The Military’s A+ Financial Benefits to Protect Your Future

As a service member, you’ve earned financial benefits to help protect your future. Take advantage of military benefits to shore up your personal finances for both the short term and long term.

Benefits that can help set you up financially

Basic pay is the fundamental component of military pay. All members receive basic pay, and it is typically the largest component of a service member’s pay. A member’s grade (usually the same as rank) and years of service determine the amount of basic pay received.

Allowances are the second-most important element of military pay. Allowances are moneys provided for specific needs, such as food or housing. Monetary allowances are provided when the government does not provide for a specific need. For example, the quantity of government housing is not sufficient to house all military members and their families, so those who are not able to live in government housing receive allowances to assist them in obtaining commercial housing. Those who live in government housing do not receive full housing allowances. You may also qualify for the Basic Needs Allowance.

Special and incentive pays. While basic pay and allowances cover the fundamental components of military pay, special and incentive pays are used to compensate service members for qualifying conditions and to recruit and retain them. Common S&I pays are:

• Hardship Duty Pay, or HDP: Recognizes service at locations where living conditions are substantially below the continental United States.
• Assignment Incentive Pay, or AIP: Paid to service members to encourage them to volunteer for difficult to fill or less desirable assignments, locations or units designated by and under conditions of service specified by the military department.
• Hazardous Duty Incentive Pay, or HDIP: Paid to service members who perform duty that is inherently dangerous or risks physical injury.
• Special Duty Assignment Pay, or SDAP: Recognizes service in assigned duties determined to be extremely demanding, requiring a greater than normal degree of responsibility or difficulty, or requiring special qualifications.

Savings Deposit Program. Service members deployed to a combat zone get guaranteed 10% interest on money put into a savings account, up to $10,000 for each deployment. That’s unheard of outside the military. Bonus: You keep earning 10% interest up to three months after you return.

Thrift Savings Plan. Sure, retirement seems a long way off. But your future self will thank your present self if you earmark a portion of each paycheck to retirement via the TSP. It’s the easiest money you’ll likely make, thanks to compound interest. If you stash $100 in a retirement account (earning 2% interest) twice a month for the next 30 years, you’ll be looking at a balance of $102,500. You have several plans to choose from. Bonus: It’s one of the lowest-cost retirement savings plans out there, charging just 40 cents per $1,000 of investment each year.

Free college. Thanks to the Post-9/11 GI Bill®, you can get the full cost of in-state tuition and fees at public colleges covered for up to four academic years or contributions for a private college education. You’ll also get a housing stipend and up to $1,000 a year for books and tutoring. Benefits cover the cost of education and training programs, including undergraduate and graduate studies, vocational schools and technical training. Learn the ins and outs of different GI Bill® programs. Bonus: Benefits may be transferable to a spouse or children. If your service ended before Jan. 1, 2013, you have 15 years to use this benefit. If your service ended on or after Jan. 1, 2013, the benefit won’t expire.

Affordable housing. Service members get a tax-free housing allowance when government quarters are not provided. The size of the monthly subsidy is based on your rank, location and family size. It is intended to cover part of your rent or mortgage payment so you can live off base comparably to civilians.

Low-cost life insurance. Service members have access to some of the lowest-cost life insurance available anywhere. You can provide your family with financial security at just 6 cents per $1,000 of insurance. That means for up to $400,000 of life insurance, you pay only $24 a month, regardless of age or health. You also get traumatic injury coverage for just $1 per month.

Other ways to build wealth

Low-cost loans. As a service member, you can get a low-cost home loan via the Veterans Administration — without having to put down a down payment or pay pricey private mortgage insurance.

Different ways to save. When joining the TSP, you can choose from two tax options: either make contributions to retirement on a pre-tax case and then pay taxes on the amounts at retirement, or contribute after-tax dollars, letting the amount grow over time and never paying taxes on that savings. Bonus: If you receive tax-free combat pay, you don’t have to pay any tax on Roth TSP or Roth Individual Retirement Account contributions.

Tax deductions. You or your spouse are eligible for numerous tax deductions, some extended to all citizens in certain situations and others exclusive to service members and their families.

Contacting Military OneSource can put you on the path to making the most of your financial benefits. Our free resources, information and personalized specialty services can help you make the most of your benefits. Call 800-342-9647 or live chat 24/7/365. OCONUS/International? View calling options.