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.

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.

BAH Rate Protection – What You Need to Know About BAH Changes

Each year the DoD adjust BAH Rates across the board. They use a host of information to calculate how much they should provide servicemembers. In some locations BAH Rates increase, and in others they decrease.

BAH Rate Protection RulesThankfully, the BAH Rate Protection policy ensures your BAH rate won’t decrease in the middle of your assignment, even if BAH Rates for your location decrease. This is important to know, with the recent news that the DoD is decreasing BAH to 99% of the expected cost of housing in your area.

Let’s take a look at BAH Rates and how the BAH Rate Protection policy maintains your BAH rates, even if they decrease in your area.

How BAH Rates Are Calculated

Determining BAH Rates is actually a fairly complicated process, so we will simplify it to the basics here. You really need to know two things: how the data is collected, and how it is processed.

BAH data is based on rental prices, the cost of utilities, and the price of renter’s insurance. Rental costs are collected on apartments, townhouses/duplexes, and single-family rental units of varying bedroom sizes. This information is then mashed into a complex formula that is designed to give service members housing based on their pay grade and dependent status.

The process is a bit complicated and is repeated each year. Sometimes the BAH rates increase, other times they decrease.

You can learn more about BAH Rates in the DoD BAH Primer, a 13 page pdf which explains everything in detail.

BAH Rate Protection

The good news is you shouldn’t see your BAH Rate drop during the middle of your assignment, even if the rates for your location decrease in any given year. There are certain exceptions to this rule, which we’ll cover in just a moment.

Individual BAH Rate Protection: This prevents decreases in your housing allowance, as long as your status doesn’t change. Servicemembers are entitled to the greater of the published BAH rate on January 1, or the BAH they were paid on December 31 of the previous year. This rate protection is in place from the time a servicemember arrives on an installation until the status of the servicemember changes due to:

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

Two important notes: The Change in dependent status on means “with dependents” or without dependents,” not the number of dependents. So you won’t see a BAH decrease if you have another child or if one of your children moves out of your home (provided you still have dependents).

Receiving a promotion also doesn’t hurt your BAH, only a reduction in pay grade will potentially decrease your BAH. So if you are promoted in a given year, you should be eligible for an increased BAH, again using the higher of the BAH Rate on January 1 of the given year, or the previous protected rate.

Summing Up BAH Rate Protection

To sum it up, BAH Rate Protection ensures that servicemembers will receive published increases in BAH Rates, but not decreases, unless any of the 3 previously mentioned conditions apply. Decreased BAH Rates should only affect servicemembers who PCS into a new area, have a change in dependency status (change from with dependents to without, or vice-versa), or to those who receive a reduction in pay grade.

New Allotment Rules – No More Allotments for Personal Property Purchases

New Allotment Rules

The DoD has banned allotment for personal property purchases.

The Department of Defense recently announced sweeping changes for when they will allow military members to use allotments from their base pay. Starting January 1, 2015, the military will no longer allow active duty servicemembers to use allotments for personal property purchases, including purchases of:

  • Vehicles, including cars, trucks, motorcycles, and boats,
  • Household goods such as furniture, appliances such as washers and dryers, refrigerators,
  • Electronics, such as laptops, tablets, cell phones and televisions; and
  • Other consumer items that are tangible and moveable.

According to the DoD website, “Allotments still can be used for savings account deposits, investments, to support dependents, pay insurance premiums, mortgages, rents, make Combined Federal Campaign contributions, and U.S. government debt repayments.”

Servicemembers will also be required to certify under the UCMJ that the allotment is not for “the purchase, lease, or rental of personal property of or payment toward personal property.”

This will not affect current allotments, or those made before January 1, 2015. Additionally, these rules only apply to active duty service members, and not retirees or DoD Civilians.

Officials Cite Protection for Servicemembers as the Reason for Changes

The driving force behind these changes is to protect servicemembers from unscrupulous retailers and lenders who take advantage of military members and their families. In fact, DoD officials almost went a step further and banned all allotments, regardless of the purpose. In the end, they decided to keep the allotment system in place because servicemembers use them for sending money to family members and other purposes.

The main goal was to prevent servicemembers from being taken advantage of through high priced loans, and loans without clear disclosure of all fees. This includes loans such as payday loans, and high-priced consumer goods.

I’ve seen some examples of this first-hand, as I knew a young servicemember (E-2) who was talked into buying a car with an interest rate over 19%. The dealership even filled out the allotment paperwork for him. He should have known better than to buy a car he couldn’t afford, but the dealership also made it easy for him when they filled out the allotment paperwork and told him to take it to his finance department.

Are Allotments Even Necessary These Days? Allotments are convenient, but are they necessary? Most banks make it easy to set up automated payments from your account. You can do this quickly and easily at most banks. Here are some recommended military banks if your bank doesn’t offer these features.

But I see how allotments have a use – especially when it comes to sending money to family members while deployed, paying child support or alimony, and making sure certain payments are taken care of each month without having to worry about them.

Will new allotment rules fix the problem? I understand the reason for the new rules. Scrapping the allotment system for personal property purchases will add a barrier for certain loans. But I don’t think it will solve everything. The key is financial education. And that is something that unfortunately, is lacking in our school systems, and in the military. Until financial education becomes a priority, we will still have servicemembers who struggle with poor financial decisions.

Flat Rate Per Diem Update

If you have traveled on official government duty, you have probably receive per diem. Per diem is the daily allotted pay the DoD gives members while they are traveling on official duty assignments. The funds are to be used to cover your lodging, food, and incidental expenses, such as laundry and basic needs. When most people refer to per diem, they break it out to the two primary expenses, their Lodging, and their Meals and Incidental Expenses (M&IE).

All the rules can be found under the Joint Federal Travel Regulations, which is linked at the bottom of this article.

How are Per Diem Rates Determined?

per diem rates military and government travelPer Diem rates are given for specific locations. The rates range from $129 per day in the Continental US (CONUS), and up to $823 per day in Out of CONUS (or OCONUS) locations. Again, the total rate is split between your lodging and your Meals and Incidental Expenses.

