By Kevin Peters
It isn’t easy being a veteran, especially a career reservist who walks a fine line between the military and civilian worlds. There may be real financial hardships resulting from regular activations that throw a monkey wrench into family finances.
Military pay may be light years ahead of where it was in the Vietnam era, but it still can’t compare to civilian pay, especially when it is in lieu of a primary breadwinner’s civilian salary.
It is common for military families to need the services of a skilled adviser to help keep the finances on track, especially for big-ticket items such as mortgages. But recently discharged vets, in addition to retirees, also could use some help getting their finances in order, understanding the long-term benefits of G.I. Bill benefits for college education, job training, disability pay for service-related injuries or sickness, no-down-payment mortgages and putting money aside for retirement and other needs.
It is important to understand that from a financial standpoint not all veterans are created equal. Vets who serve one or more enlistments but leave the service short of the 20 years required for retirement benefits, essentially have the same chances at financial success as their civilian counterparts, although career-wise they may be several years behind those who did not serve.
The years that veterans spend on active duty often are used by their civilian peers to advance their education, and after that, their careers. Even for college graduates who entered the service as officers and who may be considerably ahead of their civilian counterparts in life experiences, there is a gap, even if it is just in navigating the corporate culture.
Veterans who retire after 20 years are still relatively young and can add a second career to their retirement income, giving them the best chances of becoming serious investors. Also, retired officers usually have higher salaries in the military than enlisted personnel and have a better chance at disposable income.
Perhaps the best advice for younger vets, either those on active duty or in reserve units with regular deployments, would be to take courses in managing their finances. A recent survey of military families revealed that 49 percent have less than $5,000 in savings, and 42 percent of service members and 40 percent of military spouses identify military pay and benefits as among their top areas of concern.
Family incomes are generally supplemented by the non-service member as 68 percent of military spouses are employed and actively seeking work. But more than half of employed military spouses earned less than $20,000 in 2016.
In addition to the other stresses faced by service families, uncertainty regarding deployments and whether a change will disrupt families, potentially sending them to an area with a higher cost of living, can have a negative impact.
Financial advisers can assist with military spouse employment by helping navigate government regulations that dictate life on military bases, including military housing, and regulations governing the operations of small businesses on base.
Advisers who help military personnel and veterans also can help vets and their families by providing detailed financial advice relating to the transition to civilian life that goes deeper than the obvious big-ticket items. Three areas identified by experts in veteran financing that could help that demographic include avoiding debt, amassing savings and appropriate application of supplemental pay – such as tax-free combat zone pay – to help build a portfolio.
Advisers also can assist veterans and their families outline their income and expenditures for emergencies and other unanticipated costs and determine their ability to make long-term investments.
Veterans in all categories face challenges that the civilian population is unaware of but they still can construct a financial plan that considers both immediate and long-term needs. Whether they are retired, still serving, just discharged or have long since put the military behind them, veterans as a group encounter unique challenges and opportunities. With proper guidance they can become successful investors with solid and versatile portfolios.
Kevin Peters is a financial adviser with the Wealth Management Division of Morgan Stanley in Purchase. He can be reached at 914-225-6680.
The information contained in this column is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. Morgan Stanley Smith Barney LLC (“Morgan Stanley”), its affiliates and Morgan Stanley Financial Advisors or Private Wealth Advisors do not provide tax or legal advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney, LLC, member SIPC.