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.

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Military Financial Horror Stories – or How Not to Buy a Car

When I was in the USAF I witnessed a lot of good and bad financial decisions made by the Airmen I worked with. Some decisions were great, and some were horrible. For example, I knew a MSgt (E-7) who owned 5 houses and rented them out. He also owned his vehicles and a small Cessna airplane outright. He was great at managing money and I learned a lot from him.

However, for each success story like that, there were 10 people make horrible financial decisions. I would like to share one of those with you today.

Military Members and Cars

Military members are proud of their vehicles. A lot of military members are young and single and have disposable income to buy nice cars and other cool toys. I knew quite a few people who drove classic antiques, late model muscle cars, souped up tuners, quad cab dualies with a supercharged hemi, etc… You name it, I probably knew someone who drove one. And there’s no problem with that – if you can afford it. The problem comes when you drive more car than you can afford.

Tax free pay = more disposable income

We deployed often at the base where I served the final 3 years of my enlistment. After September 11th, we maintained a constant presence in the Middle East, with many Squadron members rotating back and forth every three or four months. It was a difficult pace to keep up with, but it also afforded many military members the opportunity to amass a large savings account because all the tax free combat pay they earned while deployed.

One Senior Airman (E-4) from my Squadron came back after several deployments and decided he wanted a new truck. His old truck was about 15 years old and was beginning to fall apart. After multiple deployments he had saved quite a bit of money and was prepared to put make a substantial down payment on his new truck. He did his research, negotiated a good deal, made a large down payment, and drove off the lot in a shiny new Chevy Colorado.

Truck Envy

An Airman (E-2) in our Squadron fell in love with the SrA’s new truck and decided he wanted to buy a similar new truck. The Airman was new to the military and was enjoying the first regular paycheck he had ever pulled down. He was new to the area and didn’t have a vehicle. I’m sure you can see where this is going…

Without talking to anyone in the squadron (supervisors, fellow Airmen, etc.) he got a taxi to the local mall, walked down to a dealership, found the truck he wanted, talked to the dealer for a few minutes, got a credit check, signed some papers, and drove off in his new truck. He then immediately drove down the road to have a new stereo and sub woofer installed.

The rest of the story

The next day at work a couple admired his new truck. When asked whether he got a good deal on it, he didn’t have an answer. He didn’t know people could negotiate when buying a new vehicle. He just walked into the dealership, found the truck he wanted, got dealer financing approved, and paid full sticker price. He didn’t know about credit scores, negotiating, or anything about buying a new car.

To put it lightly, he got raked over the coals on the deal. He didn’t have a good credit score so his loan came in at over 19%. He also didn’t have a vehicle to trade in or a down payment to make, which didn’t help him on the final price. On top of that, he had a bad driving record and didn’t check on the price of insurance before buying his truck. Because of the loan, he was required to have full coverage insurance, for which he paid about $250 per month.

By the time he paid his car payment and insurance every month (about $700), he had just enough money left over to cover his cell phone bill and a little bit of gas money. Luckily for him he was living in the dorms and had access to the chow hall. Otherwise, he would have had to park his shiny new truck in the parking lot because he would have to choose between gas and food.

New cars aren’t bad; living beyond your means is bad

There is nothing wrong with buying a new car if you can afford it. In fact, I think there are many good reasons for buying a new car (actually, I bought a new car), but I almost always recommend buying quality a used vehicle if possible. But the problem doesn’t come from trying to decide between buying a new or used car.

The problem comes when you give into temptation and live beyond your means. The Airman in our Squadron could have easily gone with a nice used truck and probably would have been happier in the long run. Sure, it wouldn’t have been as shiny and it wouldn’t have that new car smell… but he wouldn’t have struggled on a month to month basis to make his payments.

The story doesn’t have a horrible ending though. A couple months later he promoted to Airman 1st Class (E-3), which resulted in a couple hundred extra dollars per month. He also deployed a few months later and was able to park his truck for a few months and save some money. It wasn’t enough to pay off his vehicle, but it was enough to establish an emergency fund and give him some financial breathing room.

~

This article is part of a group writing project at ProBlogger.net.

This article was featured in The Carnival of Money Stories.