Rates for these locations are determined by three organizations: The General Services Administration (GSA), The Department of State (DoS), and The Defense Travel Management Office (DTMO).

Proportional Meal Rates

You may find that you are eligible to eat government provided meals on some of your trips. This will result in a Proportional Meal Rate. The proportional meal rate for your location is based on the locality meal rate and the GOVAT meal rate (GMR).

The Proportional Meal Rate is determined by:

  • adding your locality meal rate with the GMR of $11.85, dividing by 2, then rounding up to the nearest dollar. Then you add the Incidental Expense rate.
  • Ex: The CONUS Meal & Incidental Rate is $46 ($41 for meals, and $5 incidental rate). Add $41 to $11.85, gives us $52.85. Divide by 2, that gives us $26.43. Round that down to $27. Then add the $5 incidental expense, for a total of $32.

The Proportional Meal Rate is given when:

  • You are lodging in government facilities and the government provides at least one meal (but not all 3 meals).
  • You are lodging in government facilities with government meals on your orders, but the mess wasn’t available for all meals.
  • You receive one or two meals that are paid for by the Government (for example, as part of a conference registration fee).
  • You aren’t entitled to per diem but must purchase a meal (your actual expenses are compared to the Proportional Meal Rate and you will be reimbursed the lesser of the two).

Current Per Diem Rates

Looking for per diem rates by location? The Defense Travel Management Office has a list of all the current Per Diem rates. Here are the relevant links:

Updates to Per Diem Policy

The Department of Defense recently updated the per diem rates for military members on Temporary Duty Assignments (TDY).

Here are some updates you need to be aware of:

Long-term per diem rates are lower than short term rates. Travelers will receive 100% of the locality rate per diem for travel under 30 days. Long-term travel over 30 days, but less than 180 days will result in an authorized per diem rate of 75% of the locality per diem rate. TDY travel in excess of 180 days results in a rate of 55% of the locality per diem rate.

Establishes a flat rate per diem allowance for long term TDY that would authorize a traveler 75% of the locality per diem rate for TDY periods over 30 days but not exceeding 180 days. This item also establishes a flat rate per diem allowance for TDY in excess of 180 days to be set at 55% of the locality per diem rate.

ATM fees, baggage expenses, transportation tips, & laundry/dry cleaning no longer reimbursable. These items were previously allowed expenses on your travel voucher and would be reimbursed. These are now included under incidental expenses and cannot be reimbursed on your travel voucher.

Other items of note:

  • When staying in government lodging, travelers will be reimbursed for the actual lodging costs.
  • Travelers may choose to stay in furnished apartments or similar lodging for long-term stays if the rates are comparable or less than commercial hotel rates.

Here is the updated Joint Travel Regulation (updated 20141101).

Should You Join the National Guard or Reserves? (Podcast 009)

The Military Wallet Podcast on iTunesWhen I separated from active duty, I was burned out. I served for 6.5 years, during which I completed 5 deployments and a year long special duty assignment with no fixed base (I lived out of a suitcase for a full year). During my career, I literally spent more time away from home station than at home station. I needed a break, and joining the Guard or Reserves was the last thing on my mind.

Several years after leaving the military, I came around to the idea of serving again.  Earlier this summer, after an 8.5 year break in service, I joined the Air National Guard. And I love it. And I’ve learned that joining after a long break in service isn’t that uncommon.

Join Guard or Reserves

Should you join the National Guard or Reserves?

In today’s podcast we discuss joining the National Guard or Reserves. Joining the Guard or Reserves certainly isn’t for everyone. But there are many benefits to joining, including pay, access to affordable health care, education benefits, working toward a retirement pension, and one of the most important for me – being part of the military mission again.

Rob AeschbachJoining us in our podcast is a special guest, Rob Aeschbach. He is a retired Marine officer (12 years on active duty, and 10 years in the Reserves). Rob is a financial planner in the VA area. His financial planning practice focuses on helping military members and their families. If you wish to learn more about Rob, or get in touch with him, you can find him at the following online locations:

Rob was also our guest for podcast #3 – Podcast 003: Force Shaping and Involuntary Separations – How to Handle Being Laid Off from the Military.

Should You Join the Guard or Reserves?

I’ll start this off by saying this podcast and article aren’t trying to recruit you. I’m excited about the Guard and Reserves because I recently joined the Guard. But I’m also excited because I had many misconceptions about the Guard and Reserves. And to be honest, I think many active duty members do. Our goal is to help you look at the option of joining the Guard or Reserves in a different light. I was someone who dismissed the Guard and Reserves without a second thought – primarily because I was burned out from active duty. Today, I’m grateful I gave the idea a second chance.

Let’s discuss some of the benefits, pros & cons, and misconceptions about serving in the Guard and Reserves.

What Are the Guard and Reserves?

In short, the National Guard and Reserves are a reserve component designed to back up the active duty military. Members of the Reserve Corps typically work on a part-time basis in order to maintain proficiency in their career field.

Both the Guard and Reserves are very similar, but members of the National Guard and Air National Guard can be called upon by their state governor for civil relief actions, such as natural disaster relief, to help with terrorism threats, riots, etc. Guard and Reserve members can also be called upon by the Federal government to relieve active duty members, fulfill deployment needs, and more.

Similarities of Guard and Reserves:

  • Both serve in reserve capacity for active duty
  • Typical service requirement = One Weekend a Month, Two Weeks a Year

Difference between Guard and Reserves:

  • Guard = State Mission that can be called to both state and federal missions, depending on the orders.
  • Reserves = Federal Mission.

Your Commitment: 1 Weekend a Month, Two Weeks a Year

This is more or less your commitment when you join the Guard or Reserves. But you may find that your requirements may vary by unit. If you are prior service you may be able to join for as short a time period as 1 year. Or you can join for up to 6 years, or longer, depending on your contract.

