Military

Discussing financial independence with the troops

May 13, 2013 by Doug Nordman · 14 Comments

This post is long overdue, and I’m embarrassed to admit that it kept getting pushed down the priority stack. I’ve answered reader questions for most of the last six months, but this is a reader report about financial independence.

Deserat is not your typical reader: she’s a major contributor to “The Military Guide“. She wrote most of the chapter on the Reserves, contributed to the book’s section on “multiple streams of income”, and reviewed way too many drafts of the other chapters. In her military career she’s a Reserve officer at the top of her game who’s mentoring the next generation of officers & enlisted. In her civilian career she enjoys decades of engineering success in the med tech industry, even running her own consulting firm. She’s the first to point out the synergy behind her two careers: techniques she learned in the military worked in the civilian corporate environment, and the executive skills she’s learned during her tech career paid off very nicely in the military.

Today she’s financially independent, retired from her civilian career, and wrapping up her military career. She spent the last few years roaming Europe in between drill weekends and contracts. I suspect she’s also fending off multiple consulting offers while she and her spouse enjoy their new home and their travels.

A few months ago during one of her Reserve weekends, she wanted to give a presentation on achieving financial independence. The military is focused on teaching financial responsibility (stay out of debt, use credit responsibly, don’t be a security risk) but it’s not the military’s mission to teach financial skills like building your net worth. When it’s time for the transition seminars (both separating from the service and retiring from it) the emphasis is on starting a bridge career, not on when you’d stop working. Deserat wanted to show her troops how to budget, save, invest, and then decide what you’d like to do with your life.

The cover of the pocket guide, available from Impact Publications

At Impact Publications

The tool for her presentation was the pocket guide version of “The Military Guide”. It’s 4″x5″, 64 pages, and available only from Impact Publications (not on Amazon or in bookstores). It has most of the content of the full-sized paperback minus the chapter checklists, the personal stories, and the detailed appendices. Its main advantage is its price: one copy is $2.95 but 25 copies are only a little over $2/copy and 50 copies are $1.77/copy. 100 copies… well, call the publisher to get an even bigger discount.

Impact Publications specializes in pocket guides, with over a dozen of their book titles also available in pocket guide versions. They’re popular with military family service centers, veteran’s programs, and job fairs. The publisher tells me that most of the orders come from individual military commands and state VA offices that are spending their resource budgets– the display racks of pamphlets & guides that you see in their lobbies. One state veteran’s administration even bought 125,000 copies of a transition pocket guide.

We’ve been surprised and gratified at how many servicemembers are also buying the pocket guide out of command funds (or even out of their own pockets) for their training programs. Deserat led one of the more recent and larger seminars but I’ve had reports from a half-dozen others who are happy to share the knowledge with their battle buddies and wingmen. I’ve even had a query from a high-school teacher who’d like to hand them out to their military-curious students.

Deserat wrote to me a few months ago:

“I will be giving a presentation on financial independence and early retirement to a group of young officers and others when I do my next two weeks of duty. I was wondering how I could get some of the pocket guides to give away.”

We took care of her order and they came in the mail a few days later.

“I ordered 25 of the pocket guides and will be doing my presentation to unsuspecting lieutenants (and other ranks) sometime next week– now to just prepare for it. Any advice you have on the presentation (1.5 hours) would be appreciated. I’m going to hone in on the benefits about the military, living below your means, developing streams of income, investing (but not necessarily telling them how or where to), and understanding the thing about time being really your best asset.”

I’ve given a few of these seminars at military bases and public libraries, so I sent her a handout of bullet points with extra space for taking notes. A couple of weeks later:

“Well, I did the class on financial independence (I was on active duty so it was in uniform). There were even a couple of civilians there. I gave them the attached handout and the pocket guide as I talked. I started out saying I was financially independent, I had paid cash for my car and house: their eyeballs bulged at that. Turns out most of them were already interested or had started many of the necessary habits. One young captain asked me about his real estate (two rental properties) and if his savings rate should be based on gross or net income… hey, if you can get 25-50% of either, you’re doing fine!”

“They even asked me where they should invest their money. The main stickler for these troops is they live in a high-cost area and real estate is expensive. It would be very difficult for them to drive their housing costs below 35% of their expenses without a subsequent increase in transportation costs and time lost. I kept driving it home: time is all you have and you need to spend your time doing what you value… the whole purpose of financial independence is to be able to spend your time doing what you value.”

“The other thing that resonated was the statistics on how many would actually retire. I said look around: only 2-3 of you would actually last 20 years, so the ideas talked about for financial independence are even more important due to the benefits of the military pension. I also talked to them about different situations in civilian positions… my experiences with different 403(b) plans and pension plans. Lastly, I talked about the different references in the handout attached and the people who were behind those references. All in all, they seemed interested, eager and liked my approach for presenting the information.”

“Side story: someone walked in late and sat down just as I was giving some general advice on what types of investments to purchase… my point was to minimize expenses and that the Thrift Savings Plan had one of the lowest expense ratios with Vanguard right behind them. At that point I asked the audience if any of them were financial managers. They guy who came in late raised his hand and then proceeded to tell me he had come to the session to see if I would talk “crap” about investing. I just looked at him coolly and said, well, my intention wasn’t really to give out investment advice but that I could share my experiences. I’m glad I asked the question about financial managers because I was then going to say that they needed to stay away from actively managed funds as much as possible– I didn’t know if anyone there sold actively managed funds as a financial manager. He then walked out of the class with me and made the comment that everything I had said was spot on and that he met lots of people who didn’t take advantage of TSP. I just smiled. I then thought that earlier in my career he might have intimidated me, but today I knew where I was and that it was unique… and although he was a financial manager I don’t think he was financially independent.”

“Another story: I had a captive audience in a different impromptu session… three second lieutenants – we talked about savings and where to save and how they should start now. One of them wanted to know if he should put his money in the Roth TSP or the regular TSP– I explained the different types of taxes and then told him to make it a 50/50 split to hedge the bets. They were all saving something; two in TSP and the other had a family corporation… I think he was going to be fine based on what he said. Two of them were USAFA grads and the other ROTC… sharp officers. I sent them the handout.”

“Last story: I then had a meeting (to discuss other issues) with the senior leadership of my Reserve duty area and gave each of them a copy of the pocket guide. They both said they weren’t financially independent and never would be… one was a full-bird colonel on active duty (I’m shocked at how much O-6s make), the other was a retired active duty O-6 who is now a senior civil servant… in the SES case, I think he works because he likes what he does and is frankly very good at it. In the case of the active-duty officer, I sense a general lackadaisical approach to personal finance.”

“I’m still counting the days until I retire from the Reserves!”

Deserat’s probably going to be doing this training at least annually until she retires– a great way to practice what we’re preaching!

The other readers have very similar stories about their sessions. (I’m also afraid that it’s all too common to see senior officers who have chosen to remain blissfully ignorant about personal finance.) If you’re in a command financial billet then it’s probably easier to get the funds to buy the pocket guides, but a couple of servicemembers have even spent their own money on the project. From a cynical perspective, if the expense helps even one of your people stay out of financial trouble then it makes your job that much easier.

