Love for one’s country is one of the main inspirations for people signing up for U.S. military service. Although patriotism is indeed a laudable reason in and of itself, there are also numerous personal financial benefits that can be gained by serving in the military. The following are a few of these financial benefits you may have the opportunity to obtain through enlisting in the armed services.
A common reason people do enter the military is for the educational benefits they are eligible to take advantage of. This may include help with paying tuition, assistance with living expenses, help with college loan repayments and even tutoring assistance for free.
Federal military retirement benefits
Military personnel may qualify for one of two different retirement benefits programs from the federal government. Servicemembers who enlisted on December 31, 2017 or before may be eligible for the Legacy Retirement System (LRS). This program provides retirees with a monthly annuity for life beginning when they officially retire. However, you need to have at least 20 years of military service to be eligible for LRS.
Those with an enlistment date of January 1, 2018 or later are not eligible for LRS but will qualify for the Blended Retirement System (BRS). Servicemembers who enlisted during this time period are automatically registered for BRS which is a combination of the defined-benefit pension and the Thrift Savings Plan (TSP) which is a specific defined-contribution program.
Thrift Savings Plan
The TSP functions like 401(k) accounts, allowing military personnel to put a part of their base pay directly into their TSP account. Military personnel can choose to contribute on a before- or after-tax basis, depending on whether the account is a traditional or Roth TSP.
Note, the Internal Revenue Service (IRS) imposes limits on how much you are allowed to contribute annually to your TSP account. As of 2022, the limit is set at $20,500, while those 50 years of age or older are allowed an additional $6,500 contribution limit.
Many will opt to have a TSP along with a traditional or Roth IRA.
Savings Deposit Program
Some active-duty military personnel will qualify for the Savings Deposit Program (SDP) from the Department of Defense. The SDP allows service members to earn a hefty interest rate of 10% compounded monthly. However, the most you are allowed to put into your SDP account is $10,000. You will have all your funds and earned interest returned to you once you have completed our deployment.
Only those in qualified combat zones can receive SDP benefits. Additionally, you need to have been deployed 30 days in a row or at least one day per month for three consecutive months.
Military savings account
Those serving in the armed forces may be offered special benefits from banks and credit unions when they sign up for savings accounts, money market accounts, CDs, and other types of accounts. These benefits may include more generous interest payments and lower fees.
Comprehensive savings and retirement plan
Military personnel have many more options available to them for investing and saving for retirement. It can be quite confusing to sort through all of the possible choices. You may want to talk with a financial advisor who has knowledge of military financial benefits.
Opinions expressed are those of the author and are not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice.