Tips for Military Reservists to Gain More Confidence in Their Financial Future
There are many stages of military life. Whether you are an active duty service member, a reservist, or a veteran, we believe you deserve quality financial advice you can rely on. At Aviance Capital Partners, we strive to help our military clients find confidence in their financial futures.
In our previous article, we discussed six financial tips for active duty service members. Though many of these tips also apply to military reservists, in this article we’ll be discussing three specific financial planning challenges reservists face and some suggestions to help you meet them.
Military Reservists TIP 1. Healthcare Coverage
Healthcare coverage is one of the most important aspects of a strong financial plan, but navigating this issue becomes particularly complicated for military reservists. You can have access Tricare Reserve Select (TRS) as well as civilian health insurance offered through a non-military employer or obtained in the private market. Understanding your options and determining which coverage makes the best financial and medical sense is a challenge that many reservists face.
TRS is a health insurance program available to qualified members of the selected reserve and their families. It is considered minimum essential coverage under the Affordable Care Act and is often a better option for reservists than other coverages offered through private employers.
To be eligible for TRS, you must meet the following qualifications:
- You cannot be on active-duty orders.
- You cannot be covered under the Transitional Assistance Management Program.
- You cannot be eligible for or enrolled in the Federal Employees Health Benefits (FEHB) program.
With a TRS health plan, you are responsible for paying a monthly premium in addition to a co-pay and annual deductible. Service is provided by an authorized Tricare provider, much like civilian health plans.
The biggest benefit of TRS comes in the catastrophic cap, which is the maximum amount you will be required to pay for covered services in a year. It’s not uncommon to find that the catastrophic cap for a TRS plan is less than the entire annual premium of a civilian health insurance plan.
If this is the case for you, we suggest you carefully identify the services your employer’s health plan covers that might be important to you. For instance, if you employer plan covers chiropractic care and is not that much more expensive than TRS, it may make more sense for you to enroll in your employer’s plan despite the initial savings offered by TRS. Each family will have different needs, so there is no one-size-fits-all solution to this question. Working with a qualified financial professional can be a good start.
Military Reservists TIP 2. Retirement Planning
There are several ways to become a military reservist. You can be a civilian who completed boot camp and enrolled directly into the Reserves, or you can be a former active duty servicemember who reserve retired. Which path you take will ultimately affect how your retirement plan is structured and which retirement accounts you have access to.
As a civilian reservist, you do not have access to the military retirement plans available to active duty servicemembers. These include the Savings Deposit Program and Thrift Savings Plan. As such, your retirement planning must consist of employer-sponsored retirement plans, IRAs, and other personal savings and investment accounts.
If you are reserve retired, on the other hand, you will probably have SDP and TSP account balances that will either need to be rolled into a new employer’s retirement plan or managed separately until you fully retire. Either way, being a reservist adds an extra layer of retirement planning to your plate. You will often navigate questions like:
- What is your specific risk tolerance and diversification needs, and how do those factors affect your retirement plan participation?
- Should you roll over your existing accounts to your employer’s plan?
- How much should you contribute based on matching contributions, safe harbor rules, etc.?
- If deferred compensation is available to you, does it make sense to participate and how much should you defer?
Generally, the earlier you start thinking about these questions and creating a cohesive retirement plan, the better off you will be.
Military Reservists TIP 3. USERRA Implications
The Uniformed Services Employment and Reemployment Rights Act (USERRA) protects members of the military from employment discrimination and allows reservists to regain their civilian jobs following a period of uniformed service. This law comes into play should you be activated while working in a civilian position and it ensures that you are promptly re-employed following your return from duty.
Though this is an important protection for military reservists, there are still several financial planning challenges that should be considered if you are activated for duty. First and foremost, it is important to understand what effect being activated for duty will have on your earnings potential.
Your pay and benefits will be determined depending on which branch you serve and how you are activated. For instance, those in a federal military branch will receive the same pay and benefits as active-duty servicemembers whereas those serving the National Guard may be active on a state-level mission, meaning they would receive pay and benefits based on that state’s employment laws and policies.
Keep in mind that your civilian employer may also offer military leave or differential pay. All of these sources of income should be factored into your financial plan. If you know that your activation pay is going to be less than your current salary, then you can start a consistent savings schedule to lessen the financial strain that activation may cause.
It’s also important to consider how and when you can make additional contributions to your retirement plans during activation. Depending on what your budget looks like upon activation, it may make sense to pause retirement contributions until you return from duty. Conversely, if your activation pay results in a net gain, it may make more sense to save a larger amount than you otherwise would have.
At ACP, we believe that proactive planning can help you make the most of your unique financial challenges as a military reservist.
Each Situation is Unique
Though each member of the military is bonded in their collective commitment to their country, everyone’s financial situation is unique. If you are a military reservist looking for guidance when it comes to your financial plan, we would love to hear from you! At Aviance Capital Partners, our goal is to provide quality financial advice to each military servicemember, no matter their branch or stage in their career. To learn more about our process and how we can help you, reach out to us at wealthrelations@aviancepartners.com or call (239) 598-4747.
Disclosures: Aviance Capital Partners, LLC (“ACP”) is an SEC registered investment adviser located in Naples, Florida. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ACP has attained a certain level of skill, training, or ability. While information presented is believed to be factual and up-to-date, ACP does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of ACP as of the date of publication and are subject to change. Not all services will be appropriate or necessary for all clients, and the potential value and benefit of the ACP’s services will vary based upon the client’s individual investment, financial, and tax circumstances. The effectiveness and potential success of a tax strategy, investment strategy, and financial plan depends on a variety of factors, including but not limited to the manner and timing of implementation, coordination with the client and the client’s other engaged professionals, and market conditions. This should not be construed as specific investment, financial planning or tax advice tailored to an individual reader. ACP suggests that readers consult a financial professional, attorney or tax advisory professional about their specific financial, legal or tax situation. Past performance does not guarantee future results. All investment strategies have the potential for profit or loss, and different investments and types of investments involve varying degrees of risk. There can be no assurance that the future performance of any specific investment or investment strategy, including those undertaken or recommended by ACP, will be profitable or equal any historical performance level. Additional information about ACP, including its Form ADV Part 2A describing its services, fees, and applicable conflicts of interest and its Form CRS is available upon request and at https://adviserinfo.sec.gov/firm/summary/146597. For current ACP clients, please advise us promptly in writing, if there are ever any changes in your financial situation or investment objectives, if you wish to impose any reasonable restrictions to our management of your account, or if you have not been receiving at least quarterly account statements from your account custodian.