If you decide to do this type of seminar at your command, feel free to use Deserat’s talk as a guide for developing your own curriculum. Contact me or send me an e-mail if you’d like a copy of my bullet handout. If one of your local commands can’t order the pocket guide for you, then ask me or Impact Publications for a bulk discount!

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Filed Under: Finances, Military · Tagged With: early retirement, financial independence, military, military retirement, training

Military retirement and divorce

May 6, 2013 by Doug Nordman · 2 Comments

A reader writes:

“If my ex husband was active duty for 10 years and 20 years Reserve and he has 5300 retirement points at the rank of O-6, how much will he receive? I will receive 50%.”

After exchanging more e-mail, we learned that her ex-spouse is under the Final Pay retirement system (for those starting their military service before 8 September 1980). He filed for Reserve retirement in 2006 and will turn age 60 in late 2013. When their divorce agreement was mediated it was agreed that she would get 50% of his retirement and “spousal insurance” benefits.

Disclaimer: I’m a fast learner, but I know very little about military benefits for divorced spouses. Military divorce is a complex issue with many of the answers depending on state law and the wording of the divorce decree. Even though I can come up with a slew of numbers to answer the pension question, ex-spouses still have to check their divorce agreement. The decree also has to be filed with the Defense Finance and Accounting Service in order to claim the divorce’s pension payments. If any of this seems confusing or conflicting, it may be due to the extensive differences among state laws. It’s essential to consult a divorce lawyer with experience in military benefits.

Reserve retirement is also nearly as confusing as divorce agreements. (Reserve retirement has been the #1 search topic on this blog for nearly a year– look over to the sidebar on the right, under the “Top Post and Pages” header.) Most of my reader questions come from servicemembers, not the spouses. If the servicemembers are confused, then imagine that you’re a military spouse who’s not quite sure how the system works, and you’re not aware of what information sources could help you learn more. If your spouse is hiding the facts during a bitter divorce then the research becomes nearly impossible.

For example, I’m sure millions of veterans have heard of the legendary military retiree who refused his pension so that his ex-spouse would not get her share of it under the Uniformed Servicemembers Former Spouse Protection Act. (One state court eventually handed down a judgment awarding her that amount regardless of whether he was receiving his pension.) A Reserve servicemember could try a similar tactic that’s completely legitimate, although ethically dubious and financially disastrous. Instead of applying for “retired awaiting pay” status, they could elect to be discharged. “Retired awaiting pay” means that at age 60 the pension will start at the max longevity for their rank and at the pay scale in effect when they turn age 60. That’s what 99.9% of Reserve officers choose, but “retired awaiting pay” means that they’re still technically eligible for mobilization.

A discharge has no risk of mobilization, but discharge also means that longevity and pay scale are frozen on the date of discharge. At age 60 the pension would start at their rank and longevity that they held on the date of discharge (their actual years of service) using the pay scale in effect on the date of the discharge (not the pay scale in effect at age 60). If a Reservist wanted zero risk of mobilization (or if they wanted a smaller pension to spite an ex-spouse) then they could choose a discharge. However choosing “discharge” instead of “retired awaiting pay” means that years of missed pay raises can reduce a pension by 10%-50%. An unsympathetic court could still award the ex-spouse the pension share that the retiree should have elected.

Even when a servicemember elects to “retire awaiting pay”, they won’t know the precise amount of their pension until they turn age 60 and can use that year’s military pay tables. However the pension amount can be estimated using today’s 2013 pay tables and then making hopeful educated guesses about how military pay will keep up with inflation until age 60.

In this reader’s case the divorce decree splits the pension (50% to each) and the Reserve retirement starts later in 2013 (the current pay table).

The military retirement pension formula is:

Pension = (service multiple) x (pay base).

“Service multiple” comes from the number of years of service or Reserve drill points (two different formulas). “Pay base” is different from “base pay”. It’s the pay amount calculated for the “Final Pay” or “High Three” retirement systems. We’ll come back to that in a few paragraphs.

Let’s start with the easier part of the retirement pay calculation: the service multiple. For a Reserve retirement it’s:

Service multiple = (# points) / 360 * 2.5% .

(The divisor is 360, not 365, because military pay is based on 30-day months. There are 360 days in a year of 12 30-day months.)

For this reader’s situation the service multiple is:

5300 points / 360 * 2.5% = 36.806%.

The pay base for “Final Pay” is simple: the highest base pay scale earned on active duty or in the Reserves. That Final Pay number is in the O-6>40 column (maximum longevity) of the 2013 military pay table: $10,736.70/month.

The pension would be:

36.806% x $10,736.70 = $3951/month. The ex-spouse’s half of that would be $1975/month.

If the retiree’s date of initial entry into military service (DIEMS) was 8 September 1980 or later, they would be under the “High Three” retirement system. That requires calculating the average of the highest 36 months of base pay. If the retiree was turning age 60 in October 2013 then their High-Three average base pay (from O-6>40 pay tables of 2010, 2011, 2012, and 2013) would be $10,520.95.

36.806% x $10,520.95 = $3872/month.

Unfortunately that pension amount may not be the final answer. The USFSPA legislation only affects the retiree’s “disposable retired pay”, which is the pension amount minus authorized deductions. Among the authorized deductions is “amount of retired pay waived in order to receive compensation under Title 38 (Department of Veterans Affairs) of the U.S. Code”. (See Q#10 of the USFSPA FAQ at that link.) In other words, some disabled military retirees have a smaller DoD pension because they waive a portion of it in order to receive that amount from the VA.

Mahalo nui loa to Rob Aeschbach and Jason Hull for correcting my misunderstanding of the VA disability process and helping me check my references. The specific statute is in section 1408(a)(4)(B) and (C) of Title 10 of the U.S. Code and a more specific divorce discussion is at this link.

Here’s a brief example. If a military retiree has a $1000 pension and his divorce decree awards 50% to his ex-spouse, each would receive $500. If the retiree is determined to be eligible for $200 of VA compensation, they waive $200 of their (taxable) DoD pension in order to receive $200 of (untaxed) compensation from the VA. Now their “disposable retired pay” is $800 and the ex-spouse would receive $400: $100 less than they expected. The divorce decree can anticipate this issue by changing the pension payments to the ex-spouse (still limited to a max of 50% by USFSPA legislation) or awarding more funds (alimony) from other marital assets.

If a retired veteran has a disability rating of at least 50%, or combat-related disabilities, or a Chapter 61 disability retirement, then the situation is even more complicated– and far beyond the scope of this post. Seek professional legal advice.

The rules got even more complicated in 2008. Although most Reserve pensions start at age 60, a few Reservists are eligible for a pension that starts earlier. They had to deploy to a combat zone for at least 90 days anytime after 28 January 2008. For every 90 days that they deployed during a fiscal year after that date, the starting age of their pension is 90 days earlier down to as young as age 58. “Luckily” that wasn’t the case in this situation, because the ex-spouse would have to ensure that she filed her application with DFAS before the retiree’s pension began.

Ex-spouses have to “claim” their portion of the retiree’s pension at by filing with DFAS before the pension starts. If the claim isn’t filed soon enough then DFAS will not pay retroactive to the start of the pension. This is controversial and a lawyer may be able to suggest a resolution of missed pension entitlements, but the problem can be avoided by filing the claim before the retiree starts drawing their pension.

