pay issues – an overpayment on an advance for a TDY was one such occasion. I didn’t want the advance, I was forced to take it, I was overpaid, then I had to write a check to pay back the government (or they could have withheld it from future paychecks; I preferred getting it over with right away). No long-term damage was done, but it took a couple hours out of my day and took me away from work.

But some problems are much worse. I know people who were underpaid, not paid at all, grossly overpaid and had their pay docked for the next several checks, etc. These pay problems can quickly cause a lot of damage. So let’s take a look at what you can do to help survive a military paycheck problem.

What to Do When the Military Messes Up Your Paycheck

The first step is to assess the situation. What happened? Were you not paid at all? Underpaid? Overpaid? Contact your finance department, explain the situation, and see if you can sit down with them and walk through the problem and find a solution. Many military pay problems are small, and can be resolved over the phone, or with a a quick meeting. But if your problem is bigger, you will need to do a little more work to find a resolution.

Resolving an Overpayment

Being overpaid can be almost as bad as being underpaid, because you will need to repay the excess amount of pay you received. As I previously mentioned, I was overpaid for a deployment when I was forced to take a cash advance I didn’t even want. The solution for me was easy – simply write a check to the US Treasury Department for the amount I was overpaid (I think it was in the $400 range; which was not an insubstantial sum when I was an E-3 with a take home pay of about $600 per pay period).

In other situations, you may be forced to repay more than you can write a check for in one fell swoop. In that case, your paycheck may be garnished by a certain amount each check until you have repaid the debt you now owe. This can be a big problem if you are living paycheck to paycheck, or you regularly spend your entire paycheck each month. In most cases, you can work with the finance department to spread out the overpayment over several checks. But if you were grossly overpaid, you may need to figure out some form of payment plan that doesn’t take away too much of your paycheck.

Resolving an Underpayment

Being underpaid is rough. You need to keep paying for your living expenses, even if your paycheck is light, or if it doesn’t even show up. Not being paid is rare, but not unheard of. Non-payments are most common when you are changing status (being activated, deactivated, separating from the service, receiving separation pay, or receiving an enlistment or reenlistment bonus).

Underpayments can happen for a variety of reasons, including being deployed, going through a PCS, receiving a promotion, change in status, adding dependents, change in BAH rates, becoming eligible for additional pays and bonuses, etc.

Resolving an underpayment starts with contacting your finance department, explaining the situation, and waiting for them to rectify the situation. In many cases, your pay will be resolved in one or two pay periods. But in some cases, it can take longer. Situations that may take longer are often things like bonuses, separation pay, and similar payments.

Unraveling the Impact of Paycheck Problems

Thankfully, most pay problems are small. But not all. And even small problems can quickly become big problems if they aren’t resolved quickly. And the problem with paycheck errors is the initial problem can lead to further problems, such as missing payments, adding debt, incurring finance problems, and worse. So let’s run through a few common problems and what can be done about them.

Dip into Emergency Savings. Everyone should have an emergency fund. How much you should have is up to you. But it’s best to start with at least $1,000. As a rule of thumb, I recommend everyone have at least one to three months of living expenses. That will help you manage most emergencies that pop up. If you don’t have one yet, make it your resolution to start an emergency fund. Be sure to top up your emergency fund once you have the situation resolved.

Speak to Your First Sergeant or Contact Your Service Aid Society. Your First Sergeant is your first line of defense and can help point you to resources on base, or in the local community. This can include a financial counselor or other specialist. Each branch of the service also has an aid foundation that helps their servicemembers through tough times. Here is a top-level list:

In most cases, these foundations will offer interest free, or low-interest loans to help you bridge the gap. Some may also offer a small cash grant or other aid.

Work with Your Creditors. If your paycheck problems cause you to run low on cash, you need to get proactive. That means contacting your lenders and creditors. Explain the situation and ask if they will be willing to work with you. Some lenders may be willing to let you skip a payment, or may be willing to waive late charges or finance fees for your first missed payment. The key is keeping lines of communication open. They can’t and won’t work with you if they don’t know about the situation.