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My Post-Military Employment History

Earlier this week I wrote about a post-military employment survey I recently participated in. The survey is designed to help the VA provide better veterans services by better understanding the employment experiences of recently separated service members.

My post-military employment history has been very successful by my standards, even if it did take me 6 months to find work after I separated from the USAF. Many readers here may not be familiar with my other website, Cash Money Life, where I have chronicled much of my employment history (particularly as I went through a job search and found a new job a few months ago).

Leaving the military

The most important decision I had to make was deciding whether or not to reenlist in the military. I was in a situation at my former base where we were deploying every other rotation; every other 4 months at the time. During my 6 years in the USAF, I went on 5 deployments. I had a great time, but there was a point where enough was enough. I wanted to be able to settle down and have a family.

I completed my degree by this time (I let the military pay for my degree), and my decision came down to applying for OTS, reenlisting, cross-training, or separating. The USAF was doing force reductions at the time and were severely limiting officer accessions from the enlisted corps, I didn’t want to reenlist in my career field, and there weren’t any appealing jobs to cross-train into. So I decided it was time for a new job and I made the decision to separate from the USAF.

I still miss the military sometimes, but I made the best decision for me on both a professional and personal level. I have since married my best friend and on a professional level, I have advanced further than I would have had I remained in the USAF.

The job search

I began my job search even before I left the military, which is a great idea if you know you are separating. The best time to search for a new job is while you already have a job. The most difficult part about my search was that I was moving across the country to an area I had never lived before, and I didn’t have a professional network in place. The good news was that I was moving to an area where there was a major Air Force base.

The job search took me over 6 months, and I ended up finding a job as a contractor on a military installation. This was a good thing because I had no desire to go back to being an aircraft mechanic. There is nothing wrong with that profession of course, but I had spent a lot of time working on my degree, and I wanted to use it. I also know that when you are the new guy on the job, you get stuck with the shifts no one else wants. I worked them all in my military career, and I much prefer working a standard M-F day shift.

Interviewing

The interview for my first job was interesting because I didn’t have much white collar experience. I had a lot of military experience and associated maintenance and logistics knowledge, standard Microsoft Office knowledge, and a few other areas of expertise. Luckily, I was applying for a job as an Air Force contractor working in the logistics area.

I was well dressed for my interview, and showed up on time. I was relieved when I talked to my interviewers and discovered that 3 of the 4 were veterans. We had similar backgrounds and I was a good fit for the job (even though I was not an exact fit and had never worked a similar job previous to this). I received a job offer 2 days later.

Negotiating

Salary negotiations are an interesting topic, and one that entire books are written about. For this job, my soon to be employers knew I had been out of the military for a few months and they made me an offer I thought was below market value. The HR rep I talked to said the hiring manager didn’t negotiate on opening offers. So I took it.

I could have negotiated but my theory was this: the opening salary was very close to the salary I was seeking ($2,500 off), I wasn’t an exact fit for this job, I had been looking for 6 months and I needed a job (this was the first interview I had), and I knew that once I had some more experience I would have more ground to stand on in future negotiations. I have since learned more about salary negotiation tactics and if I had to do it again, I would negotiate. In the end, it didn’t hurt me because I received a raise several months later that brought me up to the original salary I was seeking.

Moving on to a new job

Over a year later, I decided the job I was working was no longer a good match for me. It was time to move on again.  I began searching for a job while I was employed and I found two good matches. I went through two telephone interviews with them, then had a couplle in-person interviews. I received two job offers and had to evaluate the job offers to determine which was the best option was for me.

In the end, I accepted one of the job offers and I resigned from my first post-military job. After I resigned, I gave an exit interview and told my former managers why I was leaving. They made me a counter-offer which I refused. Accepting a counter-offer is not usually a good idea.

Future career prospects

I don’t know exactly what the future holds (that wouldn’t be fun anyway!), but I do know that the military has prepared me well for whatever may come my way. One of the things I have considered is getting an MBA. I haven’t decided if I want to go that route yet or not. I do know that right now, I have a lot of professional prospects and my military experience is something I will carry with me for the rest of my life.

~

This article was featured in the Carnival of Personal Finance #167 – Highlights from The Beijing 2008 Olympics.