Most Guard and Reserve units drill the first full weekend of the month, and have a two week Active Training (AT) period each year in which the entire unit drills. Some Guard units have a little more flexibility. For example, my unit has two 3 day drill weekends during the year, and we take one month off in the summer. This is a little more friendly for vacation time.

Individual Mobilized Augmentees (IMA) in Reserves: The Reserves also have IMA slots in which members are able to backfill active duty slots on an as-needed, volunteer basis. IMAs typically don’t have the traditional one weekend a month, two week a year schedule. The benefit is a little more flexibility, and ability to write your own ticket.

You’ll hear more about this in the podcast, where Rob discusses some of the benefits of having an IMA slot.

Guard & Reserve Drill Pay

Members receive Drill Pay based on the days they serve. Pay is based on the active duty pay scale. However, pay is based on the time you serve. Let’s break down the pay for Guard and Reserve members that works the “one weekend a month, two weeks a year” schedule.

For each Drill weekend, you actually get paid for 4 drills, or 4 days of work, even though you only work 2 days. The pay for each drill is 1/30th of the base pay for your rank and years of service. The reason you get paid for two days of work, even though you only work one day is because you don’t receive pay for BAH and BAS when you are on Drill Duty.

You do receive BAH and BAS on the days you serve your annual AT days (your two weeks of annual training). However, you will receive Reserve Component BAH (or Non-Locality BAH), not BAH for your location. You can find this here.

How much will you get paid?  It depends on your rank and time in service, of course, but you should make several thousand dollars per year. Many servicemembers volunteer for extra days and can easily bring in over 5-figures per year in additional income. Here is a list of Guard and Reserve Drill Pay charts, or you can use the NationalGuard.com Drill Pay calculator.

Guard & Reserve Retirement Benefits

Retirement is based on earning 20 good years of service. Your active duty time will count toward a good year of service. And if you served a partial year of active duty, it may give you an additional year of service. For example, I extended 6 months on my active duty contract, finishing with 6.5 years on active duty. I immediately transferred into the Individual Ready Reserve (IRR) to finish my 8-year commitment. That half a year of active duty, plus the other 6 months in the IRR gave me a good year of service toward retirement. So I have 7 good years already.

What is a Good Year of Service? A good year of service equals 50 points. You will earn 1 point for each drill served (remember, you earn 4 drills per drill weekend, so 12 drill weekend per year is 48 points). You also earn 15 participation points per year, and 1 point for each day of AT time (your annual training, which is usually around 12 or 13 days per year). So you can easily earn about 75 points per year with regular service (48+15+12 = 75).

Earning additional points toward retirement. You can also earn more points for each day you serve, for performing burial duty and certain Honor Guard functions, and for completing correspondence courses, including Professional Military Education, or even non-military courses.

Retirement Benefits Start at Age 60

In most cases, retirement benefits start at age 60, including the Pension, and health care benefits. There are a couple of important points to note: you will be a Gray Area retiree until you reach age 60. During this time you will have base access, can use base facilities, and can shop at the BX, PX, NEX, Commissary, etc. You just won’t receive pay or health care until age 60.

Receive early retirement pay: In some cases you can receive your pension before age 60, provided you were activated for at least 90 days during a fiscal year after January 2008. The details are case specific, so I recommend reading more about early retirement to get all the details.

Health Care & Related Benefits

Members of the Guard and Reserves are eligible for affordable health care through the TRICARE Reserve Select program. You must be in a drilling status to be eligible for this program (not in the IRR). There is also a Dental program. Here are the rates and more information:

TRICARE Retired Reserve: You can also sign up for TRICARE Retired Reserve while you are awaiting full health care coverage when you turn age 60. These rates are unsubsidized and run approximately $390 for an individual and $961 for a family. You can learn more here.

TRICARE Prime & Standard. When you turn age 60 you will be eligible for either TRICARE Prime, or TRICARE Standard. You will be required to transition to TRICARE for Life when you turn age 65.

Education Benefits in Guard & Reserves

The Guard and Reserves offer Education benefits, including the Montgomery GI Selected Reserve (MGIB-SR). The rates for the MGIB-SR are lower than what you would earn on active duty, so you may want to look into the MGIB if you are prior service. You may also earn access to the Post-9/11 GI Bill if you are activated.

Some states have their own benefit for Guard Members: I happen to live in Illinois, which is one of the few states that offer free college tuition at a state college for members of their state Guard units. I believe there are only 5 states with a similar benefit. However, many other states offer scholarships, tuition reductions, or other benefits. Be sure to look into your state’s benefits.

Career Options in the Guard and Reserves

More often than not, you have more career flexibility in the Guard and Reserves than you do in the active duty military. I was able to change career fields when I joined the Air National Guard. It’s also not uncommon for Guard and Reserve members to work in multiple career fields during their career. Availability is dependent upon your base mission and the needs of your unit.

My recommendation is to contact the recruiter at your local unit(s) to ask which jobs are available, and what kind of promotion opportunity is there.

You may also find that you are able to fill a billet with promotion potential. Some units will allow you to serve in a billet either one pay grade above or below your current pay grade. But other units may allow you to fill a billet two grades above your current pay grade. This gives you an immediate opportunity for career advancement, provided you meet the time in grade requirements and other qualifications for promotion.

Travel Requirements

You might be surprised to know that many Guard and Reserve members travel long distances to perform their drill duty. I counted license plates from about 7 neighboring states at my last drill. This isn’t uncommon. The good news is your unit may put you up in a hotel room if you live outside of commuting distance. You won’t get reimbursed for mileage traveled, but you can claim mileage and other travel expenses on your taxes. You can also claim half the cost of your meals on your taxes. Those benefits don’t negate the cost of travel, but it certainly helps when you file your taxes.

Miscellaneous Benefits

Other benefits include base access, ability to shop on base, use base facilities, military discounts, etc. And for me, the biggest benefit is being part of the military again. I missed being part of something bigger than myself. Being part of a unit and a mission and that satisfaction that comes from a job well done.