Military Banking is a great way to go. Many military banking institutions will work with you on things like credit card payments, auto loans, etc. if you get them on the phone and let them know what is happening. Some of them also offer temporary loans that can help you bridge the gap. NFCU, PenFed, USAA, and other military banks are often willing to work with servicemembers in situations such as these.

Get More with a Free USAA Secure Checking Account

Raise Cash. There are many ways to raise cash quickly, so you’ll need to be creative. This can include things such as selling items on Craigslist or Ebay, having a yard sale, taking on a part time job, doing a side job for cash, etc. Your situation will be unique, so go with what you know and what you can do.

Credit Cards May Be an Option. Another option, though less attractive, is using credit cards. I don’t normally recommend using credit cards to pay for normal living expenses, but it’s a different story when it is for an emergency. And credit cards are almost always a better option than taking out a short term loan from a pay day lender, title loan company, or other company that offers high-interest short term loans. If at all possible, try to pay off your credit card as soon as possible. Here are some featured military credit cards.

Tap into Your Home Equity Line of Credit. I don’t like this option very much, because you would be taking out a loan against your home to pay for living expenses. The only time this is a good option is if you know you can (and will) repay the loan quickly. Otherwise, it’s better to look at other options.

Payday Loans and Title Loans – The Worst Options. Perhaps the worst thing you can do is get a  pay day loan, title loan, or other high interest loan. They are a quick way to digging a deeper hole and can be difficult to get out of. Interest rates on those loans don’t appear to be too bad at first-glance, but they are usually represented as a percentage for the short-term duration of the loan. So what appears to be a 20% loan is actually a 20% interest rate for a week or two. But it can be over 300% for a full year! To put that in perspective, you might borrow $1,000 and repay over $3,000. There are better options available!

Plan for the future. Once this situation is resolved, it’s a good idea to plan for something like this possibly happening again. It would be a good idea to use the separation pay and bonus to get current on any missed bills, and then save a little in an emergency fund for a rainy day. This will help you and your family avoid any potential financial surprises.

2015 Military Pay Dates – Active Duty, Guard, and Reserves

One of the first steps in creating a budget is knowing how much money you have coming in, and when. That’s why it’s important to know when you get paid. In general, military pay dates are easy to remember: you usually get paid on the 1st and 15th of each month.

Military Pay DatesThere are exceptions when those dates fall on a weekend or holiday. In those cases, you would get paid on the weekday preceding that weekend or holiday. So if your pay date would be on Sunday the 15th, you would actually receive your pay on Friday the 13th. (I guess sometimes Friday the 13th can be lucky!).

Pay Periods: You get paid for the previous work period. In this case, you get paid on the 15th for work from the 1st – 15th of the month. The pay on the 1st of the following month is for work done from the 16th – the end of the month.

What about partial months? The military considers a month to be 30 days long – this makes it easier for calculating pay and benefits for a partial month of service. So each day of pay is worth 1/30th of your monthly pay and benefits. If you only work part of a pay period you would receive 1/30th of your normal pay and benefits for this period. This is important to know for those times when you PCS, are away on an extended TDY or deployment, or when you separate or retire from the military.

Tracking Your Pay and Benefits:

The military gives service members two forms to track and understand their pay and benefits: Leave and Earnings Statements (LES) and Net Pay Advice (NPA). These can be viewed or downloaded from your myPay account. It’s not a bad idea to keep a copy of these forms to ensure accuracy of your pay and benefits.

Here is the information found on these forms:

  • LES: Everything you need to know about your pay and benefits should be found on your LES. It includes your end of month pay information, including gross pay, net pay, state and federal taxes paid, Thrift Savings Plan contributions, other pay & benefits (including BAH, BAS, Per Diem, tax-free pay, Family Separation Pay, Hazardous Pay, bonuses, and other pay and benefits), Days of Leave, and more.
  • NPA: Mid-month pay information.

2015 Military Pay Dates

Here are the military pay dates for 2015, including the day you should receive your pay, and the dates your Leave and Earnings Statements (LES) and Net Pay Advice (NPA) should be available through myPay.