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Veterans Affairs Post-Military Employment Survey – Part II

I recently participated in the second part of a Veterans Affairs Post-Military Employment Survey. As I previously mentioned, the Employment Histories Survey is designed to help the VA provide better veterans services by better understanding the employment experiences of recently separated service members.

I was happy to be able to participate in the survey, and even happier that they reward participants with $20 for taking the time to participate. I would have done it without compensation though, because I believe in what they are trying to accomplish. You see, a lot of veterans have a difficult time making the transition to civilian life. It’s not always an easy thing to accomplish, though I believe many veterans have the necessary skills to suceeed in any environment.

The problem is not always the veteran not knowing how to do certain tasks; I believe most veterans are extremely adaptable and learn quickly. I think the bigger problem is that many civilian employers do not know how to value miitary experience. There are many misconceptions about what military members do and what they are capable of doing in the civilian world.

In my opinion, military veterans are highly skilled leaders who are willing to take charge and run with projects. We learn quickly, are highly adaptable, and can handle higher stress loads than many people. Military members tend to have wide and varied expereinces working with people of different backgrounds and skill levels. All of these things make for great leaders and solid performers in the workplace.

I have been successful in my post-military career, though it did take me almost 6 months to find work after I separated. Part of the time I was traveling, and I also moved halfway across the country. But I was constantly searching for jobs via the internet. It can be difficult to find a job when you don’t have a network to tap into. Even so, I believe I have done well in my post-military career – perhaps better than I would have had I remained in the service.

I answered all the survey questions regarding my post military experience, and I hope my answers are able to help the VA come to some conclusions about how they can better provide for veterans.

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Understanding the Veterans Pension Benefit

There is a little known and little used veterans benefit called the Aid and Attendance Benefit, or Veterans Pension Benefit. This benefit can provide up to $1,800 a month to veteran or $900/widow or spouse and can be used for home care, assisted living and nursing home care.

This benefit is available to active duty veterans who served at least 90 days with at least one of those days occurring during a period of war.  Combat service is not required, only that the veteran was in the service during wartime and received an honorable discharge. You should be able to prove your service during a time of war via your DD Form 214 or other military service records.

There currently only about 543,000 individuals receiving the Aid and Attendance Benefit, which represents only 4.7% of those who could be eligible.

Who is eligible for the Veteran’s Pension Benefit?

In order to receive the benefit, a veteran must meet an income and an asset test and, in the majority of situations, a medical needs test. If a Veteran’s Pension Benefit Applicant called a regional VA Benefits office to apply for benefits, the first thing the Veterans Service Representative would usually ask for is the total household income, the amount of assets the veteran owns, and his or her medical status.

Income Test

The household income of the veteran or the surviving spouse cannot exceed the Maximum Allowable Pension Rate (MAPR) for that category of application. There are several categories of pension incomes, so determining eligibility can be complicated. In addition, under certain circumstances, a veteran’s income can actually exceed the MAPR, provided there are enough non-reimbursed medical expenses to reduce the household income below the threshold.

Example: A husband and spouse apply for the Aid and Attendance Benefit. They do not have a medical rating and their combined income cannot exceed $1,220 a month or $14,643 a year from all sources. However, their income can be reduced by non-reimbursed medical expenses to fall under the $1,220/mo threshold. Some examples of qualifying non-reimbursed medical expenses include medical insurance such as Medicare Part B ($96.40 a month) and certain medical expenses associated with assisted living care, or home care costs. The rules can be quite complicated, but it can pay to investigate your eligibility.

Asset Test

As a rule of thumb, veterans applying for the Aid and Attendance Benefit cannot own cash equivalent assets of more than $80,000. However, this is not a hard regulation; it is the generally accepted limit because regional Veterans Service Representatives are required to file paperwork justifying approved applicants if they have assets that exceed $80,000.

Counting Assets: The VA is primarily interested in those veterans who have more than $80,000 in cash and cash equivalent assets such as stocks, bonds, and similar accounts. A personal residence along with a reasonable amount of land, automobiles for personal use, and personal property are normally exempted from the asset test.

Rearranging Assets to Qualify: Veterans can get can get creative with their assets and rearrange them so as not to have too much money to qualify for the Veteran’s Pension Benefit. Veterans can gift assets to someone who does not live in the same household, or a portion of the assets can be converted into an annuity to create immediate cash flow. However, if the veteran chooses this route, he should be careful not to create too much cash flow, which could reduce or eliminate the pension eligibility.