Three more issues for this ex-spouse: first you should check whether you’re eligible for Tricare healthcare at age 60, followed by Tricare For Life healthcare at age 65 (second payer to Medicare). Many financial aspects of divorce can be negotiated while other military benefits are set by law. The expert in what’s known as the 20-20-20 rule is “Ask June” at Military.com.

Next you’ll want to check your “spousal insurance” paperwork that you negotiated during the divorce. It sounds as if you’re describing the Reserve Component Survivor Benefit Plan, which certainly covered you for the last seven years. If your ex-spouse has been voluntarily paying SBP premiums on your behalf then he can change his mind and cancel the insurance after paying two years of premiums (starting at age 60). If he remarries then he can change the beneficiary to his new spouse, but the wording of the divorce decree may affect that. If you trust that he’s treating your honestly then you’re probably getting the straight story. If you’re not sure then you need to seek a lawyer who understands military divorce, the RCSBP, and Former Spouse Coverage.

Finally, you probably already know that you may be entitled to a portion of your ex-spouse’s Social Security benefits based on his and your earnings records.

I’ll end this post by encouraging military spouses to educate themselves on their benefits. As Kate Kashman writes over at Military.com, the more educated and involved you are then the better you’ll be able to take care of yourself and your family. When your spouse is working on their military career, they can use your help to make sure that you both understand your pay, allowances, and benefits and use every program you can. When they’re deployed and you’re managing the family finances, you’ll need to know what you’re entitled to and where to find it. If you ever have to deal with divorce like this reader, the day you visit a lawyer is the worst possible time to start a personal cram course on military benefits acronyms.

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Filed Under: Finances, Military · Tagged With: divorce, financial independence, military, military retirement, RCSBP, SBP, USFSPA

Military retirement from the Individual Ready Reserve

April 29, 2013 by Doug Nordman · Leave a Comment

(Note: For over nine months, the topics of the Reserve and National Guard forces have been at the top of this blog’s searches. After 30 months of blogging, some of these posts rank higher in Google’s search results than the official DoD pages.

At the end of this post I’ve linked every major article on this blog with information about the Reserves and Guard: serving, benefits, separating, and retiring. Some of the reader questions may apply to only a few servicemembers or retirees, but I’ve included all of them. Please let me know if you have questions, advice, or your own story to share!)

In today’s post, a reader writes:

Hello sir! I’m an O-5 (USNR) with 19 years and I stumbled upon your website/blog. All I can say is AWESOME! You put things in plain English when many other websites and instructions either “beat around the bush” or use vernacular that usually leads to more questions! BZ! I was hoping you could answer one question for me. Since I am at 19 years in the Navy (seven years active / 12 years Reserve) – I am trying to weigh my options when I go over 20.

After I hit 20, if I am on the O-6 promotion list and then immediately choose to transfer to the IRR, would I be able to retire as a CAPT? Would I have to serve as a CAPT for at least three years in the IRR and if I earn enough points for a good year, does that mean I could eventually “retire awaiting pay” and retire as an O-6? I guess that was a long-winded way of asking, can you be promoted to O-6 in the IRR and earn good years in the IRR?

Thanks! Eight years of instructor duty, most of it with submariners: complex concepts, simple words.

The big-picture answer to your question is that you can go to the Individual Ready Reserve after you’re selected for O-6. Once you’re in the IRR you’ll have to continue to earn your “good years” in order to satisfactorily complete your time in grade.

The details:

Officers are eligible for promotion while they’re in the IRR, but I have never heard of anyone getting promoted while they were in the IRR. It’s possible, but there are too many Reservists on mobilization and drilling status who have probably done more things to earn the selection board’s attention. You’ll hopefully be drilling (or mobilizing) at least until you reach 20 years and get your Notice of Eligibility letter. Ideally you’ll keep at it until you’re selected for O-6 and the selection results are approved by Congress.

Once you’re selected for O-6, though, you can go to the IRR whenever you want. (Even before you’re formally promoted to O-6.) No matter what timing you choose, the only way your time in grade will accrue is when you accumulate good years (50 points per year). You could hypothetically do that in a pay billet (if you get one), or by getting mobilized, or by drilling in the Volunteer Training Unit. If you’re in the IRR, though, you’ll probably do it by correspondence courses or special duty (funeral detail), or by other individual arrangements with your chain of command. (You may also want to see if you can earn points by serving as a U.S. Naval Academy Blue & Gold Officer.) IRR members still have to show up for annual musters and maintain whatever other readiness status is required by your chain of command (medical & dental screenings, staying within physical standards). Time in grade only counts when you earn a good year.

Your O-6 time in grade is normally three years, whether you’re drilling or mobilizing or in the IRR– as long as you accumulate your good years. However when you request retirement you can also request a waiver to reduce the TIG requirement to two years. That’s routinely approved for most retirements and would almost certainly be approved for a retirement from the IRR during a drawdown.

No matter when you choose to submit your retirement request, make sure you review your options under the Reserve Component Survivor Benefit Plan and Tricare Retired Reserve. The first is an exceptionally inexpensive life insurance annuity that offers more benefits than any civilian policy. The second will provide health insurance (up through age 60) that might even be cheaper than some civilian programs.

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Filed Under: Military · Tagged With: financial independence, Individual Ready Reserve, IRR, military, military retirement

New links for military retirement, military transition, and blogging

April 25, 2013 by Doug Nordman · 2 Comments

Here’s an easy slide into the weekend. I only have a few new links to share with you today, but a couple of these are time-sensitive as well as being current events.

Take the survey

First up, thanks to Rob Aeschbach‘s recommendation, is a survey request from Orders To Nowhere. Mike Grice retired from the Marine Corps in 2012 and has been blogging about his military transition. He’d like to hear how your own transition went and what issues you came across. It’s a straightforward SurveyMonkey format with mostly multiple-choice questions and a few short essays. (It’s not graded!) Best of all, you’re contributing data to a research project that could improve the transition process and maybe even result in another book. Nearly a decade ago, a similar survey started me down the same road. Please help a blogger out.

Plan your transition

Speaking of the military transition, the new Transition Assistance Program courses seem to be a hit. This is a combination of seminars, interest surveys, skills discovery assessments, and certification programs sponsored by DoD, the VA, and the Department of Labor. They’re designed to translate military skills to civilian resumes, streamline credentials and licenses, and generally speed up the job search. The popularity comes from the student critiques, but these veterans are just now beginning their job search. (I’ve heard privately from another retiring servicemember that the curriculum is still PowerPoint overload, now with lots more links to other websites.) Another quarter-million servicemembers are projected to leave the military during the next four years.

If I had to make a skeptical prediction, I’d suggest that you’ll get results out of the program only if you bring your own initiative and motivation. If you show up with your own plan and have a chance to review & tweak it then you’ll probably do fine. If you show up expecting TAP to hand you a plan, you’ll be disappointed.

Help a blogger, or get help from a blogger

You can help teach other bloggers or learn something new for yourself!

