Financial Readiness

DoDI 1342.27, Personal Financial Management Programs, requires each military service to provide financial education, counseling, and assistance to service members and their families.

TSP is a federal retirement savings plan similar to a 401(k) for military members and federal employees. It offers tax-advantaged investing with low expense ratios and matching contributions for those under the Blended Retirement System (BRS).

G Fund (government securities), F Fund (fixed income/bonds), C Fund (S&P 500 index), S Fund (small/mid-cap stocks), I Fund (international stocks), and L Funds (lifecycle target-date funds that automatically adjust allocation).

BRS combines a reduced pension (2.0% per year of service) with TSP matching. DoD automatically contributes 1% after 60 days and matches up to 5% of basic pay: 1% auto + dollar-for-dollar on first 3% + $0.50 per dollar on next 2%.

The IRS annual elective deferral limit applies (check current year — it was $23,500 for 2025). Service members in combat zones can contribute up to the annual additions limit ($70,000 range) including tax-exempt combat zone pay.

Traditional TSP contributions are pre-tax (reduce taxable income now, taxed upon withdrawal). Roth TSP contributions are after-tax (no tax break now, but qualified withdrawals in retirement are completely tax-free, including earnings).

BAH is a monthly allowance to help service members pay for civilian housing when government quarters are not provided. The amount is based on duty station location, pay grade, and dependency status. BAH is tax-free.

BAS is a monthly allowance to offset the cost of meals for service members. Enlisted members receive a higher BAS rate than officers. BAS is tax-free and is meant to cover the cost of food only.

The SCRA (formerly Soldiers' and Sailors' Civil Relief Act) provides protections for active duty members including a 6% interest rate cap on pre-service debts, protection from eviction, the right to terminate leases, and protection from default judgments.

The SCRA caps interest at 6% per year on debts incurred before active duty (mortgages, car loans, credit cards, student loans). You must request the cap in writing and provide a copy of your orders. The lender must forgive interest above 6%, not just defer it.

Service members can terminate residential and vehicle leases early without penalty when they receive PCS orders, deployment orders of 90+ days, or enter active duty from reserve status. Written notice and a copy of orders are required.

Predatory lending involves unfair, deceptive, or abusive loan practices. Warning signs: extremely high interest rates, excessive fees, balloon payments, loan flipping (frequent refinancing), requiring unnecessary products, and targeting military communities.

The MLA (2006, expanded 2015) caps the Military Annual Percentage Rate (MAPR) at 36% for most consumer credit to active duty members and dependents, prohibits mandatory arbitration, and bans certain predatory practices.

Payday loans, car title loans, rent-to-own agreements, high-interest used car dealers, and 'military discount' financing with hidden fees. These businesses often cluster near military installations.

Financial experts recommend 3 to 6 months of essential expenses in an easily accessible savings account. For military families, this provides a buffer during PCS transitions, deployments, or unexpected expenses.

SBP provides a monthly annuity to eligible survivors (spouse, children) of deceased retirees. It pays up to 55% of the member's retired pay. Members must elect SBP before retirement; the premium is 6.5% of selected base amount.

If a married member does not elect SBP, the spouse must concur in writing. Without SBP, military retired pay stops completely upon the retiree's death, leaving the surviving spouse with no military pension annuity.

SGLI provides low-cost term life insurance up to $500,000 for active duty members. It is automatically provided unless declined. Coverage is available at $0.06 per $1,000 per month ($31/month for maximum $500,000).

VGLI allows veterans to convert SGLI to renewable term insurance after separation without medical underqualification. You must apply within 240 days of separation (or 1 year with evidence of good health). Premiums increase with age.

BAH, BAS, combat zone pay, hazardous duty pay, family separation allowance, move-related allowances, and uniform allowances are all tax-free. This effectively increases take-home pay compared to equivalent civilian salaries.

Enlisted members and warrant officers have all pay earned in a combat zone excluded from federal income tax. Officers' exclusion is capped at the highest enlisted pay rate plus imminent danger/hostile fire pay.

Military basic pay is determined by pay grade (E-1 through E-9 for enlisted, O-1 through O-10 for officers, W-1 through W-5 for warrant officers) and years of service. It increases with promotions and time in service.

SAVE (Saving on a Valuable Education) is an income-driven repayment plan that calculates payments based on income and family size. Military members benefit because tax-free allowances (BAH/BAS) are excluded from the income calculation.

PSLF forgives remaining federal student loan balances after 120 qualifying monthly payments (10 years) while working full-time for a qualifying public service employer. Active duty military service qualifies. Payments under income-driven plans count.

Military OneSource financial counseling, installation Personal Financial Management Program (PFMP), military relief societies (AER, AFAS, NMCFA, CGMA), the Consumer Financial Protection Bureau (CFPB) Office of Servicemember Affairs, and free tax preparation through VITA/MilTax.

Military relief societies: Army Emergency Relief (AER), Air Force Aid Society (AFAS), Navy-Marine Corps Relief Society (NMCFA), and Coast Guard Mutual Assistance (CGMA). They provide interest-free loans and grants for emergency financial needs.

Financial problems can lead to loss of security clearance, administrative action, reduction in grade, bars to reenlistment, and involuntary separation. Commanders are notified of garnishments, and debt can trigger security clearance reviews.

Debt-to-income ratio compares monthly debt payments to monthly gross income. Lenders use it for loan approval (generally under 36% is preferred). High ratios indicate financial stress and can trigger security clearance concerns.

Check your credit report, research fair pricing, get pre-approved through a military credit union or bank, avoid dealerships near bases that target military, read all contracts carefully, understand total cost including interest, and consult with your installation's financial counselor.

VA Home Loans offer eligible service members home purchases with no down payment, no private mortgage insurance (PMI), competitive interest rates, limited closing costs, and no prepayment penalty. The VA guarantees a portion of the loan to the lender.

High-3 provides 2.5% x years of service x average of highest 36 months of basic pay (50% at 20 years) with no TSP matching. BRS provides 2.0% multiplier (40% at 20 years) plus TSP matching and continuation pay, benefiting those who serve less than 20 years.

A one-time lump sum payment (2.5x to 13x monthly basic pay, varies by service) offered between 8 and 12 years of service in exchange for agreeing to serve an additional 3+ years. It incentivizes mid-career retention under BRS.

MilTax is a free tax preparation and filing service available through Military OneSource. It provides tax preparation software, consultants for military-specific tax questions, and covers federal and up to three state returns at no cost.

TSP offers general purpose loans (repaid in 1-5 years) and residential loans (repaid in 1-15 years). Minimum loan is $1,000, maximum is 50% of vested balance up to $50,000. You repay yourself with interest, but miss market gains on borrowed funds.

Execute a durable power of attorney before deployment designating a trusted person to handle financial, legal, and property matters. Military legal assistance offices prepare these free of charge. Review and update it before each deployment.

FSGLI provides term life insurance for spouses (up to $100,000) and children ($10,000) of service members with SGLI. Spouse premiums vary by age; child coverage costs $2.50/month regardless of number of children.