Decades Of Out-Dated Financial Advice
I’ll cut right to the chase: veterans are suffering the consequences of financial planning theories and military benefits programs left over from the 70s and 80s. They are only being given a limited picture of their benefits, which is hurting both our service-members and the American taxpayers. That’s why we launched US VetWealth, to help service-members, veterans, and their families learn how to navigate and leverage their financial benefits so that they get the most out of a lifetime of service.
At first glance this may not seem like such an overwhelming “problem,” but I assure you, it is. And it’s not surprising—it follows logically from everything else that the military gives us. We’re all given standard-issue uniforms, bunks, MREs, eye protection, weapons, and the like. We go through boot camp, OCS, and academies designed to burn away our individuality so that we can respond to commands, hit the “I believe” button, and be aimed like weapons at objectives decided at pay-grades way above ours. This is a great strategy for winning wars. It is awful strategy for winning at life. As soldiers, sailors, airmen, and marines, we are treated as bulk items. But the one-size-fits-all approach to financial planning DOES NOT WORK. As veterans, we have to remember how to be individuals, and it’s about time that we learned to use our benefits as such.
It's Time To Stop Following Orders
When it comes to your military benefits, there are questions that “they” hope you never ask. And if you were to ask these hard questions, it would sound suspiciously like you were questioning an order, and we are taught not to do that. But these are your benefits, and the taxpayers want you to use them the right way. It is our responsibility as service-members and veterans to be stewards of these benefits. But if we all got smart about our benefits, this whole rotten bureaucracy would come tumbling down, because it is made up of laziness, greed, and a whole lot of “that’s how we’ve always done it.” It goes to that expression about generals being experts at winning yesterday’s wars. Our benefits system is great at providing benefits for military veterans of WWII. But your pensions are not ration coupons. They are assets to be leveraged.
But if we all got smart about our benefits, this whole rotten bureaucracy would come tumbling down, because it is made up of laziness, greed, and a whole lot of “that’s how we’ve always done it.”
One of the repercussions of the benefits problem we are facing today is that it allows room for too much change. Consider a couple with $500,000 saved up for retirement in a managed retirement account, which earns on average a 6.5% return per year. Some years are good, some are not, but at the end of the day, there’s plenty left over for the next generation. But what happens to this couple if they are unfortunate enough to have to start drawing on their retirement funds in a bad market? This is called the sequence of returns risk. Bad luck in the first few years of distribution could cause them to spend their assets down too fast for them to recover when the index recovers. Thus, it is possible for a once-affluent couple to deplete their assets down to destitution in a very short period of time, even though they did “all the right things.”
Are we all hopelessly at the mercy of Lady Luck? What if there was a way to diminish the role luck plays in our ability to attain our goals?
There is, and it starts by making sure we understand the tools at our disposal.
The Unknown Knowns
Think about the SGLI. Did you all know when you signed up for it that the premiums would be payroll-deducted from your LES? Did you know at the time that you most likely qualified for a LOT more coverage for the premium you were being charged? Did the contractor talking to you about it show you any other option? Did he give you a day—or even an hour—to talk it over with anyone before handing you a form and a pen so you could sign it?
How about the VGLI? Did you know that the premiums would go up every 5 years for the same coverage you had as an SGLI? Did you know that if you didn’t opt out of it, you would get charged for it, and it would go on your credit report if you didn’t pay for it? I know because it happened to one of us on the US VetWealth team when he was in the reserves and still serving!
What about your SBP? Did any of you out there do 20 years and then get told to sign up for a Survivor’s Benefits Plan? How clear were they about how the benefits worked? Did they tell you that there’s no equity in an SBP? Did they tell you that you’d be on the hook for 6.5% of your monthly pension for the next 30 years? Did they show you what that 6.5% of your pension could get you on the open financial market so that you could compare your options? Did you know that you and your spouse have to categorically opt out of it if you didn’t want it? Is it even possible to get out of it once you sign up for it?
And what about your Thrift Savings Plan? Did they tell you who was in control of it? Do you know how to look at it and check your balance? Do you know how to choose your asset allocations? Is there anyone you can talk to in order to review your investment strategies? Is there ANYONE around who can show you how to spend it when you do plan to retire? Is there anyone around who feels as though they were adequately educated as to how the TSP works?
Too many service members and veterans are “choosing” these benefits because everyone else is signing up for them, or because it’s better than nothing. But “nothing” is not the only alternative. Another alternative is to stop following orders and start educating yourself. It all starts with reaching out to US VetWealth and asking a simple question: What are my options?
We’re here when you’re ready.
After serving as an Intelligence Officer with the U.S. Navy, Ethan spent years providing comprehensive financial planning and investment solutions to individuals and businesses. As Director of Financial Solutions at US VetWealth, he now manages a team of professionals that helps service-members, veterans, and their families learn how to navigate and leverage their financial benefits to maximize their lifetime of service.