Enlist professional help when rearranging assets. There can be legal ramifications when assets are transferred or rearranged. One topic in particular to be aware of is interfering with Medicaid benefits. Assets reallocated to qualify for VA benefits could create penalties for Medicaid eligibility. Be sure that if you rearrange assets that you get the professional help you need to do be able to qualify for the Aid and Attendance while still qualifying for other benefits.

Medical Needs Test

The most important qualification to receive the Veterans Pension Benefit is demonstrating a medical need for assistance or supervision due to a disability. Certain medical costs can qualify as deductions to reduce household income levels. The high costs that accompany long term care such as nursing home care, assisted living, or home care are sufficient to allow medical deductions for a veteran to qualify for the Veteran’s Pension Benefit.

If the veteran under age 65, he or she must be totally disabled to receive the benefit and must provide medical documentation to support his claim. Veterans over age 65 do not have a disability requirement to receive benefits. Surviving spouses may also apply for a Death Pension benefit. In these situations, the deceased veteran did not have to meet any disability requirements nor does the surviving spouse need to meet any disability requirements, regardless of age.

Most of the veterans and surviving spouses who qualify for the Aid and Attendance benefit qualify with low incomes and have few cash assets. They usually meet both the income and asset tests without the need for the special provision for medical expense deductions to reduce income.

Take advantage of your Veteran’s Benefits – That’s what they are for!

This is just one of many Veteran’s Benefits Programs that is underutilized because it is complicated to qualify for and it is not well known. However, don’t let the complicated qualifications discourage you from applying. This is one program that has a lot of flexibility when determining eligibility.

If you know a veteran who is in need of assistance, direct them to their local regional Veteran’s Benefits Office. There may just be a program they qualify for. They sacrificed, and they have earned these benefits.

For more information about this program, visit your local or regional VA center, or visit the VA website.

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Not all Veteran’s Have Received Their Economic Stimulus Checks Yet

I was doing some reading online last night and I read something that alarmed me: There are over 5 million unclaimed economic stimulus checks currently held by the IRS. A large percentage of those are held by military veterans whose primary source of income is VA benefits or Social Security checks.

But there is a problem… many people whose sole source income comes from Social Security or VA benefits are not required to file taxes with the IRS every year. The problem is that the only way to receive the economic stimulus rebate is to file taxes with the IRS. Many people who are eligible for the stimulus rebate have not received it because they did not file taxes, because they are not normally required to do so. If you know anyone who may be in this situation, please do them a favor and let them know they might be eligible for a rebate.

The stimulus check was automatically sent out to qualifying tax filers, but if you have not yet received your rebate, check, there is still time.

How to claim your stimulus check

First, make sure you filed your taxes. You will not receive a stimulus check if you do not file taxes.

Second, learn when you should receive your rebate. The best way to do this is to use the official stimulus payment tracker provided by the IRS web site. You will need to have information from your 2007 tax return, so be sure to have that handy when you use this online tool.

Third, check for reasons that may delay your rebate check. There may be legitimate reasons for receiving your economic stimulus payment late, or for not receiving it at all.

  • If you filed your taxes late, your rebate check will be delayed. Expect a 2-6 week delay if you filed your taxes late. You must file by Oct. 15th 2008 to receive a rebate this year.
  • Your stimulus rebate check was garnished. Your check can be garnished by the Treasury Offset Program. If your money was scheduled to be garnished, you should have received a notice. Reasons can include unpaid child support, back taxes, or student loans.
  • You PCS’d or changed addresses. The IRS will not forward rebate checks, so you need to notify them if you moved. You should file a Form 8822 with the IRS, and a change of address notice with the U.S. Postal Service.

Fourth, contact the IRS. If all else fails, contact the people who know best. Try calling the IRS at 1-866-234-2942. Again, be patient. IRS workers are receiving hundreds of calls daily, and need time to process your information. You will get much better results if you are friendly with the agent handling your claim.

Fifth, have patience. Above all else, be prepared to wait. The checks acan take anywhere from 2-6 weeks to be sent out. In addition, IRS agents are handling hundreds of calls daily, so be patient with them.

