Money management is a responsible, necessary part of life involving short-term and long-term choices. Cook at home or eat out? Keep that older, paid-off car or get a new one with monthly payments? Buy a home or rent? Vacation? Save a portion of each paycheck through automatic transfers, or set whatever is left aside? Is the Thrift Savings Plan something I can max out? The choices are yours. Your decisions --- how you manage your money --- have far-reaching ramifications for your present and future.
Fortunately, you don't have to figure everything out on your own! Service members receive financial literacy training throughout their careers, and no-cost support is always available to military members and their families.
The National Defense Authorization Act (NDAA) of 2016 stipulated a significant number of changes to 10 USC §992 which effectively created mandatory touchpoints where a service member must receive financial literacy training. The change in law required service members to possess the knowledge and skills to make informed and effective decisions at various life stages.
The career touchpoints that will trigger required financial readiness training are:
Accessions: Basic Military Training, U.S. Air Force Academy, Officer Training School or Reserve Officer Training Corps:
For most new servicemembers, this training will take place during basic training or during OTS/ROTC/Service Academy. Many new servicemembers are receiving their first pay check. The objectives of the initial training are to set the basic foundation for careful money management, prudent use of credit, and an early understanding of the concept of investments, especially the potential reward and the sources of risk. The servicemember must also learn about MyPay, the Leave and Earnings Statement (LES), and the Thrift Savings Plan website. For many servicemembers, this training may very well be the first time that they’ve been taught responsible finances. The objective is that the more servicemembers can learn about their finances at the start of their careers, they will be better set up for financial success the rest of their life.
First Duty Station: Service members must receive training within the first 90 days of arrival at their first duty station:
The next touch point is when the servicemember arrives at their first permanent duty station. This career milestone comes as they will inherit an adaptable routine and an environment for managing predictable living expenses, savings, and credit while understanding the relationships between financial goal setting, and budget planning. Also, as part of the ongoing review of the Blended Retirement System (BRS), this training will review the TSP including both the traditional and Roth options while covering the index mutual funds, their historical rates of return, and their performance across successive economic cycles.
Thrift Savings Plan Vesting: A&FRCs offer training and/or counseling on TSP Vesting to eligible Airmen:
For new accessions after 1 Jan 2018 that will be automatically enrolled in the BRS, they will vest the government’s 1% TSP contribution upon completion of two year of service. For those that don’t know what “vesting” means, this term describes how the servicemember now “owns” all of the government money that has been accumulating in the TSP. If the servicemember had left the military prior to the 2 year vesting, they would hold no right to walk away with that money. It would revert back to the government.
This touch point marks the start of the servicemember’s eligibility for government matching in the TSP, so this is the major focus of this requirement. If servicemembers enrolled in the BRS do not take advantage of the full match, they are leaving “free money” on the table and missing out on a guaranteed immediate 80% return
Continuation Pay: A&FRCs offer training and/or counseling for Airmen who become eligible for continuation pay under the Blended Retirement System:
The National Defense Authorization Act of Fiscal Year 2016 also included a continuation pay provision as a way to encourage Service members to continue serving in the Uniformed Services. Under BRS, Continuation Pay is offered to members at the completion of 12 years of service provided members sign up to complete an addition four-year commitment.
This touch point offers the final chance to help the servicemember understand that a decision to forego or choose Continuation Pay should be made only after a concerted effort to project retirement income that might result from following a civilian career path. For servicemembers that select Continuation Pay, the full tax implications of receiving the payment in one payment as opposed to 2 or 3 equal annual payments are covered as well as outlining the options for allocating continuation pay: spending, saving, investing, paying down debt, or charity
Transition: A&FRCs provide financial literacy training as a part of the Transition Assistance Program:
The NDAA envisions three significant transition events relative to the BRS. Chronologically, the first is at separation when the servicemember faces a decision on the portability of the TSP. The second is when the servicemember transitions from the Active Component to the Reserve Component and needs to become familiar with RC provisions of the BRS. The third is when the servicemember retires and has the option of electing to take a lump sum payment of future retirement assets.
Pre-/Post-Deployment: A&FRCs offer training and/or counseling for Airmen prior to, and upon return from deployment:
As servicemembers deploy throughout their careers, this touch point provides the opportunity to leverage the financial benefits, but also offers financial challenges for families remaining behind. Deployment presents financial opportunities and challenges for them as they prepare to be away from home station, possibly in a combat zone, for an extended period of time, and upon returning home as some benefits end.
During the pre-deployment training, the focus will be on understanding allowances and special pays which will be received during the deployment and knowing which pays are taxable and which are “tax-free.” The servicemember will be encouraged to set goals for the expected increase in savings over the deployment including options as the Savings Deposit Program (SDP) or contributing “tax-free” contributions to the TSP, and discuss how the gains will be used at the end of the deployment.
Major Life Events: A&FRCs offer training and/or counseling for Airmen who get married, divorced, who are expecting, give birth to, or adopt their first child, or members affected by a disabling sickness or condition:
Life happens, and these circumstances most always impact peoples’ finances. The DoD plans to use significant life events (i.e., marriage, divorce, birth of child, disabling sickness or condition, etc.) experienced by servicemembers may have implications or impact on short- and long-term personal financial goals, budgets, and reevaluate life insurance, car insurance, and as necessary, health and long-term care insurance needs.
When a servicemember makes the appropriate changes in DEERs, he will be prompted to schedule an appointment with the base personal financial counselor. This appointment will cover the impact on monthly and annual budgets as well as the impact affecting taxes in multiple ways, generally increasing or decreasing exemptions, deductions, or credits even creating a change in filing status.
Subsequent Duty Station: A&FRCs offer training and/or counseling for Airmen who experience a subsequent permanent change of station while in grades E-4/O-3 and below:
As part of the out-processing checklist, the servicemember will contact the installation Personal Financial Manager (PFM) and Relocation staff for a consultation or class on making a smooth move. The primary purpose of this appointment is to project expenses before the move, expenses during transit, and expenses at the new duty station while also covering all of the applicable travel pay allowances authorized for the move, particularly for an overseas move
Promotion: A&FRCs offer training and/or counseling for Airmen who receive promotions while serving in the grades E-5/O-4 and below:
As servicemembers promote to the next rank, this touch point provides another opportunity to check in with the servicemember on their financial status. Once members are notified of their impending promotion, they can schedule an appointment with the base personal financial counselor to review individual or family current standard of living, as well as short-term, intermediate-term, and long-term financial goals.
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