Strategic Financial Planning for Veterans, Federal Employees, and Military Personnel

May 21

By Kate Cote, CFP®

In addition to facing challenges that differ from the average civilian, those who serve our country through the military and the federal government also have different financial planning needs. However, thanks to their service, these groups have opportunities and access to programs developed just for them.

The financial planning landscape for federal employees and military members varies a bit more than for private citizens. Are you a military member? Here’s how financial planning can help you navigate the wilderness!

Planning for Retirement

To assist with financial planning, active and veteran military personnel have access to special programs: those on active duty are eligible for the military’s defined benefit program, which sets pension amounts according to time of service and earnings, and can access the Thrift Savings Plan (TSP), a tax-advantaged investment product similar to 401(k)s.

Federal employees can qualify for the Federal Employees Retirement System (FERS) pension plan and have access to the TSP for retirement savings. The government makes a non-elective contribution of 1% to the TSP and will match up to an additional 4% of the employee’s salary.

Both military personnel and federal employees should make regular contributions to the TSP because they often have to depend on savings and investments in retirement due to:

Differences in pension
Abbreviated service periods
Difficulty transitioning into civilian life
Healthcare costs

Tax Planning

Non-civilians may qualify for quite a range of tax breaks on home sales, travel expenses, uniforms, relocation expenses, and more. Military members who have served in designated parts of the world may be able to exclude combat pay from their taxable income. Transition out of the military also requires tax planning—more income is taxed, and potentially a higher tax bracket.

Federal employees have the advantage of HSAs, public transportation benefits, educational assistance programs, home office deductions, etc, and tax-free per diem allowances are provided for work-related travel expenses.

Once we assess the overall financial situation, Clear Insight Wealth Management advises on whether to contribute to the TSP on a pre-tax or Roth basis, contribute to a Roth IRA, or if a Roth conversion is right for the situation. These strategies can significantly reduce taxes paid over the lifetime of a military member or federal employee!

Insurance

Due to the nature of their work, military members and federal employees also have special insurance considerations.

Deployment to certain areas of the globe brings elevated risks, which makes life insurance mandatory for active members. They may also take part in the Servicemembers’ Group Life Insurance (SGLI), transitioning to Veterans’ Group Life Insurance (VGLI) after they retire. Also, long-term care insurance for hazards encountered in the line of duty can be obtained from the Veterans Administration.

Investment Strategies

Non-civilians may gain entry into investment strategies or products specific to them, such as the TSP, Military Savings Deposit Program (SDP), Veterans’ Affairs (VA) investments, and homeownership assistance. Federal workers may have investment opportunities for specialized education as well.

Military and federal workers with security clearances can invest in products or services specific to their work situations. These sensitive investments are not typically available to most other investing classes. There may also be chances to invest in defense contractors, cybersecurity and IT firms, government contractors on classified projects, and private equity funds. Be clear on the ethical considerations of investing, and practice discretion.

Get Help With Financial Planning

Clear Insight Wealth Management is squarely focused on financial planning in Spokane, WA, and Washington, D.C., for military members and federal employees. If you’re part of those communities and need help navigating financial issues, we’re ready to help you create a clear path to the future you want.

About Kate

Kate Cote is a financial advisor and partner at Clear Insight Wealth Management, a wealth management firm for military families, government employees, and small business owners looking for a clear path to living their best lives. Using a whole-team approach, Kate guides clients to define and create the life they want to live. When she helps someone do what they never thought they could, she feels like a rock star.

A military spouse with over 20 years of financial service industry experience, Kate holds a bachelor’s degree from Villanova University and the CERTIFIED FINANCIAL PLANNER™ and Registered Life Planner® designations. She also serves on the board of the Military Financial Advisor Association.

Kate knows that life is about the relationships we have with others, so she spends her time traveling to visit family and friends. She’s looking for friends and family that reside outside the U.S. so she can fulfill her other passion—seeing the world. Wherever she happens to be, Kate loves visiting museums to learn about the people and history. Her favorite weekend activity is biking or hiking in the woods alongside the water. Most nights you’ll either find her cooking a gourmet meal or reading a book. When Kate was a dresser in the graduate theater at Villanova, the theater became one of her passions. (She wouldn’t consider it a good year without a trip to the theater or a concert.) Little known fact: Kate is descended from Nathaniel Colburn, who arrived in the colonies in 1636 and was one of the original founders of Dedham, Massachusetts. To learn more about Kate, connect with her on LinkedIn.

Adrienne Ross