Pay PeriodMid-Month Pay DayNPA AvailableEnd-of-Month Pay DayLES Available
January 2015Jan. 15Jan. 8Jan. 30Jan. 23
February 2015Feb. 13Feb. 6Feb. 27Feb. 20
March 2015Mar. 13Mar. 6Apr. 1Mar. 25
April 2015Apr. 15Apr. 8May 1Apr. 24
May 2015May 15May 8June 1May 25
June 2015June 15June 8July 1June 24
July 2015July 15July 8July 31July 24
August 2015Aug. 14Aug. 7Sep. 1Aug. 25
September 2015Sep. 15Sep. 8Oct. 1Sep. 24
October 2015Oct. 15Oct. 8Oct. 30Oct. 23
November 2015Nov. 13Nov. 6Dec. 1Nov. 20
December 2015Dec. 15Dec. 8Dec. 31Dec. 18

The above military pay dates are applicable to all branches of the military, including the Air Force, Air Force Reserves, Air National Guard, Army, Army National Guard, Army Reserves, Marine Corps, Marine Corps Reserves, Navy, Navy Reserves, Coast Guard, Coast Guard Reserves, and the Public Health Service.

The Guard and Reserves are listed with the same pay dates: this only applies to those who are serving in the active Guard or active Reserves. Those who serve as Traditional members of the Reserve Corps may have different pay dates for their drill duty or their AT days.

When Will I Receive My Military Paycheck?

Your Military paycheck will normally be available on your payday. However, it may be available a day or two earlier or later, depending on your financial institution. For example, some Military Banks offer military deposits a day or two earlier than the actual pay date. This is common with Navy Federal Credit Union (if you use the Active Duty Checking Account) and USAA Federal Savings, among others. Here is the pdf with the NFCU pay days. Here are the dates military paychecks are available through USAA.

Top Military Banks: Here is our list of the top military banks and credit unions. You may consider choosing to bank with one of these financial institutions if receiving your pay earlier is important to you.

Roth TSP Contribution Rules Changes – Action Required

Roth TSP ChangesCurrent Thrift Savings Plan participants who are contributing to the Roth TSP must make changes to how they make their contributions, otherwise their contributions will automatically stop. Current rules allow members to contribute a specific dollar amount to their Thrift Savings Plan account. The new rules will require members to contribute a percentage of their pay instead of a dollar amount. Changes must be made by January 31, 2015. This rule change only applies to Roth TSP contributions, as Traditional contributions are already processed based on a percentage of pay.

Who is affected? All active duty members of the Air Force, Army, and Navy who contribute to the Roth TSP. This will also affect members of the Guard or Reserve who are activated for over 30 days.

Action Required: Log in to your MyPay account after January 1, 2015 and change your contribution to a percentage of your pay instead of a specific dollar amount. When you are in your MyPay account, click the section labeled “Traditional TSP and Roth TSP”. Make your contribution election (for example, 10 percent). Then click the Save button.

Deadline: Changes must be made by January 31, 2015, or your Roth TSP contributions will automatically stop. Be sure to make the change before January 31, as you can’t go back and make retroactive contributions.

Concerns: There isn’t really anything to be concerned about with this change, other than taking the time to get it done! Defense Finance and Accounting Service (DFAS) will take care of everything in the background, and will also give you the ability to track your contributions in MyPay, so you will know how much you have contributed throughout the year.

How to Max Out Your Roth TSP Contributions

If your goal is to max out your annual Roth TSP contributions, then it’s not too much trouble to calculate the percentage you need to contribute. The annual Roth TSP contribution limit in 2015 is $18,000, which comes out to $1,500 per month. Just divide this by your salary to determine how much you need to contribute. If your salary is $6,000 per month, you would divide $1,500 by $6,000 and you would get 25%.

Catch-up contributions, for those age 50 and over, are limited to $6,000 per year. So if you are eligible to make catch-up contributions, be sure to include that in your calculations. The max for you would be $24,000 per year, or $2,000 per month. If you have an $8,000 salary, you would divide your $2,000 contribution by your $8,000 salary, which would also come out to a 25% contribution.