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Ohio Gives All Veterans In-State Tuition Rates

Ohio governor Ted Strickland recently signed The Ohio G.I. Promise into state law, which changes the  in-state residence requirements at each of the state’s 36 colleges and universities to allow all veterans, their spouses and dependents to attend Ohio colleges and universities at in-state tuition rates. This is the first plan of its kind in the US. This is a huge benefit for veterans attending college on the G.I. Bill.

The Ohio G.I. Promise law follows the passing of the new GI Bill which was recently passed by Congress and signed into law by President George W. Bush June 30. The new G.I. Bill essentially doubles college benefits for eligible troops and veterans, guaranteeing full-tuition scholarships at any in-state public college or university, as well as providing monthly housing stipends. However, the new G.I. Bill only makes provisions for in-state tuition, which limits veterans wanting full tuition coverage to their state of residence. The Ohio G.I. Promise bill makes college affordable for all veterans who wish to attend college in the state of OH.

This is also a great move for the state of Ohio because it brings in more qualified individuals looking to improve their education and professional skills – potentially improving Ohio’s workforce.

According to Ted Strickland:

“This is a great benefit for veterans, as well as for Ohio,” Strickland said. “It delivers real support to veterans while helping strengthen Ohio’s strategic plan for higher education, which calls for attracting and keeping talent in the state. Who better to have as part of Ohio’s colleges and universities, workforce and communities than the veterans who have served, led, and protected our country?”

This is an awesome bill, and one that each state should pass. For more information, you can read the press release.

More information about The Ohio G.I. Promise and veteran’s Education Programs

You can read more about The Ohio G.I. Promise law at the OH GI Promise website. Here is more information about OH state college tuition.

Military education benefits:

Search GI Bill Schools: You can use this GI Bill School search tool to help find available programs where you can use your GI Bill.

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Monthly Commander’s Call – July Edition

I plan on doing a recap of some of the best articles in the military money category every month to highlight information that will be valuable for military members, veterans, and their families. So far, I haven’t found very many military money blogs out there, but those that are around are providing a valuable service to the military community. If you write a military money blog, or are aware of any military money blogs, please contact me. I would love to make some quality additions to my blogroll and to these monthly “Commander’s Calls.”

Military Money Highlights:

You’ll notice quite a few articles about the Post-911 GI Bill. That’s because this is a huge change to the GI Bill and will affect several hundred thousand people. I plan on writing more about this topic in the near future.

Thanks for stopping by, and be sure to check back for more military money articles!

P.S. I was never a commander of any kind during my military service. But now that I am out, I can have a little fun.
;)

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What Should You Do with your TSP When You Leave the Service?

When I separated from the USAF in 2006, I was faced with a decision regarding my Thrift Savings Plan (TSP). Since I would no longer be a member of the armed forces, I could no longer contribute to the TSP. So what should I do? In the end I decided to leave the money in there, but I’ll walk you through your options so you can make an informed decision if ever the need arises.

Options for your TSP when you leave the service

The TSP plan is similar to a civilian 401(k) plan. Members contribute pre-tax money into their Thrift Savings Plan account and only pay taxes when they withdraw the money. When your employment ends with the military or civil service and you can no longer contribute to your TSP account, you are faced with several decisions regarding your TSP account. Your options are similar to those with a civilian 401(k) plan.

There are 5 options for your TSP account.

  1. Leave the assets in your TSP account.
  2. Roll your TSP account assets into an IRA
  3. Roll your TSP account into your new employer’s 401(k) plan.
  4. Withdraw your TSP account assets in a lump sum.
  5. Transfer your TSP account assets to a qualified annuity.

Let’s take a closer look at your options:

1. Leave TSP account assets in your account.

The easiest thing to do is leave your assets in your TSP account. However, you need to keep in mind that you will not be able to make additional deposits to your account once you are no longer part of the uniformed services or civil service.

Advantages: The TSP is a great place to invest for retirement. The TSP is easy to use, and while it doesn’t have many investment choices, the fees are among the lowest you can possibly find – even lower than most popular index funds. You always maintain the option of moving your funds from the TSP at a later date. There are also special tax considerations if you invested in your TSP while deployed to a war zone. Read more about advantages of investing in the TSP.