There is a lot more covered in the podcast, so I hope you give it a listen.

To subscribe you can visit our podcast on iTunes and Stitcher Radio:

TradeKing Promotional Code – $1,000 Commission Free Trades!

UPDATE: $50 New Account Bonus – Black Friday – Cyber Monday. Receive a $50 cash bonus when you open a new TradeKing account between Nov 28 and Dec 1, 2014 11:59 pm. See below for more details, or click the promotion link, and use promotion code BF50 when opening the account.

There is never a better time than right now to start planning your future. If you are thinking about opening a new investment account, now is a great time to do it. TradeKing is one of my favorite places to open an account for online stock trading – I’ve been a customer for several years now and recommend their service to anyone looking for an online brokerage account that offers a combination of price, service, tools, and educational products. Are you looking for more incentive to open an account? Then check out this TradeKing overview and these current TradeKing promotional codes, including TradeKing’s best promo offer ever – $1,000 in commission credits!

TradeKing Promo code and sign up bonusAbout TradeKing. TradeKing is one of the one of the leading online discount brokerage firms and is the broker I use for my online stock trades. TradeKing was rated #1 overall discount broker by Smart Money Magazine in 2006 and 2007, and was rated #4 overall online broker in 2011. SmartMoney also rated TradeKing best in customer service in 2008, 2010, and 2011. TradeKing has also received numerous awards from Barron’s (4 Star rating 5 years running, and #1 in usability in 2011), Kiplinger’s, and other periodicals.

TradeKing Features: TradeKing is one of the leaders in the discount brokerage community and features:

  • $4.95 stock trades
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We wrote a full TradeKing Review on our sister site which overs TradeKing’s features in more detail.

TradeKing $50 Cash Bonus – Black Friday – Cyber Monday

Receive a $50 cash bonus when you open a new TradeKing account with at least $3,000 between Black Friday and Cyber Monday (Nov. 28 – Dec 1, 2014). You must keep at least $3,000 in your account (minus any trading losses) for 6 months.

Here is the fine print:

New customers are eligible for this special offer after opening a TradeKing account with a minimum of $3,000. You must apply for cash credit by inputting promotion code BF50 when opening the account. To qualify for this offer, new accounts must be opened by 11:59pm PST on 12/1/2014, funded with $3,000 or more within 30 days of account opening, and executed at least 3 trades within 180 days of account opening. New accounts receive $50 credit one business day after all requirements have been fulfilled. Offer is not transferable or valid in conjunction with any other offer. Open to US residents only and excludes employees of TradeKing Group, Inc. or its affiliates, current TradeKing, LLC account holders and new account holders who have maintained an account with TradeKing, LLC during the last 30 days. Not valid for any retirement accounts. TradeKing can modify or discontinue this offer at anytime without notice. The minimum funds of $3,000 must remain in the account (minus any trading losses) for a minimum of 6 months or TradeKing may charge the account for the cost of the cash awarded to the account. Offer is valid for only one account per customer. Other restrictions may apply. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business.

TradeKing Promotional Code – $1,000 in Commission Free Trades

I have been a TradeKing customer for over six years now, and this is the most generous offer I have ever seen from them – $1,000 in commission credits for new customers! The $1,000 commission credit is good for equity, ETF and option orders including the per contract commission. This makes this an excellent offer for active traders and options traders.

Get this deal while it lasts:

You will receive your $1,000 commission credit within one business day of opening your account. The credit will be good for 60 days, and as mentioned previously, will apply to equity, ETF and option trades. This is the largest commission free trade credit I have ever seen from TradeKing or any other discount brokerage.

As always, there is some fine print, which you can read here:

The fine print: New customers are eligible for this special offer after opening a TradeKing account with a minimum of $10,000. You must apply for the free trade commission offer by inputting promotion code FREE1000 when opening the account. New accounts receive $1,000 in commission credit for equity, ETF and option trades executed within 60 days of funding the new account. The commission credit takes one business day from the funding date to be applied. To qualify for this offer, new accounts must be opened by 12/31/2014 and funded with $10,000 or more within 30 days of account opening. Commission credit covers equity, ETF and option orders including the per contract commission. Exercise and assignment fees still apply. You will not receive cash compensation for any unused free trade commissions. Offer is not transferable or valid in conjunction with any other offer. Open to US residents only and excludes employees of TradeKing Group, Inc. or its affiliates, current TradeKing, LLC account holders and new account holders who have maintained an account with TradeKing, LLC during the last 30 days. TradeKing can modify or discontinue this offer at anytime without notice. The minimum funds of $10,000 must remain in the account (minus any trading losses) for a minimum of 6 months or TradeKing may charge the account for the cost of the cash awarded to the account. Offer is valid for only one account per customer. Other restrictions may apply. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business.

Click Here to Open a New TradeKing Account and Receive $1,000 in Commission Free Trades.

TradeKing also offers other promotions, such as the $150 asset transfer reimbursement, which makes it easy to transfer your assets to TradeKing without losing your tax base or requiring you to first liquidate your stocks or other assets.

TradeKing $150 Asset Transfer Reimbursement

TradeKing is currently offering to reimburse new customers up to $150 in ACAT fees when they transfer their investment assets to TradeKing. Why is this a big deal? Brokerages often charge customers an Automated Customer Account Transfer fee when they transfer their assets to another brokerage. This fee is called an ACAT fee. It varies from broker to broker, and can cost you a fairly decent amount, depending on how much you are transferring, and your broker’s rules. TradeKing is offering to make it easier on you to transfer your investments without having the pay a large transfer fee to your current broker. It’s their way of saying thanks! Switch to TradeKing and get up to $150 in transfer fees reimbursed.

Military Forcing Some Officers to Retire with Enlisted Pay

Update: Rep. Glenn Thompson (R-Penn.) is stepping up to introduce the Proudly Restoring Officers of Prior Enlistment Retirement (PROPER) Act. The bill would modify existing discharge authority to allow military officers appointed from the enlisted ranks with at least 20 years of service to retire as an officer with only four years of service as a commissioned officer. Source: MOAA.