Obviously, not all numbers work out that easily. But the concept is the same.

One caveat: try not to contribute too much to your Roth TSP. The Thrift Savings Plan should refund the extra contributions, but you might find that it is a manual process, or there may be a delay in the refund. So try to get as close to the contribution limit as possible without going over.

What No One Ever Talks About – The Emotional Aspects of Transitioning Out of the Military

This post was originally published in the USAA Member Community – The Emotional Aspects of Transitioning Out of the Military | Sponsored post by USAA.

What No One Ever Talks About – The Emotional Aspects of Transitioning Out of the Military

by: Ryan Guina

Military TransitionI transitioned from the Air Force in 2006, after completing six and a half years on active duty. Like many military veterans, I packed a lot of living into those six-plus years. I traveled to dozens of countries and I deployed five times. I also handled a decent amount of responsibility for a 25 year old. I was a shift-leader during my last assignment. I had the responsibility of assessing the tasks at hand, putting a plan into place, and making sure we executed.

But, things changed quickly after I separated from the military. I packed up and moved across the country to a state where I only knew two people. I was unemployed for six of the longest months of my life. It was hard, but not for the reasons I expected. The biggest struggle for me wasn’t financial. I saved a lot of money during my deployments and I knew I could live for a full year without any additional income. My biggest struggle was finding my new identity in the civilian world.

I transitioned from being a leader with concrete goals and tangible outcomes, to someone who had no responsibilities other than finding work. I spent hours crafting my resume, making phone calls, searching job sites, applying to jobs, and doing everything I could to find a new place in the world. I finally found a new job through a mixture of networking, and reworking my resume to better highlight my skill sets.

Starting my new job was one of the best things that could have happened to me. Not just because of the paycheck, which was nice, but because it gave me somewhere to focus my energies. Working again gave me the opportunity to contribute to a team and be a part of something that was larger than myself. This was something I had missed after leaving the military.

If you haven’t made the transition out of the military yet, I encourage you to think about your next steps. Yes, save your money, and get your education or professional certifications. Those will be immensely valuable in the civilian sector. But, also spend some time thinking about the other aspects of your transition. How will it affect you and your family emotionally? Will you remain part of your local community, or like me, will you move to a new state?

Finding your identity in a post-military world can be difficult. If you find yourself struggling, I encourage you to step a little bit out of your comfort zone. Joining groups in your local community can be a great way to meet people and grow your network. Good examples include participating in your church, local or national volunteer organizations, professional organizations, or other organizations that will help you get out into the community and be part of something bigger than yourself.

Your dependents may also struggle with the post-military transition. I would encourage you to include some family activities in your plans, or encourage your family members to get out in the community or join school organizations.

Getting out into the community will help ease the transition and give you back something that might be missing. It will also help you grow your personal and professional network, something that can pay long-term dividends.

This post was originally published in the USAA Member Community – The Emotional Aspects of Transitioning Out of the Military | Sponsored post by USAA.

Active Duty Military Retirement Benefits (Podcast 010)

The Military Wallet Podcast on iTunesToday’s podcast covers active duty military retirement benefits. We cover a wide range of topics in this interview with Doug Nordman, military retiree and author of The Military Guide to Financial Independence and Retirement.

Active Duty Military Retirement BenefitsAs a military retiree, Doug has a great perspective on what it takes to earn an active duty retirement, as well as how to maximize the benefits you are eligible to receive as a military retiree. In our interview, and in this guide, you will learn more about:

  • How to qualify for an active duty retirement
  • How to calculate an active duty pension
  • How to prepare to live on your military pension
  • The power of Cost of Living Adjustments (this is much more valuable than you think!)
  • Health care options through TRICARE
  • Base access, shopping, & activities
  • and other valuable retirement benefits.

About Doug Nordman: As I mentioned, Doug is the author of The Military Guide to Financial Independence and Retirement. This book had a large impact on me and I highly recommend it. Doug also runs a blog called The Military Guide where he writes about a variety of topics related to military benefits, veterans topics, retirement, and personal finance.

