Saving While Serving

As a military member, saving money may seem daunting, especially when faced with the unique financial challenges of military life. However, you can build a strong foundation for your financial future by taking advantage of the various savings opportunities available to servicemembers and implementing smart financial strategies.

Let's review some of the best savings opportunities available to servicemembers to help you get the most out of your compensation while on active duty.

Understand Your Pension

The cornerstone of any long-term savings strategy is a retirement plan. While defined benefit pension plans have fallen out of favor in the private sector, military members still have access to a 20-year pension. For those who joined in 2018 or later, pension benefits may also be available before 20 years of service, and benefits can increase substantially for those with more than 20 years of service.

There's a wrinkle, however - no partial vesting exists for those who joined before 2018. If you depart after 18 years, you'll lose everything you've accrued. Despite the longer time requirement for some servicemembers, military pensions still represent an enormous opportunity, as you can potentially hit your 20-year mark at age 38 - with plenty of time to start a second career.

While military salaries may be lower than public-sector salaries, military pensions are far more generous than most private-sector ones. Anyone in the service seeking to maximize their savings should consider taking full advantage of this attractive benefit.

Participate in the Thrift Savings Plan (TSP)

The Thrift Savings Plan (TSP) is a powerful savings tool for military personnel. Like a 401(k) plan, the TSP allows you to contribute a portion of your income to a tax-advantaged retirement account. Key benefits of the TSP include:

• Low fees - The TSP has some of the lowest administrative costs among retirement plans, which means more of your money stays invested for your future.
• Tax advantages - Traditional TSP contributions are made with pre-tax dollars, reducing taxable income. Roth TSP contributions are made with after-tax dollars but offer tax-free withdrawals in retirement.
• Matching contributions - Under the Blended Retirement System (BRS), the military matches a portion of your TSP contributions, providing an instant boost to your savings.

To maximize your TSP savings, aim to contribute at least enough to receive the full employer match and gradually increase your contributions over time.

Leverage the Savings Deposit Program (SDP) During Deployment

The Savings Deposit Program is a unique savings opportunity for servicemembers deployed to designated combat zones. The SDP allows you to deposit up to $10,000 and earn a guaranteed 10% annual return on your investment. This high-yield, risk-free return is unmatched in the civilian world, making the SDP a valuable tool for building savings during deployment.

While this program isn't available to everyone, the guaranteed return makes it one of the military's most attractive savings tools.

Explore Military Banking and Savings Products

Many banks and credit unions offer specialized products and services tailored to the needs of military personnel. These may include:

• High-yield savings accounts with no minimum balance requirements or monthly fees.
• Low-interest loans and credit cards with reduced fees and SCRA benefits.
• Exclusive financial education resources and tools.

By taking advantage of these military-specific banking and savings products, you can stretch your budget further and save more of your hard-earned money.

Automate Your Savings

One of the most effective ways to consistently save money is to automate the process. By setting up automatic transfers from your paycheck to your TSP, SDP, or other savings accounts, you ensure that your savings grow with each pay period. Automating your savings helps you build wealth consistently over time without relying on willpower or remembering to make manual transfers.

Understand Military-Only Benefits

While, admittedly, military salaries aren't the most generous, the benefits are another story. Aside from standard military discounts offered by retailers, members of the armed forces can:

• Save money for college with the GI Bill (sometimes these benefits are transferable to a spouse or child).
• Buy inexpensive life insurance, which is available only to service personnel.
• Access special mortgage deals from the Veterans Administration.
• Save money that would otherwise be spent on rent or a mortgage thanks to the military's Basic Allowance for Housing.
• Receive special tax breaks available to military members.

By taking advantage of the myriad discounts and programs available, military personnel can stretch their incomes much farther than someone in the private sector. By combining smart savings with one of the military's attractive retirement plans, service personnel can put themselves in a great position when they are ready for a civilian career.

The Takeaway

Saving money while serving in the military requires discipline, planning, and a proactive approach to leveraging your unique resources and opportunities. By participating in the TSP, utilizing the SDP during deployment, taking advantage of military banking products, and automating your savings, you can build wealth consistently throughout your military career.

Remember, every dollar saved today is a step towards a more financially secure future for you and your loved ones. By prioritizing savings and making informed financial decisions while serving, you'll be well-positioned for success in your military and civilian life.