Very few military members remain on active duty long enough to earn a military pension. The latest numbers show that only about 17% of servicemembers reach the full 20 years required for an active duty pension. It’s a wonderful achievement and a testament to the hard work and dedication it takes to make a career of the military.

That’s why it’s disheartening to read about certain service members who are being forced out of the military due to Force Shaping. It’s difficult for anyone who is forced out of the military, particularly when they have chosen to make it a career.

Officers forced to retire with enlisted pay

Some officers are being forced to retire before reaching enough service time to retire as an officer.

Some military members are being forced to retire early under the TERA program. This is unfortunate, as many retirees under TERA wish to complete their full 20 years of service and receive their full pension (retirees under TERA take a reduced pension equal to the number of years served * 2.5%, times a reduction factor based on the number of years they retired early).

But there is one class of servicemembers who arguably have it worse than others: some officers are being forced to retire from the military, but they don’t have the minimum service time to retire as an officer.

Rules for Retiring as an Officer

The normal rules require military members to serve 10 years as an officer to be able to retire as an officer. However, due to Force Shaping, there is currently an exception written into Title 10 of the US Code (the law that governs military pay and benefits), that allows service members with only 8 years of service as an officer to retire as an officer. Here are the applicable laws (note: these showcase the Army laws, as this is affecting more Army members than other services; the laws for the other services are similar):

  • Title 10 U.S. Code section 1370: “a commissioned officer […] will “be retired in the highest grade in which he served on active duty satisfactorily, as determined by the Secretary of the military department concerned, for not less than six months.”
  • Title 10 U.S. Code section 3911: “the Secretary of the Army may, upon the officer’s request, retire a regular or reserve commissioned officer of the Army who has at least 20 years of service computed under section 3926 of this title, at least 10 years of which have been active service as a commissioned officer.”
  • Title 10 U.S. Code section 3911: “The Secretary of Defense may authorize the Secretary of the Army, during the period specified in paragraph (2), to reduce the requirement under subsection (a) for at least 10 years of active service as a commissioned officer to a period (determined by the Secretary of the Army) of not less than eight years.”

But there are many officers being let go just shy of the required 8 years. In some cases, officers are allowed to get a waiver to extend their service up to 60 days or so to reach the required service time. But others aren’t so lucky, and are being forced from the service just short of reaching the requirement time served to retire as an officer. In fact, some of them are  just months shy of reaching the required 8 years.

And the difference is huge.

Impact on Retirement

There are two major impacts on retirement. The first, is these servicemembers retire as enlisted members, not officers. Their paperwork and retiree cards will be in the enlisted ranks. The other impact is to retirement pay.

The immediate impact on the pension is obvious – these soon-to-be-retirees will be earning substantially less in their retirement checks than they would have had they been able to serve an additional year or two. I’ll give an example in just a moment. But here is the worst part: these servicemembers’ pensions will be paid based on their previous enlisted pay.

Using High-3 rules, you have to go back to their highest three years of pay at their enlisted ranks. So not only do you have to take away their Officer Pay as though it never happened, these servicemembers’ pensions will be based on old pay scales at their previous rank. To add insult to injury, these servicemembers are artificially held at their last pay grade. So someone who served as an E-7 is forever an E-7 for pay and retirement purposes, even if they became a Captain.

Let that sink in a moment. These servicemembers didn’t have the same opportunities for promotion through the enlisted ranks. Its very possible many of these officers would have been able to promote one or two times as an enlisted member. Some of them may have been able to max out their pay scale and become E-9’s.  But they weren’t given that opportunity.

Reduced Pension for Enlisted Vs. Officer:

Here is a sample based on an E-7 pay grade and O-3E at 20 years service (7 as an officer)*.

  • Enlisted Base Pay (E-7, 18-20 years service): $4,323.90
  • Enlisted Retirement: $2,161.95
  • Officer Base Pay (O3-E, 18-20 years service): $6,726.00
  • Officer Retirement: $3,363.00
  • Difference: $1,201.05 per month

As you can see, there is a large difference – an approximate cut of 35%.

*These numbers are actually rough estimates. High-3 rules average the pay for the last 3 years of service at the highest grade held. So it would be an average of these salaries and the preceding two years.

The primary benefit these servicemembers received for being officers was increased pay while they were officers (increased base pay and BAH, however they had reduced BAS and were required to pay for all uniforms out of pocket).

Additional Reading on This Topic

Being forced out of the military is difficult for anyone, regardless of how long you served. There are many who are lucky, and are simply able to retire with full benefits, even if they were forced to retire earlier than they wished. Others may have to retire with a reduced pension under TERA rules. And then there are the unlucky few who rose from the enlisted ranks, answered the call to become an officer, and were later forced out before they could retire as an officer. This is an unfortunate situation, and unfortunately, one I don’t have answers for.

Here are some additional articles about this topic:

News Reports Blast Veterans for Triple-Dipping Benefits

Military and veterans benefits are often seen as overly generous by those who don’t understand what it takes to earn them. While it is true that some military benefits are generous, servicemembers have to go through a lot to earn them.

Veterans Triple-Dipping BenefitsTake military retirement, for example. A military member can retire after 20 years on active duty, and pull down 50% of their base pay for the rest of their life. There aren’t many similar retirement programs anywhere in the U.S. But there is a reason it is so generous – it is incredibly difficult to achieve. Only about 17% of servicemembers remain on active duty long enough to earn a military pension. The job is difficult, and attrition is high.

Injuries sustained in the line of duty contribute to the low-percentage of military members reaching retirement. As military members, we work in hazardous conditions, both in and off the battlefield. Congress and the Department of Veterans Affairs recognize this. That is why they award veterans service-connected disability compensation benefits for injuries or illnesses that occurred or were made worse while they served on active duty. The disability compensation is awarded to servicemembers due to their reduced capacity to work. I don’t think anyone has a reasonable argument that this benefit isn’t earned.