The following article covers many of the facts in the podcast, but misses out on some of the examples given and additional information. I recommend listening to the podcast if you have the time, and bookmarking this as a resource for future reference.

How to Qualify for Retirement

In general, you need to serve 20 years to be eligible for military retirement benefits. This is true for those who serve on active duty, or in the Guard or Reserves. However, there are situations when you may be eligible to retire a little early. One example is the Temporary Early Retirement Authority, or TERA, which is often used during periods of downsizing (such as the present moment). Under TERA, some servicemembers are eligible to retire with as few as 15 years of active duty service. However, they also receive a smaller pension, both based on years served, and because there is a multiplier used that decreases the final pension calculation. Other exceptions for early retirement can be made for medical reasons, or under some other limitations. But in general, we are working with the assumption an active duty military retirement is 20 or more years.

Active Duty Retirement Pensions

There are 3 Main Types of Military Retirement Pay Plans:

  • Final Pay / High Pay – for servicemembers who entered the military before Sep. 8, 1980
  • High 3 – for servicemembers who entered the military after Sep. 8, 1980
  • REDUX – an elective retirement option for servicemembers who entered the military after Sep. 8, 1980

We focus almost exclusively on the High 3 Retirement Plan in the podcast because most current servicemembers and recent retirees are eligible for this plan. REDUX is not discussed other than to say it is not a great option.

Military Pensions are from Your Base Pay Only

Your first retirement paycheck may surprise you. In fact, you might think there is an error. That’s probably because many people think their retirement pay will be roughly half their normal military paycheck. Unfortunately, that isn’t the case. Your military pension is based only on your base pay—it doesn’t take your other benefits such as BAS and BAH into account. You also won’t receive any form of flight pay, sea pay, danger pay, or other special duty pays or benefits in your retirement pay.

Rules of Thumb for Calculating Your Retirement Pay (High-3 Retirement System): Doug gave us a couple rules of thumb to use for back of the envelope calculations to get a rough idea of what your retirement paycheck will look like.

  • 95% Rule of Thumb: To calculate your pension under High-3, you can multiply your final base pay by 95% (this accounts for the annual raises during your final 3 years). Then multiply this by your multiplier based on years served (2.5% per year served under High-3; this comes out to 50% at 20 years). So at 20 years of service, your pension would be roughly 47.5% of your final base pay (50% * 95% = 47.5%).
  • 30% Rule of Thumb: Another rule of thumb is to look at your total compensation (base pay, BAH, and BAS) and multiply that by 30%. That will get you in the ball park of your pension payment. Note: this is less precise than the 95% rule of thumb, and may vary by rank and your location if you have a high BAH.

Get a More Precise Estimate of Your Pension: Every service has an online retirement calculator that allows you to put in very granular information, including your Date of Initial Entry Into Military Service (DIEMS), your estimated retirement date, and other factors. It’s important to note that these calculators are often password protected and you need to login to your branch website get this information.

Notes on Military Pension Payments:

  • You will not receive your first pension payment until the month after you retire.
  • Checks only arrive once a month at the beginning of month (may arrive a day or two early, depending on your bank – some military banks will actually deposit military paychecks and pensions early).

COLA Adjustments

The most underrated part of military pensions are the Cost of Living Adjustments (COLA). Military pensions are tied to an annual COLA based on the Consumer Price Index, or the average cost of inflation over a variety of consumer goods. This varies from year to year. In some years there is no COLA increase to retirement pay, and in other years it could 1%, 2%, or even higher.

What makes COLAs so valuable is they work like compound interest—they stack on top of each other. So your first COLA may be small, but it increases your base for the next COLA. Over time, even small gains of 1%-2% can make a huge difference. For example, Doug shared that his military pension has increased 27% over the last 12 years, just from COLA increases. 27% is huge!

It would not unreasonable to see a pension double in one’s lifetime, depending on various factors such as when the veteran retired, how ling the retiree lives, etc.

Big note: As Doug points out, the 27% pension increase is great. But it’s also just enough to keep up with inflation. So while the overall dollar amount is larger, the purchasing power should remain roughly the same. But what many military retirees don’t realize is that many private sector pensions aren’t indexed to inflation. That makes the Cost of Living Adjustment an immensely valuable benefit.