Disadvantages: The TSP has limited investment options. There are only 5 main funds to choose from and a few target funds. You will also not be able to make new contributions or take loans from your old TSP account. Having one more account to keep track of can also be a headache for some people. Not only does it involve more work when balancing your assets, but you also must maintain more paperwork. Read more about disadvantages of investing in the TSP.

Verdict: The fees charged to manage the Thrift Savings Plan are probably the lowest you will ever find. Consider leaving your funds in the TSP unless you don’t want to deal with extra paper work or you want more investment options. Otherwise, consider rolling your TSP account assets into your new 401(k) plan if you have one, or one of the other following options.

2. Roll your TSP assets into an IRA

Rolling your Thrift Savings Plan assets into a Traditional IRA will help you avoid the 10% early withdrawal penalty. You will also control your IRA and have unlimited investment options. If you enjoy hands on investments, then rolling your TSP into an IRA may be for you.

Advantages: The biggest advantages of rolling over your TSP into an IRA are avoiding the 10% early withdrawal penalty, maintaining certain tax advantages, and controlling your investment options which will no longer limited to the investment options in the Thrift Savings Plan or your new employer’s 401(k) plan. Total control allows you to limit your expenses and maintain full control of your investment. Also note that rolling your TSP assets into an IRA does not mean it is final – you may be able to roll it into your new 401(k) plan later.

Disadvantages: You will not be able to take loans from your TSP, which you would have been able to do if you rolled it into your new employer’s 401(k) plan. It is also easier to make withdrawals from 401(k) plans under certain circumstances.

Verdict: Consider this option if you want total control over your investments, you want more investment options, your new employer’s 401(k) plan does not offer strong investment options, or you want to consolidate your investment holdings into fewer accounts.

Looking for a Rollover IRA? Check out this tool from Mint.com, which will help you find the right Rollover IRA for your needs.

3. Roll your TSP assets into new employer’s 401(k) plan

This is a good option if your new employer’s 401(k) plan has strong investment options and low expense ratios. Another thing to consider is reducing the number of investment accounts you have to keep track of, maintain, and balance.

Advantages: Your retirement assets maintain their tax advantages and there are no penalties or fees to transfer or your money. You can borrow against your 401(k) if you want, and you will minimize the number of retirement accounts you have.

Disadvantages: You are limited to your new plan’s investment options. This is important if your new 401(k) plan has limited investment options or higher than average expense ratios, which cause lower returns. Some employers have a minimum waiting period before you can sign up for their 401(k) plan, so you may have to wait before you can rollover your TSP assets.

Verdict: Consider this option if your new plan has strong investment options and/or you want to reduce the number of retirement accounts you need to maintain.

4. Withdraw your TSP assets in a lump sum

Withdrawing your Thrift Savings Plan assets in a lump sum is not usually recommended because you will be assessed with taxes (usually 20%) and early withdrawal penalties (10%). Together, these can eat up nearly a third of your total TSP assets.

Possible Advantages: Your assets (minus income taxes and early withdrawal penalties) will be available for immediate use. This can help during periods of unemployment after separating form the military or civil service.

Disadvantages: The huge tax payment and the 10% early withdrawal penalty (if you are under age 59½) reduces the amount you receive by almost a third. In addition you also all lose tax deferral benefits, potential future earnings, and lock in any market losses. Most importantly, you reduce the amount of money you have for your retirement.

You can change your mind within 60 days. The law requires your old fund manager to deduct 20% of your withdrawal for taxes at the time of withdrawal. If you change your mind, there is a 60-day rollover rule which allows you to roll the money into an IRA within 60 days. However, you will be required to come up with the 20% difference to reinvest the entire amount and avoid paying income taxes. You will get the 20% back when you file taxes the following year as long as you complete the rollover within 60 days.

Verdict: Consider this option only if you need the funds immediately and you cannot meet those expenses through other means. But I strongly advise you to speak with a financial planner to look at other options before doing this.

5. Transfer the assets to a qualified annuity

The final option is to transfer your TSP assets into a qualified deferred annuity. This is an an option few people are aware of, and one not many people use. In many cases it is not the best option. As with rolling over TSP assets into an IRA or 401(k), the assets will remain tax deferred and you will not pay early withdrawal penalties.