So why write this article?

Because these are two of the three benefits that the Washington Times recently bashed in an article entitled, “Veterans caught triple-dipping on benefits.”

The third benefit? Social Security Disability Insurance (SSDI) benefits. This benefit is only awarded to severely disabled individuals who are unable to work. Individuals must have paid into the Social Security system to be able to receive this benefit. Because military members pay into the Social security system*, they are eligible to receive Social Security benefits, including SSDI. (Note: some military members may be eligible to receive Social Security Disability benefits for Wounded Warriors, which is a variation of the SSDI benefit specifically tailored to military members).

*Military members used to be exempt from Social Security contributions, but that changed years ago; military veterans who are eligible for Social Security may be eligible for increased benefits depending on when they served.

Is There an Issue with Triple-Dipping?

The Washington Times article is written as though veterans are scamming the American taxpayer. Just look at the title – Veterans caught triple-dipping on benefits.

Caught, as in they were doing something wrong. But they aren’t. Everything is within the scope of the law.

Let’s look at the three benefits again:

  • Military retirement: Is this an earned benefit? Absolutely. And I don’t think we need to go into any deep discussions about what it takes to earn a military pension. Fewer than one in five active duty members remain in the service long enough to earn it.
  • VA Disability Compensation: Is this an earned benefit? Sadly, yes. The VA wouldn’t award this benefit if it wasn’t “earned” through the injuries or illnesses sustained during the servicemember’s time on active duty. There are checks and balances in place to review the veteran’s claims, and the award is given based on medical evidence and decreased quality of life. No benefit is awarded as a hand out.
  • Social Security Disability: Is this an earned benefit? Sadly, yes. Similar to the VA disability compensation, the Social Security Administration has checks and balances to ensure someone is qualified to receive the benefit. People receiving SSDI don’t choose to get injured to the point of being unable to work.

The “Problem” with Triple-Dipping

The reason these veterans are receiving extra attention is because most people aren’t eligible to receive two forms of disability compensation. For example, there is a clause that prohibits people from receiving SSDI if they earn more than $13,000 a year. But Social Security rules don’t count income from military pensions or VA disability compensation. So some veterans who are receiving both a military pension and VA disability compensation may also be eligible to receive SSDI, even if they have income over the $13,000 threshold.

A Deeper Look at Triple-Dipping

The article went on to state, “nearly 60,000 triple dippers collected $3.5 billion in benefits,” and, “Of the $3.5 billion spent in 2013 on the triple dippers, $1.4 billion came from the VA, $1.2 billion came from the Pentagon, and $937.4 million came from Social Security.”

On the surface, that is a huge number. But the article went on to quote two specific examples:

Veteran 1: A 54-year-old who retired in 1997 after 20 years in the military, who had lung disease, vascular disease and lost use of his feet, collected $122,887 in benefits in 2013 — nearly three times the $43,808 someone of his pay grade would have made in the military.

Veteran 2: Meanwhile, a 59-year-old who retired in 2004 after 26 years, who lost his feet, is blind in one eye and has renal problems, collected $152,719 in 2013 — more than twice the $72,824 salary of someone at his final military pay grade. Most of his benefits — $85,958 — came from VA disability, while $46,396 was military retirement, and $20,365 was from Social Security.

These are serious illnesses and injuries.

What the article fails to mention is that Veteran 2 receives the maximum special disability award of $85,958. That is only given to severely disabled veterans who require full aid and attendance in their home. In other words, the money is to be used for home nursing care.

The funds aren’t going into the veteran’s bank account. They are being used to provide health care for service-connected injuries.

Budget Cuts Are Important – But Find them Elsewhere

I know the government is trying to balance the books and cut redundancies. But I think they should look elsewhere. The thing is, veterans rely upon their earned benefits, and in the case of the veterans called out by the Washington Times, these veterans are simply trying to hang on to life.

Are there some veterans who game the system? I’m sure there are. But the vast majority of veterans simply want to receive the benefits they earned. They aren’t getting rich off the fat of the land. They don’t want to be labeled as freeloaders. They simply want to go on with life. And for those who are so severely disabled that they can’t work, or that they require hospice care, I think that is the least we can offer them. Without the vitriol and politics, please. We owe them that much. And a whole lot more.

Story: Washington Times.

Additional Commentary: DisabledVeterans.org.

Podcast 008: Using Tuition Assistance Benefits and Taking Classes While on Active Duty

Today I’d like to tell you how I used the military Tuition Assistance Program to pay for my Bachelor’s Degree while I was on active duty. My goal was to achieve my Bachelor’s Degree by the time I completed my first enlistment. This would give me many options going forward: I could remain in the enlisted ranks with a complimentary degree, I could apply for a commission to become an officer, or I would have my military experience and a degree, and I could try my hand in the civilian world.

My goal was aggressive. By the time I started working on my degree, I had been in for about 3 and a half years on a six year enlistment. That left me with two and a half years to complete my 4-year degree. In this podcast, I share exactly how I leveraged the Tuition Assistance program to accomplish my goal. I also discuss the military Tuition Assistance program benefits, eligibility, how to test out of college classes, and how to take classes while working a full-time military job.

Military Tuition Assistance Benefits

Tuition Assistance is one of the most valuable benefits you have available to you!

Whether you plan on making the military a career, you want to go from the enlisted ranks to the officer ranks, or you want to improve your prospects in the civilian sector, formal education is an excellent investment in time and money. And if you play your cards right, you can get most, if not all, of your degree paid for by the military.

In this episode I lay it all out on the line, starting with how Tuition Assistance benefits work, how to test out of classes, and the strategies I used to complete my Bachelor’s Degree while I was on active duty. I hope you’ll find this educational and inspiring!

Tuition Assistance – One of the Most Valuable Benefits Available

You don’t need me to tell you that a college degree is a valuable thing to have. It can help you promote within your military career, and it can help you in your post-military career as well. You may even decide to get a degree for personal knowledge. Whatever your reason, a college degree is a valuable. And getting it for free makes it an even better deal.