Bloggers Helping Bloggers

Next, whether you’re a blogger or just wondering whether it’s worth your time, Jana could use some help over at Bloggers Helping Bloggers. We’re always happy to have new bloggers show up over there, or intermediate bloggers who are trying to figure out how to raise their game. However Jana especially wants to hear from more experienced bloggers who can volunteer as mentors.

I’ll start the pitch for her by pointing out that the bar is not very high: I’m one of the mentors, yet the blogger I’m mentoring has more experience than me. We each have skills to teach each other, though, and it takes about an hour a week. You and your blogger partner set the pace and share the knowledge over the phone, Skype, e-mail, social media, or however you want. (We’re roughly 5000 miles apart, so e-mail & phone has worked out best.) A new round starts every eight weeks, and the June group needs more mentors. I’ve thoroughly enjoyed mentoring and I’m going to sign up for another round.

Go Curry Cracker

Third, I’d like to re-introduce you to Team Go Curry Cracker. (Don’t laugh! That phrase rules the first page of Google search results, and it’s going to be stuck in your brain for the rest of the day.) I first met Jeremy and Winnie several years ago through Early-Retirement.org while they were vacationing in Waikiki. They were pretty close to financial independence, putting the final touches on their portfolio, and coping with the fiscal pounding of the Great Recession. Late last year, while still in their 30s, they pulled the plug and started traveling. Believe it or not, it takes a lot less than a million dollars when you’re traveling light and living local. It’s like watching Billy & Akaisha Kaderli start their journey again.

Reader Challenge Roundup

Fourth, in a shameless plug, I’d like to thank Pat Flynn at Smart Passive Income for including my pillar post in his latest Reader Challenge Roundup. I’ll confess that I got pretty excited when I saw it near the top of his post, but that’s probably just because I turned it in early it has a catchy rhyming title. If you’re a blogger, or if you’ve been wonderin’ if you should get yerself some of that there passive income everyone seems so excited about, then subscribe to his blog and keep an eye out for the “Niche Site Duel #2″ challenge. I can affirm (like thousands of other bloggers) that his techniques are working on this blog.

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Filed Under: Books & publishing, Finances, Military · Tagged With: Bloggers Helping Bloggers, financial independence, military, military retirement, TAP

Ask the readers: Returning to duty after military retirement?

April 22, 2013 by Doug Nordman · 4 Comments

I occasionally get a question that I can’t answer on my own, and this one is of general interest to many of us. Can you help this military retiree with an instruction reference or a website?

Here’s their question:

I retired from the Army and Army Reserve after a total of 29 years. Six of those years were active duty. 11 of those years I was enlisted, and 18 of them I was an officer. I retired, I got divorced, and I really miss the military.

I am age 50 in excellent condition and even had a military physical completed to try to back in – but no one thinks they can help me. I don’t want to go active duty just Reserve or IMA (individual mobilization). Please advise me of who can help me. I miss the military. Thanks.

The Army Reserve allows some retirees to participate, with several restrictions. Here’s an excerpt from that link:

Transfer to the Retired Reserve. A member in this category may participate in inactive duty training provided:
a) Such training is at no expense to the Government.
b) Members are not entitled to pay or retirement points.
c) No official record of such participation is maintained.

Similar wording is in the “Army Reserve Non-Regular Retirement Information Guide“, chapter 3-1 c.2.b, page 8 (that link opens a Word document).

You could try talking with your local Army Reserve recruiter, but I don’t know what’s typically available at local sites. You could also contact the Army’s Human Resource Service Center for other program or instruction references, and then see what you could arrange in your area.

I can think of three other options to share in the military culture:

JROTC instructor at a local high school. These are pay billets filled by military retirees, but they’re very popular and in high demand. You might have to do this as an unpaid volunteer for months or even years.
Honors detail for military funerals.
Volunteering with a local veteran’s organization like American Legion, Veterans of Foreign Wars, Military Officer Association of America, one of the wounded warrior programs, or whatever other chapters are in your area.

Readers, any other ideas? Do you have a reference or a website?

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Filed Under: Military · Tagged With: financial independence, military, military retirement, Reserve, return to duty

Total Pay: How much will your next paycheck be?

April 18, 2013 by Doug Nordman · 2 Comments

During my active-duty days, we used to have a frequent conversation around Hale Nords:

“So what’s your pay going to be now?”

“Well, let’s see. I’m on the promotion message, I just got a longevity raise, I’m getting submarine pay, I’m eligible for sea pay again, and the new housing & cost of living allowance rates are out. My paycheck should go up about… eh, I’ll have to go look up everything and add it together.”

And that was before the deployment to a combat zone… the family separation allowance… the imminent danger pay… the new BAH & COLA tables… and of course they’re barely on the same web pages. You still have to enter them into a spreadsheet (or on a piece of paper) and add them up.

Even worse was my spouse’s Reserve career:

“So, what are you getting paid this month?”

“Well, there’s the drill weekend of course, and I pulled an extra day of drill to take care of that project. Then there was the three-day conference and the two-week active duty for training. Oh, yeah, and I get a partial housing allowance for the AT. Hey, I just went over a longevity raise too!”

You can see why we pursued financial independence: to avoid having to figure out our pay for a civil-service job or some other bridge career.

The Total Pay icon

I retired in 2002, long before the App Store launched. Heck, we were just happy to be able to look up the pay tables on the Internet instead of stealing each others’ paper copies of Navy Times. But now there’s an app for that: Total Pay. It’s in the iPhone section of the (U.S.) App Store. Look for the logo of Uncle Sam’s smiling face –>

Total Pay tells servicemembers, active-duty or Reserve, no matter where they are in the world, what their pay deposit should be. It even includes the General Schedule salary table for federal civil-service paygrades.

The developer, Matt Pagan, has personally experienced the pain of figuring out his paycheck. He’s an active-duty Marine who noticed that a majority of his fellow Marines were largely unaware of their pay scales, what they rated, and how/where to check the numbers. Many of them were simply taking whatever was deposited to their checking accounts. They were too busy (or possibly too blissfully ignorant) to dig into the tables and figure out whether they were getting everything they’d earned.

Matt says that his vision is to get servicemembers more involved in their military finances, especially the younger personnel. He teaches “Financial Fridays” to his Marines to help them handle the basics of budgeting, investing, credit scores, and the Thrift Savings Plan. He feels that more should be done at the unit level to help these individuals, particularly those straight out of high school who lack experience with their finances.

From his “Financial Friday” experience, he designed Total Pay to be a quick view of military pay & allowances. The app parses the pay databases according to your input, and eliminates searching online through the various military pay charts. The pay data is part of the app, not just online, so after the app is downloaded & installed it can be used anywhere with no Internet connection necessary. The app starts with the 2013 military pay info and users will be provided with free updates for life.

Beyond calculating your next paycheck, the app can also help explore “What if?” questions. Users can look up BAH Rates at any location for their next duty station. You can change your rank, change your years of service, and add various skill or duty designations. You can even see what your pay should be if you’re married and adding kids.

You know there’s a catch. Stand by: the Total Pay app costs 99 cents. It’s worth the horrific expense, even if you have forgo the frippery of a frappe latte or sell a little blood plasma to pay for the convenience.