Possible Advantages: An annuity is similar to a “personal” pension and creates an income stream for life. Retirement plans such as the TSP, IRAs, and 401(k)s are limited to the amount of money you are able to invest and you can outlive them. Your heirs may be able to inherit a portion of your annuity if you pass away during the accumulation phase.

Possible Disadvantages: Rolling your TSP into an annuity is final. Once it has been done, it cannot be reversed. Many annuities come with much higher fees than 401(k) plans and IRAs, and many states charge high tax premiums on annuity plans. In addition, you may pass away before your annuity pays out the amount of money you would have had in your 401(k) or IRA, leaving nothing for your heirs.

Verdict: Annuities are not necessarily bad, but there are often complicated and have many associated variables. If you think an annuity may be for you, consider talking to a certified financial planner or other tax or retirement professional for more details. One more note concerning annuities: beware of salesmen. Many annuities are given the hard sell because they are often extremely profitable for the investment management company.

Best options for your Thrift Savings Plan account

In most cases, the best option will be to transfer your TSP assets to your new 401(k) plan, an IRA, or leave your assets in the TSP account. Your should base your decision on your situation.

What did I do with my TSP account?

I chose to leave my TSP alone because the portion of money you invest in your TSP account while in a tax free combat zone will remain tax free, even when you withdraw it during retirement. I deployed 5 times while I was in the service, so I was able to invest a decent amount of tax free money in my TSP.

Do you have a 401(k) plan you need to transfer? Then check out this article: Should you consolidate 401(k) accounts? This article looks at the same situation rolling over a TSP account.

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Do Military Members Get Paid Enough?

Last week I wrote an article on my other website about food stamps in the US and how they are not providing enough assistance for some people. Many people are finding that food prices are quickly rising and they are running out of food stamp benefits before the end of the month. In some parts of the US, people who receive food stamps are lining up at stores at midnight on the first of the month because that is when their benefits are automatically deposited in there accounts.

This reminded me of how the base commissaries are always crowded on the 1st and the 15th of the month, because this is when military members get paid and they need groceries.

I mentioned this in the article, but followed that up with the fact that military members get paid twice per month vs. once per month, and military members have received several good raises over the last few years. However, it wasn’t too many years ago when it was fairly common for low ranking military members to be on food stamps. While not unheard of now, it is much less common than in previous years. (note: the military now offers Family Supplemental Subsistence Allowance to eliminate the need for military members to receive food stamps).

Over the last few years, Congress has voted on several consecutive pay raises, which greatly enhanced the quality of life for most military members. Here is a link to the 2008 military pay chart. If you compare the new pay rates to historic military pay charts it is easy to see how much has changed in the last few years.

But is it enough? Everyone knows the dangers of being in the military. Many military members put their lives on the line every day, which makes them some of the most underpaid people in America. But there are also other considerations, such as working with hazardous materials and in dangerous situations, being on call 24-7/365, and dealing with long term deployments and family separation. This begs to ask the question, is a job worth your life? But to me, being in the military is more than just a job. It is a duty and a way of life.

The benefits. On the other side, there are multiple benefits military members enjoy that many people don’t consider. Military members receive tax free housing and food allowances, free health care, access to high tech training and other educational benefits, multiple pay allowances depending on job and/or location, numerous veterans benefits including the GI Bill and the VA loan, military discounts, and other veterans benefits which may vary depending numerous factors including state of residence, disability status, and more.

There are obviously a lot of pros and cons to military pay. It is a complicated system, and there are many people who receive relatively little compared to other military members and their civilian counterparts, and there are others who receive more than other military members and their civilian counterparts. I think a lot depends on the individual military member and their personal situation. There simply is no cut and dry answer to whether military members receive enough pay for the service they provide our country.

In the end, you can never put a price on a human life, and I am not going to attempt to do that. Even though most military members will never get rich off their paycheck, most earn enough to live comfortably.

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Carnival of Financial Goals – Financial Freedom Edition

Welcome to the July 4, 2008 edition of the Carnival of Financial Goals – Financial Freedom Edition. This edition is focused on declaring your goal for financial freedom – be it freedom from debt, avoiding credit card use, or being able to retire.

On my other website, Cash Money Life, I wrote about Defining Financial Freedom. To me, financial freedom means being able to work on my own terms doing something I enjoy and appreciate, instead of working for a boss in a job I need to work because I have no other choice (at least financially). Financial freedom has a different meaning to everyone, so think about what it means to you and work toward it!