Here is one more value play many people don’t think about: Getting your degree now gives you the option to use your GI Bill later – either for yourself for a higher level degree, or you may even be able to transfer it to a family member. Being able to transfer your GI Bill can save you or your family members tens of thousands of dollars in tuition payments.

Who Can Use Tuition Assistance & When

Tuition Assistance is available to most active duty military members. In general, you must have served a minimum of 181 days on active duty before you are eligible for Tuition Assistance Benefits. However, it would be rare to join the military and start taking classes 6 months later. Most branches have a minimum service requirement before members can take classes. You usually can’t use TA while you are in an official upgrade training status, either. So that means you can’t use TA while you are in basic training, or AIT, or Tech School. You generally can’t use it while you are in an official upgrade training status beyond those schools either. There may be other minimum service requirements depending on your branch of service.

For example, Army policy prohibits Soldiers from taking college classes until they have completed 1 year of service after completing AIT (their tech school). They may also have to get supervisor’s approval before taking classes.

When I was in the Air Force, I wasn’t allowed to begin taking college courses until I had reached my 5-level status. To put that in perspective, I had 2 months of Basic Training, followed by 6 months of tech school. Then I had about a year of upgrade training where I learned my job and received my 5-level skill certification. So it was roughly 20 months into my tour before I was even able to take college courses. I actually didn’t start for over a year after that point. But I bring that up to illustrate how long it could take before you are eligible to begin taking classes.

If you aren’t eligible for Tuition Assistance benefits, it’s probably because you haven’t completed your initial training yet, or you already have a degree that is covered under Tuition Assistance (new rules often prohibit service members from using TA to achieve a lateral degree program or a lower degree than what you currently have).

Each Branch Has a Budget – and  Slightly Different Rules

Each branch of the military is given an education fund by Congress. How they use it is up to them. But I will tell you this benefit has come under the chopping block, and we have seen recent changes to this benefit as a direct result of budget issues (we’ll cover these later in this episode). In fact, Tuition Assistance benefits were cut from almost all branches during the sequestration. The benefit was later reinstated, but many people missed out on classes.

New rules limit the benefit on many levels, including who can take classes, when they can take them, which classes they can take, and more. The Marines actually offer their benefit on a first-come, first-served basis. Once they run out of funds, Tuition Assistance is done until the following year. So it makes sense to front-load classes in the hope of using your annual benefit and completing your degree more quickly without having to dip into your GI Bill or pay out of pocket expenses.

All of these limits sound draconian, but they aren’t. Tuition Assistance is still an excellent benefit.

How Much Does Tuition Assistance Cover?

In general, all branches except the Coast Guard offer 100% tuition assistance, up to a set dollar amount per credit hour – usually $250 per credit hour. The total amount one can receive in any given year or over their lifetime is determined by each branch.

The exception is the Coast Guard, which currently offers 75% TA, up to $187.50 per credit hour, for a total of $2,250 per year.

What Tuition Assistance Covers

Tuition Assistance can be used for approved college courses, certain exams (such as the GRE, GMAT, SAT, ACT, etc.), and for some professional certifications. Not all professional certifications are covered, there may be limitations on which programs you can use TA for, and limits on when you can use TA for a certification. For example, you may have a lifetime cap on the benefits you can receive for a professional certification. Or you may have an annual Tuition Assistance benefits cap that applies to both certifications and college courses. You will need to contact your education office for more specific information on what you can use TA for.

Also, the DoD no longer allows the Tuition Assistance programs to cover lab fees or certain course fees.

Tuition Assistance Reimbursements

A new DoD Instruction requires servicemembers to repay their branch of service if they fail to maintain satisfactory scores on the coursework. For example, you may be required to repay the cost of your classes if you earn a D or lower in an undergrad course, or a C or lower in a graduate level course.

Maintain good grades. The military retains the right to suspend your TA benefits if you don’t maintain high enough scores. You would then have to pay for classes out of pocket or use the GI Bill to bring your GPA up to acceptable levels before you would be eligible to receive TA benefits again.

Tuition Assistance Benefits for Each Branch of Service

Here are the current TuitionAssistance rules for each branch:

Testing out of Classes – CLEP, DANTES, & More

Another related benefit related to Tuition Assistance is college placement exams. These are tests you can take to test out of college classes and the cost is covered under the Tuition Assitance program. They can be a huge time- and money-saver!

Some examples of placement exams that you can take through the military include CLEP tests, or the College Level Examination Program, and DANTES Exams. DANTES is a DoD program, that stands for Defense Activity for Non-Traditional Education Support.

When I received my degree there was another program called Excelsior exams. The program is still around, but the exams are no longer free for military members. They can still be worth taking if it saves you from taking the actual college course. Just be sure to look at the CLEP and DANTES options first.

The tests work like this: you visit your Education and Training Office, sign up to take a test, and if you pass, you can receive college for the course.

A couple notes – these aren’t accepted by every college, but they are accepted by most community colleges and state schools, and by many private universities. They are also accepted by the Community College of the Air Force, which makes them popular for Airmen who want to receive their Associate’s Degree from the Air Force.

Before taking these exams, you want to make sure they are accepted by your school, and that they will work toward your degree plan. Some schools won’t allow you to test out of classes that are directly related to your major or minor. And some schools may only accept these test for elective credits. Other schools may have a limit to the number of credit hours you can transfer in, and another limit for how many classes you can test out of. I’ll share how I used these test toward my degree in just a few moments.

Test Taking Tips

Most people study for placement exams the wrong way. They go to the base library and borrow a study guide, which is usually just a few practice tests. They try to memorize as many questions as they can, then they take the test. It’s no surprise many people fail. You don’t learn anything from studying questions. You need to learn the material. The practice tests aren’t bad. Just don’t use the test alone and expect to pass.