In retrospect, I can’t believe how my frugal sphincters reflexively clenched at the thought of shelling out almost an entire dollar for an app. (Jason Hull writes extensively about this typical Monkey Brain reaction.) Hey, I’ve never paid for an app in my life and I have over 11,000 iTunes tracks on my hard drive. Why in the world would I be expected to pay a whole freakin’ buck for an app that the military should be giving us for free?!?

I’ll tell you why: because one of our fellow servicemembers saw a problem and fixed it instead of kvetching about it like the rest of us. He’s made our lives a little easier by relieving us of spending 20 minutes parsing various websites and totaling up the numbers. He’s made it so easy that even our kids can crunch the app to find out how much money we rich parents are making (or could make). Better yet, he’s making it easier for all your shipmates to figure out their finances so that you don’t have to help them fix their problems.

Matt must be doing something right– he’s already had 2000 downloads in five months and he’s in the App Store’s top 40 out of over 19,000 financial apps. Those of you who know your apps math are already groaning at those results: the App Store takes 30%, Matt outsourced the programming, and he still has to offer annual free updates. He’s a little above the average app developer’s earnings of $700/year, but he had plenty of expenses and it’s a good thing that he’s keeping his Marine Corps day job. He’s already made more money in the first five months of his 99-cent app than I made in the first five months of my $12 book, so he’s ahead of the starving-author power curve. However he’s still a little shy of “Angry Birds” territory, and I don’t think that he’ll be shopping for a Tesla this year. Maybe not this decade, either.

Here’s another reason you can afford to fritter away 99 cents on this app: to help take care of your troops. Way back in 1978, I had to memorize 30+ verses of the ancient poem “The Laws of the Navy“. I’ve long since forgotten most of them (some of my upperclass midshipmen doubt that I even learned them in the first place), but one has stayed with me for over three decades:

“Dost deem that thy vessel needs gilding,
And the dockyard forbear to supply?
Place thy hand in thy pocket and gild her,
There be those who have risen thereby.”

I think we can all find a way to cough up 99 cents for this app. Frugal side-hustlers could charge their battle buddies a nickel to verify their paychecks for them.

However you’re also absolutely right: the military should adopt this app, pay Matt a decent price for it, and offer it to all 1.4 million servicemembers (and retirees and our families and civil-service employees) for free. I think it’s certainly worth bringing to the attention of USAA for including with their app. If you have any other suggestions, please contact me or send me an e-mail.

Matt is considering whether to program an Android version. I can vouch that this iPhone app will run on an iPad. (Switch your iPad search to the App Store’s iPhone option. When you run the app, look for the “2x” button in the lower right corner.) If you’d like to help him with the Android programming (and testing on all the Android open-source hardware) then let him know.

A few of you have already seen where this could be going: a retirement calculator, especially for the Reserve and National Guard. Heck, imagine if the phone had a credit-card reader for your CAC data.

I know at least a couple of readers are wondering “Holy crap, when does a Marine find the spare time and the money to write an app?!?” Well, Marines are pretty good at establishing priorities and managing their time (or cutting back on their social life) to accomplish them. Since it’s a financial app, I suspect he figured out how to allocate his financial resources too.

However if you want to read the whole story then he could use a hand writing it. He has a few other ideas that he’s working on, so let him know if you’d like to partner with him on an eBook. I’m already behind on my own eBook projects that I should be working on, but Matt’s looks like a winner.

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Guest Post Wednesday: “You’ve Been SERB’d!”

April 17, 2013 by Anonymous Army O-5 · 7 Comments

This guest post is brought to you by an Army officer who’s been voluntold for the Selective Early Retirement Board. For you younger readers who’ve never heard of such a heinous process, the drawdown military is partyin’ like it’s 1994 all over again.

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I’ve finally been cleared for takeoff!

After “redshirting” the real world for nearly 30 years, I’m finally going to experience how 99% of the rest of America survives lives day to day. For the second time in my military career, the Army finds itself in major drawdown mode and it looks like I won’t escape the corporate decision “to trim force structure that is excess to strategic requirements”. As a former enlisted Soldier who as a Lieutenant Colonel (O5) was fortunate enough to command a battalion, I successfully navigated the terrain in the early 90’s that saw 1 of every 3 Army lieutenants receive invitations to leave the service. But after 3 combat tours, 2 yearlong unaccompanied assignments to southwest Asia, countless months in remote training environments (at every temperature extreme), and all the office politics associated with senior level commands, I’ve decided that missing the birth of children, numerous anniversaries, birthdays, holidays and family milestones to last two lifetimes, it is time to move on.

In reality the Army greatly aided my decision-making process with the announcement that old farts “vintage” members of the O5-O6 variety don’t have an abundance of potential in a possibly 20 percent smaller force and announced a selective early retirement board (SERB). A SERB is the Department of Defense’s way of downsizing. For those of us who are subjected to being retired early it feels a lot like being cut from the team after years of being a first round draft choice. Despite being a stellar performer, I have become a casualty of timing and expense; every excess O-5 costs the same as three O-1s with a much shorter shelf life. My initial reaction was one of anger, disappointment, bitterness, and yet somehow, relief after I accepted that like Father Time, “Uncle Transition” is also undefeated. Nobody stays forever. I’ve done well to defy the inevitable for as long as I have. I now have a date certain to move to the next phase of my professional life. Yet while I recognize this is a corporate decision that is not about me, it is still a challenge not to take it personal.

Why am I writing this guest post? Primarily, I want it to document my transition from professional Soldier to professional retiree. I also hope that putting thoughts to paper will help me decide what I want to be when I grow up and learn from those who’ve already made the transition. Finally, I’ve resolved to not overly focus on the emotional instead I will, hopefully, provide readers with a map of the chokepoints, hotspots and landmines for those making the transition over the next few years.

From Citizen to Soldier

My 30 year journey began humbly enough. Initially, I enlisted for a three year tour to pay off my student loans, gain a little experience, and provide medical benefits to my new family. In four years I served as an enlisted Soldier, I saw every promotion from E3 to E6 come in the minimum time. At the three year mark of my initial enlistment I realized that this Army thing was okay and that I wasn’t taking full advantage of my talents or master’s degree. I applied for and was chosen to attend Officer Candidate School (OCS). After gaining a commission through OCS in 1989, it seemed every promotion after O2 always came with strings. I had the misfortune of earning a commission just as the Cold War was coming to an end. In 1989 the Army commissioned more than 5800 second lieutenants (O1s). An average “year group” (military terminology for personnel management of a class of officers) or management class is approximately 3000 officers. I’ve been right sized my entire 24 commissioned years through various retention boards, delayed promotion list releases, and even reducing the size of my year group by redefining the commission year. Despite the career advancement hurdles, I’ve always been considered in the upper 10% of my peer group, at least until now. After successfully serving as the executive officer of a battalion in combat, the operations officer of a deployed 3500 man brigade, and commanding a recruiting unit of more than 340 personnel , I found myself at a terminal assignment after not being selected to serve as an O6. As difficult as it was to hear that your performance was not quite good enough, I’ve made peace with the fact that I did my best. Now what? The SERB meets this August with selection results released a month or two after that. After a career of looking forward to list release (at least until the last couple of promotion lists) this is one I’m thinking of not waiting around for. One of the provisions of the selective early retirement process is the opportunity to save face by quitting before you’re fired. I can submit my application to voluntarily retire now and avoid the get out now selective process. If I exercised this option I will leave approximately five months before I was originally planning to or I can wait for the list results and leave on my original timeline with the mental scar of knowing I was asked to leave.