As today is the Fourth of July, I thought it appropriate to select those who wrote a Declaration of Financial Independence as the editor’s choice selections. I hope you enjoy reading these, and are inspired by the goals and progress of others!

Financial Declarations of Independence

These personal Declarations of Independence are a great first step toward becoming financially free. Writing down your goal, or at least defining it, is a great step toward accomplishing financial freedom.

  • Mrs. Micah shares her article, What Financial Independence Means to Me. Mrs. Micah also defines financial freedom as not having to work miserable, dead end jobs because she needs the money, but rather being able to choose her work.
  • Twinsmom presents Financial Independence Day posted at Blessed by Twins. Her goal is to pay off her loans and establish an emergency fund. Awesome goal, Twinsmom!
  • JvW shares her article, Independence Day Challenge Complete! (Mostly) posted at The Good Life on a Budget. At the beginning of June she set a goal to be financially free from one credit card by Independence Day – and she achieved her goal with a week to spare. Congrats!
  • Pamela Grundy from Personal Finance Analyst wrote about declaring financial independence in hard times. The economy is difficult right now, but there are things we can all do to make do and even thrive. Read what Pamela is doing.
  • MIT Beta at Don’t Feed the Alligators declared Financial Independence Day by stating his goal of financial independence. Like me,he wants to be free from working for a boss.

These are not personal declarations of Financial Independence, but can help you define what that means to you.

More Financial and Goal Related Articles

The following articles all have one thing in common: they are meant to teach and inspire people to achieve their goals. You gotta love that!

Career

Debt Reduction

  • paidtwice presents A Year Of Debt Reduction at I’ve Paid For This Twice Already. It is truly amazing how much debt she and her husband have reduced over the last year. So much in fact, that they are a year ahead of schedule in their progress. Much of their success comes from setting realistic goals, and snowflaking.
  • Kevin at Becoming & Staying Debt Free, just paid of his mortgage, and is now working on reducing his remaining debt! Read his article, “And That Mortgage is Gone!”; Kevin is Mortgage Free!, for the story. Very inspiring!

Financial Education

Goal Setting

  • Steve, of Brip Blap fame, writes about updating his financial goals, July 2008. This is his mid year check up. Even though Steve started off a little slower than he wanted to, it looks like he is on pace to meet or exceed his goals. Awesome!
  • Jeremy from GenxFinance shares some tips on how to perform a Mid-Year Financial Checkup and Review Your Goals and Progress. Periodically checking in on your progress is essential to good financial planning.
  • Jonathan from Master Your Card, presents 10 Steps to Take Before Having a Baby. Being financially prepared for a baby is just as important as being emotionally prepared! (Of course, this is coming from someone without kids, but I think it’s probably true!)
  • Todd presents Stop Aiming For Average posted at HarvestingDollars. If you aim for average, that’s probably the highest level you will ever achieve. Shoot for the stars and if you fall short, you’ll still probably be better than average!
  • Mark Runta presents Lessons from the Wild! posted at Smart Investing & Money Management. This is a carpe diem type message… Just do it!
  • Brice Hogan presents Believing is Achieving posted at Financialzip.com. He says, “In order to make the most out of yourself and your goals you must believe.” I agree, Brice. Nice article!
  • Dereck presents How to become what you want to become, in about two days posted at I Will Not Die. Solid goal setting tips!
  • Anand presents How to Master Money & Wealth | Commitment and Focus posted at Anand Dhillon.com. Anand has some great tips for cultivating the mindset you need in order to become financially successful.
  • Ralph Jean-Paul presents How to Think Like a Visionary posted at Potential 2 Success, saying, “Accomplish amazing goals by setting your sights in the right direction. Expand your mind and learn how the great thinkers, inventors, and leaders reached greatness by having and following their visions.”
  • Rob Bennett presents 8 Paths to Financial Independence posted at A Rich Life: Personal Finance for Liberal Arts Graduates.

Net Worth

Real Estate

Saving

Thanks for stopping by!

Thank you for visiting this edition of the Carnival of Financial Goals. Submit your blog article to the next edition of carnival of financial goals using our carnival submission form. Past posts and future hosts can be found on our blog carnival index page.

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