I passed about 10 of these tests, and had zero failures. I also didn’t spend a dime on any training manuals. This isn’t because I’m exceptionally smart. I simply learned how to study for these exams. Here is what I did:

Each of these companies has an associated website. You can visit the site, search for the test you want to take, and look at the test information. The companies show the test name and how the test questions are broken up. For example, if you wanted to take a US History I test, it would give the breakdown as US History, 1500 – 1877. Here is the site.

  • 30% covers 1Early Colonization through the Revolutionary War
  • 70% covers the dates after the Revolutionary War through the end of the Civil War and into the Reformation.

There are further breakdowns on the page that list percentages of what the test covers, 35% covers political institutions and public policy, 25% covers this, 15% covers that, etc.

The page also lists 20 or so themes you need to know to pass the test.

Use this information as your study guide. Print out that screen, grab a spiral notebook, and spend a couple hours on Google and Wikipedia learning all the information on the study guide you just downloaded for free. Once you have a handle on the information, you can spend some time with the practice tests. Just don’t expect to pass the test with the practice tests alone. It probably won’t work well.

What Happens if you fail a placement test? The tests are free for active duty members, but if you fail you have to wait a few months before you can take the class again, and you may have to pay to take it. So be sure to know the material before you sit for the test!

Here are more tips for testing out of college classes.

Putting this all together

Now I’d like to tell you my story – how I used Tuition Assistance benefits to complete my Bachelor’s degree while I was on active duty.

I had been in the Air Force for 3 and a half years, which was just past my halfway point on my 6 year enlistment. I decided I wanted to complete my Bachelor’s Degree before my 6 year mark so I had options when it came time to decide whether or not to re-up.

Getting my degree was a great strategic move as it gave me the option of staying in the military as an enlisted member, the option of applying for a Commission as an Officer, or getting out of the service with my experience and a Bachelor’s Degree.

I had already completed one year of college when I joined the military, so at most, I was looking at taking 3 years of college to complete my 4-year degree. I knew about College Placement Exams, so I figured I had enough time to complete my degree if I got lucky and passed a few tests.

It actually took me just over a year and a half to complete my degree, and that included a PCS and two 4-month deployments.

Create an Education Plan – Then Execute

The first thing I did was visit the base education office to see my options. There were a couple colleges there, and I spoke with the representative from Embry-Riddle Aeronautical University. They have an excellent program, and they have satellite campuses on many military installations. I made an appointment with a counselor to get a degree plan made, and found out that a lot of my Air Force training would count as college credits toward either a technical management degree, or a degree in Professional Aeronautics, which is basically a management degree with a heavy emphasis on the aviation field.

Between my year of college and my military training, I had almost two years of credits on the books (the Air Force has  the Community College of the Air Force, which is an accredited community college). I also received college credits for professional military education, which was required when I became an NCO. With my credits, I needed to take just over 2 years worth of classes to receive my Bachelor’s Degree. The counselor was kind enough to show me exactly which classes I could test out of, and we made a list of the classes I would need to take to get my degree.

Armed with this knowledge, I scheduled some CLEP tests and studied them using the method I outlined earlier. I passed all of them.

As for the required courses through Embry-Riddle, I completed those through a combination of in-residence classes and distance learning while I was deployed.

Balancing School & Full-time Military Requirements

Embry-Riddle had a satellite campus on our base, which only offered night classes. I was single, and education was a priority for me, so I volunteered to work the midnight shift for almost two years while I worked toward my degree. I went to class from 5 – 9pm, had dinner, then went to work around midnight. I went to bed when I got home, then studied and wrote papers in the afternoon before going to class again. I worked with my supervisors to ensure I could remain on the midnight shift. They loved that because they had an NCO on the late-shift, and I loved it because it allowed me to take classes.

I also took online classes when I was deployed. We often worked 14 hour days while deployed, but there was always some down time here and there. I was an aircraft mechanic, an we had to ride the launch truck in case there were ay last-minute emergencies. Riding launch could take anywhere from 15 minutes, to well over an hour. Much of that time we were on stand-by. While everyone on the truck was cutting up or reading Maxim Magazine, I was reading about the history of flight or a book about aviation management. I also used my random days off to study and write papers.

Using a combination of my previous college credits, my Air Force training, taking placement exams, and taking classes through Embry-Riddle, I was able to complete my degree in about 20 months. It would have taken longer if I didn’t have the year of college already under my belt, but I also would have doubled-up on more classes and tested out of other classes. I’m confident I could have completed it in around 2, to 2.5 years.

Applying this to Your Degree

My situation was unique because I already had a year of college and I received a lot of credits for my Air Force Training. Your situation will be your own. So you need to be strategic with your planning.

I chose the degree that was best for me at the time. I had hopes of being an Air Force officer, so a degree in Professional Aeronautics was a great fit. It worked well with my experience and gave me options going forward. It was also the easiest for me to achieve because of the credits I received for my Air Force training.

You may or may not be in a situation where you can apply your military training toward your degree, but you should at least look into it. You should also look into testing out of classes. They will save you a lot of time, money, and heartache. Sit down with your guidance counselor and determine which classes you must take, and which you can test out of. It’s reasonable to test out of one or two classes per month if you keep to a schedule.

Here are more tips for taking classes while on active duty.

Final Note – You Must Maintain Your Military Standards

Finally, you need to maintain your work standards and be flexible with your work situation. Most units require a supervisor’s permission to take classes. They aren’t likely to give you permission if you are still in upgrade training or your work isn’t up to par. You also won’t be able to take classes if you have an unfavorable information file. So make sure you pass your PT tests, show up to work on time, and maintain the expected performance.

As to your work schedule, you may need to get creative. The classes offered on our base were in the evenings. So I offered to work the midnight shift in order to take classes. Things can get tricky if your only option is the day shift and your school only offers classes in the day time. If that is the case, you may need to get creative with scheduling and offer to work an extra hour here or there, eat a 10 minute lunch everyday, or take classes online. You might even consider attending classes at a different school. But don’t let those little details stop you from taking classes. Tuition Assistance is a very valuable benefit and achieving your degree can pay dividends long after your military career ends.