Health Care in Retirement

Military retirees are eligible for health care coverage through TRICARE. You will start off with TRICARE Prime or Standard if you are under age 65. TRICARE Prime is the same health care coverage you have as an active duty member. However, it is only eligible if you live within a certain distance of a military installation. If you move out of the area, you would only be eligible to use TRICARE Standard. TRICARE Prime and Standard both have monthly premiums, and certain associated copays.

If you are age 65 or over, you would be eligible to receive TRICARE for Life, which is a Medicare Supplemental Insurance Program. There are no monthly premiums for this plan.

Which plan is the best? This is where it’s a good idea to listen to the Podcast episode. Doug goes into each of these plans in more detail, and explains the associated pros and cons of each plan. Additionally, you can contact a TRICARE Ombudsman who can help you decide which plan is best for your situation. There should be one at each Military Treatment Facility, or you can contact TRICARE, and they will have someone explain things to you and help you choose.

Here are some plan details, and links to the website:

TRICARE Prime – Premiums ($50/ mo for member & dependent):

  • $12 copay off-base
  • MTF – space available, but no Copay
  • Prescriptions
    • Formulary – free
    • Local pharmacy – variable
  • Only available until age
  • Only available within 40 miles or 30 minutes from a military base (cost-cutting measure) There are waivers for this.
  • Link to TRICARE Prime website.

TRICARE Standard:

TRICARE for Life age 65:

Additional Health Care Info Covered in the Podcast:

  • Health care for dependents
  • What if you don’t live near a Military Health Care Facility?

Does all of this sound a little confusing? It certainly can be. Thankfully each Military Treatment Facility has a TRICARE ombudsman who can help you make sense of your options and help you make the best decision based on your needs.

Other Retirement Benefits

Doug and I discuss other military retiree benefits, including access to base facilities such as the:

  • Commissary
  • Base Exchanges
  • Gyms
  • Hobby activities where available, such as the Auto Hobby Shop, Woodworking Shop, MWR facilities, movie theater, etc.

These base activities can be a great way to save money, participate in hobbies, and continue to be a part of the military community.

Military Hops – Space-A Travel: Military hops and Space-A travel are another topic we discussed. These can be a great way to see the world on the cheap. Basically, flying Space-A allows you to jump onto a military transport if there are available seats. You pay a nominal fee (usually only a few dollars). You can often find trips going all over the world, and many of the flights go out on a regular basis. There are some downsides, however. Because you are flying on a space-available basis, you may not be able to get the flight at the day or time you want. Flexibility is the key if you use Space-A travel!

Benefits for Spouses & Dependents

Benefits for your dependents, including your spouse and children, are similar going to be similar to when you were on active duty, with the exception of your health care which will depend upon your specific situation (whether you are eligible to use TRICARE Prime, or are required to use Standard). Spouses and Dependents still maintain base access and access to the Commissary, Exchanges, MWR facilities, and other base activities.

Did we miss anything? Military retirement is a huge topic, and we tried to cover as much as we could in the 40 minutes or so that we talked. I also did my best to get the main points down on paper for those who prefer to read. Please leave a note in the comments if we missed anything and we’ll address it. Thanks!

BAH Rate Cuts: 99% BAH – The New Reality & The Future of BAH

BAH Rate CutsThe DoD recently announced the there would be BAH Rate cuts in the 2015 budget. Instead of the 100% BAH rate which has been the norm since 2005, the Department of Defense announced they would reduce BAH to 99% of expected costs. This is part of a larger, long-term goal of implementing BAH Rate cuts to cover only 95% of expected costs.

Don’t fret about this change yet. BAH Rate Protection protects your BAH Rates, so you shouldn’t see an immediate decrease in your BAH check each month, except under a few circumstances, which will will cover in a bit. Let’s take a look at the new 99% policy, why it has come to be, and discuss BAH Rate Protection.

Why Move to 99% BAH?