What about Finances?

Financially, the difference between the choices is roughly $90 per month. The dollar figure is really not a major decision factor since the good news in all this is that my wife and I are in pretty good shape fiscally. I started my adult life with a solid financial foundation. Not that I was born with a silver spoon or platinum trust fund; instead my parents left me something better – an excellent work ethic and an appreciation for living within my means. While we were never wealthy while I was growing up, we lived with the expectation that you always paid your own way, gave to those less fortunate (though at the time I doubted such people existed), and saved for the day when you could no longer work.

I started investing with a simple “portfolio” of a $50 series EE savings bond purchased through allotment from my handsome $723 monthly E3 salary. Considering that I had finished college during what was then thought a severe recession, I counted myself fortunate to have not only a job but also to be debt free since one of my enlistment incentives was government repayment of my education loans. At the time we were a family of four and barely scraping by but I thought it was important that we put aside something. I was more interested in developing the discipline to save since I had the education on investing and assumed I would have the assets to invest sooner or later. I spent nearly as many hours then studying investment options (all of which I couldn’t afford) as I do now. Interestingly, the basics of living within your means, saving and investing for the future, having a plan, and investing in what you know or are comfortable with are as important now as they were then.

Currently my wife and I are in what I call in quasi-empty nest mode. All of our kids have finished their undergraduate degree programs and are (or soon will be) beginning graduate studies on their own dime. We consciously decided not to be landlords during my career and have only owned one house. Partly as a result we are debt free and have been for quite some time. The wife has finally gotten on board with my vision of financial management, so we live somewhat frugally and below our means. We invest and save more than 50 percent of our household net income. We’ve methodically built a mid-six figure portfolio despite the fact that my wife has not worked outside the home for more than 10 years for personal reasons and because of health challenges. I’ve run the numbers through various “what if” drills and I’m convinced that we will be able to live fairly comfortably on my retirement and continue to fund a portfolio to that will augment the pension and still achieve my goal of a seven figure portfolio by age 60 to leave a fiscal legacy.

From Soldier to Chief Life Officer

The truth of the matter is that the methodical, quantifiable aspects are the easier part of this problem set for me. As I go from Soldier to Chief Life Office the less analytical, harder to enumerate challenges, are where I am not as sure of the way forward. For instance, I don’t think I will have to and I’m not sure that I want to work so we are considering “opting out” of the work force. Not being tethered to a job offers more opportunities. In terms of housing, we still have to answer the question of where we want to settle. My chief concern, like many military retirees, is restlessness. This has been a frequent topic of discussion with my retiree coworkers. After more than 15 moves in 30 years, I’m concerned that the nomadic DNA cannot be excised with a set of retirement orders. The answer may lie in something that has piqued our interest – an RV. I’ve looked at several in various military lemon resell lots and see them as a compromise. With an RV we can hit the road at will and still have roots in a community. Another question is how close do we move to family? Again our compromise is that we want to be close enough to get there in an emergency and far enough to prevent most drive by/drop in visits. We also want to be an acceptable (four hours or less) distance to a military installation to take advantage of military benefits like the commissary while they last.

I’m sure that over the next 10-12 months I will discover answers to questions that I haven’t even thought of and others that I’m conscientiously ignoring for the moment. I know I will have to address issues of medical care co-pays and deductibles, long term care insurance, state taxes, and other things that Uncle Sugar has taken care of on my behalf. In the meantime I plan to continue to pay due diligence to my transition by attending all the recommended transition courses, talking to those who have already retired, and of course, following blogs like this one.

All in all, I think this SERB thing is going to work out just fine. I’ll let you know of any blog worthy discoveries along the way.

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Filed Under: Finances, Military · Tagged With: early retirement, financial independence, military, military retirement, Selective Early Retirement Board, SERB

Reserve military pension for “discharge” instead of “retired awaiting pay”

April 11, 2013 by Doug Nordman · Leave a Comment

“Am I eligible for a military retirement?”

A reader writes:

“I hope you can answer my question, or point me to more information. After more than 20 years in the Army National Guard, including a year of deployment in Iraq and numerous temporary home-station full-time orders, I went into the IRR. I was caring for an elderly parent and could no longer serve. I had originally thought I might return to the Guard, but that turned out not to be possible, and I ETS’ed from the IRR. I received my “twenty-year letter” the year before I went into the IRR.”

“I had read about the process to apply for retirement, but I wasn’t sure if my situation in going into the IRR had made a difference. I didn’t receive any information from the Guard when I went into the IRR, and I didn’t get any information from the Reserves either. I didn’t really pursue it, either, as it was an incredibly stressful time for me – my parent’s final years of life were difficult, and the decision to leave the Guard was the most painful in my life. I had very little contact with the Reserve unit that I was assigned to for IRR – I never even got an ID card, and I have no “grey card” now – the person in charge of making ID cards always seemed to be gone when I went there. The Reserve unit is over 50 miles from my home, and I could not leave my parent at home alone for more than a short time without getting a home-care aide to come in, which was very expensive.”

“I wasn’t given any information about having a choice of retirement. I was given an honorable discharge when my ETS date came. It came in the mail. I didn’t get any package of information, from the Reserves or the Guard. I didn’t get any counseling of any kind.”

“Am I eligible for retirement pay? What do I have to do? Thanks for any help you can offer.”

First the good news: Yes, you’re eligible for a National Guard military retirement. You received your Notice of Eligibility (the 20-year letter) before you were discharged. Your pension will probably start at age 60 but there’s a remote chance that it could start up to a year earlier. Your Tricare benefits will start at age 60.

The “other” news is that you have some paperwork to catch up on. You may also need to make a decision about Survivor Benefit Plan insurance. Luckily most of this can be started online.

You say that you ETS’d from the IRR. That can take two forms: “retired awaiting pay” or “resign”. If you elected were handed the “resign” option then you’ll need to request a retirement pay application packet. That’s described at the Army National Guard G1 Personnel Gateway. You could contact your nearest Army National Guard unit to start the process, or you could phone another unit in your state to discuss the retirement packet. The Army National Guard G1 staff doesn’t list their phone numbers or e-mail addresses, but you could start with the Army Human Resources Center. More links and forms are at the Army National Guard G1 Personnel Gateway website page on applying for non-regular retired pay.

You may be told that you should start this paperwork no more than nine months prior to the date at which you’ll be eligible for retired pay. However you’ll probably still want to make sure that you understand what websites to use to start that process and who you could contact for help.

The discharge means that your retired pay will be calculated on the pay tables in effect at the date of your ETS and on the years of longevity in your rank at that time. In other words, your pension eligibility did not keep up with inflation. If that’s the case then don’t use a military retirement pay calculator– their numbers will be too high. You’ll need to manually calculate your retirement pay, or have it done by the National Guard or the Defense Finance & Accounting Service. Although you may have to wait until nine months before your retirement begins to request your retirement package, you can ask for the calculation now.

