Skip to main content

By Barbara O’Neill, Ph.D., CFP®, [email protected]


Many Personal Financial Managers (PFMs) belong to the Association for Financial Counseling and Planning Education (AFCPE) as a professional “home” for financial practitioners and to earn continuing education credits as accredited financial counselors (AFCs). AFCPE is a 501(c)(3) non-profit membership organization that supports, educates, connects, and certifies professionals who serve communities worldwide.

AFCPE recently sponsored a webinar called Military Essentials and several podcast episodes on topics that PFMs frequently hold briefings on. Below are six take-aways for PFMs to share with service members:

  1. Not All Military Income is Taxable– As much as 30% of a service member’s compensation is tax-exempt. For example, most military allowances such as BAH (basic allowance for housing), BAS (basic allowance for subsistence), and clothing allowances are not taxed. Types of income that are taxed include active duty pay, special duty assignment pay, foreign duty pay, and enlistment and reenlistment bonuses. Military retirement pay is also taxable on federal and state income tax returns. CONUS (Continental United States) COLA (cost of living adjustment) income that offsets higher living costs in 42 high-cost locations is also taxable.
  2. Base Pay Determines TSP Contributions– Military pay can be confusing with various types of pay, bonuses, allowances, and benefits. For purposes of contributions to the Thrift Savings Plan (TSP), the amount deducted is not necessarily a percentage of what is on a service member’s paycheck. TSP contributions are a percentage of basic pay, incentive pay, or bonuses up to an annual IRS limit. Service members who enlisted after January 1, 2018 are automatically enrolled in the TSP and receive a government contribution of 1% of basic pay each month. Pre-BRS (Blended Retirement System) military TSP participants do not get a government match.
  3. Document Medical Issues Before Military Separation– Service members should see a doctor for medical issues that they are experiencing prior to military separation. It is a mistake to waive a pre-separation physical and psychological exam simply to speed up the military separation process. Having medical issues documented can be critical for obtaining post-service VA health care benefits or service-related disability compensation. There must be a record about symptoms, treatments, or medical diagnoses in a service member’s file.
  4. Savings Deposit Program (SDP) Benefits- The SDP is available to service members serving in designated combat zones and enables them to build savings for emergencies and future financial goals. Up to $10,000 may be deposited in the SDP and this money earns up to 10% annual interest, which is compounded quarterly. Interest accrues on SDP savings for up to 90 days after a service member exits the combat zone. This interest rate obviously far exceeds what is available on civilian bank accounts and reflects the level of risk involved.
  5. VGLI Premiums Increase with Age– Veterans’ Group Life Insurance (VGLI) is group term life insurance for departing service members who had Servicemembers’ Group Life Insurance (SGLI). Coverage is available for life as long as premiums are paid. Premiums increase every five years in five-year age increments, ranging from age 29 and below and age 30-34 up to age 75-79 and age 80 and older, to reflect policyholders’ decreasing life expectancy at older ages. VGLI policies can be converted to a commercial (civilian) permanent (whole life) insurance policy but not to a commercial term policy or other types of life insurance policies.
  6. Goal-Setting Requires Visual Cues- Many people live with an “I can’t do it” mindset. A good way to teach people to reach goals and get things done is to encourage them to start with a small block of time: 10 minutes a day or one hour a week. Props like a whiteboard or a to-do list are also useful, so people feel a sense of satisfaction when they “knock off” tasks that they accomplish. To-do lists should be tangible and viewable versus a list saved in a computer file. People need to see their to-do list every day as a reminder to “get up and get something done.” Self-confidence results from the three Ps: Practice, Preparation, and Perseverance.

For additional information about personal finance topics of interest to service members, visit the DoD Office of Financial Readiness (FINRED) website:


Photo by Fauxels from Pexels