The DoD, along with the rest of the government, is hurting for money. They are looking for places to cut back spending. And since BAH affects majority of the military population, it is a prime target for cuts. This 1% cut is expected to save the government approximately $200 million per year.

The 2015 defense budget called for plans to cut BAH to 95% of expected costs over the next several years. So this is only the first step. While many servicemembers and their families will start seeing more money out of pocket in the coming years, this is still a much better situation than the 1990’s, when BAH only covered 80% of expected housing costs.

BAH Rate Protection

We have a full-length article covering BAH Rate Protection, but here are the basics. Your BAH Rate is protected from the time you arrive on your installation, until you leave, with the exception of three circumstances:

  • Permanent Change of Station (PCS)
  • Reduction in paygrade
  • Change in dependent status

In other words, your BAH rates can only increase, not decrease, unless you move to another base via a PCS, you receive a reduction in paygrade, or your dependent status changes from with dependents to without, or vice-versa. For the rest of your assignment, your BAH will be the higher of the published BAH Rate on January 1, or the BAH Rate you held on December 31 of the previous year.

I will say it again: Your BAH Rate will not drop during the middle of your assignment, even if the rates for your location decrease in any given year.

Note about a PCS moves: If you live in an area with two bases close to each other and you receive a permanent change of station assignment to the other base, you could possibly remain in the same home, but still face a decreased BAH because it would officially be a PCS move.

How Much Will This Cost Me When I Move?

At the time of this publication, the DoD hasn’t announced exactly how the cuts will take place. They could do one of several actions, including decreasing BAH 1% across the board, calculating the total cuts across the entire DoD and applying an average cut to everyone who receives BAH, or some other calculation.

Andrew Tilghman of the MilitaryTimes reported,

“Military officials do not want to create a new incentive for troops to prefer rural areas over costly urban ones, so it is likely that the Pentagon will calculate some sort of single across-the-board cut for all BAH checks.

For example, they might take the average of all 1 percent reductions nationwide and use that to determine a single dollar amount to shave from every BAH check. For example, regardless of the location and actual BAH rates, each service member may face a reduction of about $200 a year.”

Let’s look at an example: We’ll look at two different BAH rates for an E-5 with dependents. The first is the rate used for the Post-9/11 GI Bill when you take classes exclusively offered online (in-residence classes are based on the ZIP code for your school). The other BAH Rate is an E-5 in Chicago, chosen to illustrate the difference in a high-cost of living location:

  • E-5 with Dependents Rate (non-location, used for Post-9/11 GI Bill): $714.50, *99% = New Rate of $707.36, a difference of $7.14/month, or $85.68/year
  • E-5 with Dependents Rate (Chicago): Current Rate: $1,977.00, * 99%, New Rate = $1,957.23. Difference of: $19.77/month, or $237.24/year.

When put in the context of a monthly cut, $7 – $20 is noticeable, but not a massive cut. Especially if you don’t see it due to BAH Rate Protection. When you PCS to your next base, you should have a good idea of the BAH in your new area and can use that BAH when setting your budget for your new location.

BAH Rates Can and Do Change for Other Reasons

It’s also important to note that BAH Rates change when cost of living in a local area changes. In general, the BAH should increase as the cost of living increases, and the BAH may decrease when the cost of living in an area decreases. Falling BAH Rates were common after the real estate markets crashed in 2007-2009. This is when BAH Rate Protection was helpful for many servicemembers. It’s also possible that you may see increased BAH payments, even with BAH paid out at 99% of the calculated rate. The important thing to remember is that your BAH Rates should not decrease, regardless of what happens to the published rates. Your rates should only increase throughout the duration of your tour.

What is the Future of BAH?

Right now, we can only go from the information we have at hand, which is from the recent budget talks. The DoD wants to decrease BAH to 95% of the actual cost of housing, but Congress limited to cut to 1%. This 1% decrease could just be the first step. Right now we don’t even have the full picture on the implementation. But going forward I would expect the decreases to continue on an annual basis for the near future. The DoD won’t implement the full 5% overnight, and the BAH Rate Protection should protect a large portion of servicemembers over the next few years. The largest impact to most servicemembers probably won’t be felt for the next couple years.