One other wrinkle: If you were deployed to a combat zone after 28 January 2008 then you may be eligible for retired pay a day earlier for each day of the deployment. You would have had to serve at least 90 days after the date of that legislation, and your retirement pay would start at least 90 days earlier. However your Tricare medical benefits would still start at age 60.

I’ll put some pension amount numbers on a generic example that you can tailor to your specific rank and service dates. (I’m going to cherry-pick numbers that will avoid messy calculations & fractions, but in most cases the math is carried out to three decimals and rounded to two.) Let’s assume that two E-8s complete 21 years of service with 5400 points by the end of 2002. One of them chooses to “retire awaiting pay” while the other (for personal reasons) elects to resign for a discharge. (Resigning means that they cannot be recalled to Reserve/Guard duty and cannot be mobilized.) They’ll both be age 60 on 1 January 2013 (10 years later) and will start drawing their retired pay then.

Because they both joined the service after 7 September 1980, they’re under the High Three retirement system. Their “base rate” for determining their retired pay will be the average of the highest 36 months of pay that they earned. However, here’s where the difference in their retirement decisions kicks in.

Calculating the pension difference

I don’t have a link to the Army Reserve instruction, but here’s the wording in the Navy’s Reserve instruction BUPERSINST 1001.39F (whose revision is nearly finished and should be back on the BUPERS website in a month or two*):

“Note that for purposes of entering the pay tables, a member’s longevity starts with the pay entry base date (PEBD) and continues to accrue as long as the member holds Retired status until the member starts to draw retired pay. Because of this standard, most reserve members will max out on the longevity scales by the time they reach age 60.

“Also note that should a member request and receive a discharge, instead of transferring to Retired Reserve status, at an age of less than 60 years, longevity would no longer accrue and base pay would be calculated on pay scales available at the discharge date.”

The E-8 who “retired awaiting pay” will receive their pension at the pay tables in effect when they turn age 60, and at the maximum longevity for that rank. (This is the reward earned for accepting the risk of being recalled to Reserve duty or even mobilized before age 60. Admittedly it’s a very small risk, but it’s a risk.) During the years before they file for retirement and actually start drawing their pension, the value of their pension will keep pace with the growth of the military pay tables. There’s no guarantee that military pay will keep up with any wage or price indexes, but Congress and the service chiefs know that they have to be willing to pay for military readiness.

This E-8 would use the military pay tables for the three years before they turn age 60: 2010, 2011, and 2012. Because their longevity continued to accrue while “retired awaiting pay”, they’d use the maximum longevity for their rank. Their E-8 monthly pay scales for these years are $5336.40, $5411.10, and $5497.80. The average of those 36 months is:

[12x$5336.40 + 12x$5411.10 + 12x$5497.80] / 36 = $5415.10.

The E-8 who was discharged would use the pay tables in effect at the date of their discharge and at the longevity held at discharge. Their E-8 monthly pay scale for their longevity was >18 years in 2000 ($2875.50) & 2001 ($3041.10) and >20 in 2002 ($3420.30). (Of course if they went >18 or >20 during the year then you’d use some months in one longevity column and the rest of the year in the next longevity column.) The average of those 36 months is:

[12x$2875.50 + 12x$3041.10 + 12x$3420.30] / 36 = $3112.30

You can already see that for this particular example the Reserve/Guard member who was discharged instead of “retired awaiting pay” has suffered a heavy financial penalty for having no risk of recall or mobilization during those 10 years. Their pay base for the pension formula is only 57% of the amount for the “retired awaiting pay” servicemember.

Once the retirement High Three “pay base” has been determined, the Reserve/Guard retirement pension calculation is the same for each servicemember: their points are divided by 360 (12 30-day months in a year) and multiplied by 2.5%. In this case it’s 5400 / 360 x 2.5% = 37.5%.

The pay base is multiplied by the percentage and rounded down to the whole dollar to get the monthly pension amount.

E-8 retired awaiting pay: $5415.10 x 37.5% = $2030.

E-8 discharged: $3112.30 x 37.5% = $1167.

Back to the reader’s question: the Reserve unit discharged you without counseling, so they could be hypothetically be accused of negligence in their retirement processing. You may be entitled to appeal your discharge and have it revised to “retired awaiting pay”. It’s also possible that the Reserve unit decided that your need to care for your parent meant that you should not be at risk of recall, so they made the decision for you. In that case (whether or not the decision was made with your input) the appeals process may determine that the decision was the correct response to the situation.

Of course your actual pension calculation will be different from this example. You’d use your actual rank and longevity pay table column at discharge as well as your final point count. Comparing your actual “discharge” pension to a “retired awaiting pay” pension may also require some speculation. If you’re younger than age 60 then you’d have to predict what the pay tables might look like at age 60. Only then could you estimate how much the Reserve unit’s actions cost you.

I can’t predict how an appeal would turn out, and you’d need to seek the advice of your own attorney. The difference between the two pensions in the example is $10,356/year. (In your case the difference might be less.) I don’t know how much a lawyer would charge for drafting the appeal and pursuing it, but it could easily be over $10,000. In addition it could drag on for months or even years of processing and more appeals to higher authority. This is a very hard decision to make on your own, and a lawyer would help you frame the discussion. However in this case you may very well only receive the justice that you can afford to buy, and even then your appeal may be turned down.

Do any of you readers have any other advice? Have any of you ever processed an appeal of “retired awaiting pay” versus discharge? Contact me or send me an e-mail, and I’ll pass it on to this reader.

[* Thanks to Navy Reservist Mark Bell on Linkedin for updating me on the BUPERSINST 1001.39 status.]

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Filed Under: Finances, Military · Tagged With: discharge, financial independence, military, military retirement, retired awaiting pay

Guest Post Wednesday: How Military Wives’ Employment Affects Military Retention

April 10, 2013 by Angela Gutierrez · 6 Comments

Editor’s note: This post focuses on women military spouses because, well, there are a lot more of them than men military spouses. Yeah, I know, guys are military spouses too: I’m one of them. We already have one male milspouse guest post on this blog, and I’d love to have more. So if you think male milspouses need representation too, then send me a guest post!

Will you be a successful military spouse too?

Military spouse success

A Rand Corporation analysis of military wives and employment found that military wives earn lower wages, work fewer hours and have higher rates of unemployment than their civilian counterparts. Factors like frequent moving can cause military wives to accept jobs with lower wages and can prompt employers to shy away from hiring them, even if these wives have utilized military dependent scholarships to update their job skills.

At the same time, good job prospects for military wives often correlate with their spouses actually leaving the military. Wives who believe that job prospects in the labor market are good can influence their spouses to resign from the military. So how can military wives enjoy professional success without increasing the chances that their spouses will leave military service?

Why Good Jobs are Tough to Find

A military family moves approximately every 2.9 years. As a result, many wives don’t have the opportunity to accumulate long periods of job experience. Also, if a military wife works in a profession that requires state licensure, like nursing or education, then the differing requirements between states mean training for and acquiring new licenses.

In 14 states, when a military wife loses a job because her spouse is transferred, she receives no unemployment benefits because these states view the job leave as voluntary. Additionally, if a wife is in college when her spouse is transferred, she may not be able to afford out-of-state tuition to finish her degree, and she may lose a substantial number of the credits that she has earned.

When her husband is deployed, a military wife runs her household, often by herself. Military cultural norms mean that she is expected to volunteer to run the military’s family readiness groups that support wives whose husbands are deployed. All of these different factors reduce her earning capacity and availability for work.

The Effects on Military Retention

In 2008, the Army was hemorrhaging junior officers, so it started offering $35,000 retention bonuses for captains to try to keep numbers from plummeting. While the conflicts in Iraq and Afghanistan were partly responsible for the losses, the difficulties that military wives face when pursuing professional careers were a major factor causing these junior officers to rejoin civilian life.

Laura Dempsey, a military wife and an attorney, wrote an article for the Christian Science Monitor about the challenge of having a career while having a spouse in the Armed Forces. In a 10-year span, she moved seven times, held five jobs and took four different state bar exams. Many military wives, according to Dempsey, have dubbed situations like hers the military’s “spouse tax.”

The Department of Defense has stated that it recognizes the consequences that a military wife’s unemployment may have for service member retention and reenlistment. A joint report issued by the DoD and the Treasury Department said that military wife employment enhanced the personal and financial well-being of the military household. Without adequately supporting military wives and their career objectives, the report said, the military could face difficulty retaining current service members.

How Government is Addressing the Issue

The DoD has focused its efforts on allowing military spouses’ professional licenses to transfer more easily between states when military families move. The DoD’s states liaison office, in conjunction with Michelle Obama’s “Joining Forces” initiative, has outlined three ways that states can facilitate licensure transfer:

Accept substantially equivalent licenses. If requirements between states are substantially equivalent, then a state should accept the license of another state without adding requirements.
Issue temporary licenses. While the spouse works to obtain a new license, the state can issue a temporary license that would allow the spouse to work.
Expedite licensure for military spouses. Streamline and speed up the licensure process to minimize career disruptions for military spouses.

While many issues including college transfers and unemployment compensation remain to be solved, the Armed Forces have begun to recognize just how much a military wife’s career satisfaction affects retention. By continuing to support policies that could help military wives find good jobs, the military could prevent the losses of so many of its talented young officers.

About the Author: Angela Gutierrez is the daughter of an Army captain. She lives in and writes from her home in New Hampshire, where she is happily married to a civilian engineer.

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Filed Under: Military · Tagged With: military retention, military spouse, military spouse employment

Reserve military retirement for active-duty veterans with previous Reserve or National Guard service

April 8, 2013 by Doug Nordman · 4 Comments

Thanks to David McDonald for sending the comment that led to this post!

This information applies to only a handful of veterans, but it may earn them a military retirement. You could be affected if you were in the Reserves or National Guard and then went on to serve an active-duty service obligation (more than a mobilization).

Servicemembers who separated from active duty before reaching 20 years of service are rarely eligible for an active-duty retirement (and then it usually involves a temporary early-retirement authorization or a medical issue). However if you separated from active duty but had lengthy prior Reserve/Guard service, then you may still have reached eligibility for a Reserve/Guard retirement. If you’ve been in uniform for at least 20 years with a combination of Reserve/Guard service and active duty then you could be eligible for a Reserve/Guard military retirement.

Back before April 2005, Reserve/Guard retirement eligibility had to be attained in a Reserve or Guard unit. Servicemembers who reached 20 years had to serve their final six “good years” in a Reserve/Guard unit. I’m not sure why this requirement existed, but it meant that Reserve/Guard retirees were almost certain to be serving in a Reserve/Guard unit before they retired. Their service’s Reserve/Guard personnel staff had full cognizance over the tracking of their points and their good years.

When extensive military mobilizations began after 11 September 2001, it became painfully clear that Reserve/Guard personnel procedures varied significantly from their active-duty services– and varied even more widely among the services. Each service had their own stovepipe systems for tracking their Reserve/Guard personnel, and those procedures didn’t work very well for integrating individual Reserve/Guard servicemembers with active-duty units. However Reserve/Guard servicemembers were working the same hours on the same duties under the same conditions as active-duty servicemembers. They deserved to be treated the same way.

In addition, a few active-duty servicemembers had served in the Reserve/Guard before 9/11. They might have separated from the military before 9/11 and then re-enlisted for an active-duty obligation, or they might have transferred from the Reserve/Guard to active status. They didn’t simply mobilize for active duty and expect that someday they’d demobilize. They actually left the Reserve/Guard to serve an active-duty contract.

In November 2005, DoD policy required that the same procedures be used to manage all active duty (regular duty) and Reserve duty of servicemembers. This included tracking the crediting and accounting of Reserve retirement (“non-regular retirement”) along with active-duty retirement. This also includes tracking any non-regular service credit achieved by active-duty servicemembers.

When a Reserve/Guard member qualifies for a Reserve (“non-regular”) retirement, they receive a Notification of Eligibility that their 20-year requirement has been completed. In addition to their points, they’d achieved 20 years of qualifying service– 20 “good years”. With the new DoD policy, if they reached Reserve/Guard retirement eligibility while serving on active duty then their active-duty personnel staff were now responsible for delivery of the NOE.

Another law was changed effective 26 April 2005. After this date, Reserve/Guard servicemembers could retire without serving their final six qualifying years in a Reserve/Guard unit. (Scroll down to the “Retirement Eligibility” section of that link.) This meant that a servicemember on active duty who had previous Reserve/Guard service could reach eligibility for a Reserve/Guard retirement (a “non-regular retirement” on page 3 of Encl(1) of that link) while they were still serving on active duty. I’m not sure why this requirement was changed. (Please contact me if you know!) Now active-duty servicemembers with lengthy prior Reserve/Guard service might be eligible for a Reserve pension at age 60 (with gray-area benefits before age 60).

It’s been nearly eight years since the rule change, but not all of the data has transferred over from the Reserves to the active-duty personnel staffs. Reserve/Guard units are informing their members that they no longer have to serve their final six years in a Reserve/Guard unit before retiring, but active duty personnel staff may not be passing the same information to active-duty servicemembers who have previous Reserve/Guard experience. Even worse, active-duty personnel staffs are not tracking the total “good years” of service for those members and they’re not issuing them a NOE when they qualify for a Reserve retirement.

In this post, “lengthy” Reserve/Guard service before active duty probably means at least two years. If you have two years of prior Reserve/Guard service then you’d reach non-regular retirement eligibility after 18 years of active duty, and you’d probably choose to try to do two more years of active duty for an active-duty retirement. Even if you had 4-5 years of prior Reserve/Guard service then you’d probably still try to stay on active duty for another 4-5 years of an active-duty retirement. However you’d have a choice, and that choice could be based on personal or family priorities instead of simply the financial difference between a Reserve retirement and an active-duty one.

Eventually the systems will be reconciled to cover this gap in tracking. However you have to be responsible for your own career and you have to stay aware of your own benefits. If you think you’re eligible for a Reserve/Guard retirement then talk with your personnel staff or a Reserve unit, or contact me. If you had lengthy Reserve or National Guard time before you went on active duty then you may want to explore a Reserve retirement now.

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Filed Under: Military · Tagged With: early retirement, financial independence, military, military retirement, non-regular retirement, Reserve retirement

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