Find Financial Advisors for Air Force Service Members: Q&A Insights from the Experts

The TSP Is Underused by Many Air Force Members

Many can contribute much more than they do. Understanding decades of tax-free or tax-deferred compounding is key to motivation to save more each month.

Don’t Default to the VA Home Loan Without Weighing the Alternatives

The VA loan isn’t always the best choice, and planning around the GI Bill for yourself or your children is another major topic. Frequent moves can also turn families into accidental landlords.

Before Separating, Plan Your TSP, VA Disability Claim, and Insurance

Decide what to do with your TSP, file a VA disability claim, arrange life and disability coverage, build a 12-month cash flow plan, and update your estate documents.

I help members of the Air Force understand the benefits available to them, such as the Thrift Savings Plan (TSP), Servicemember’s Group Life Insurance (SGLI), the GI Bill, and the VA Home Loan. These benefits can be a huge positive impact when used properly.

I love to ask people why money matters to them to get an understanding about how they feel about money. I also like to get an idea of their history of service and plans for the future to better inform the planning that we do today.

I think the Thrift Savings Plan (TSP) is underutilized by most Air Force members. Many can contribute much more than they do, and they get sidetracked by other consumption expenses, especially at a young age. Understanding the power of tax free or tax deferred compounding for decades in the TSP is key to having the motivation to contribute more every month.

The GI Bill and planning around that for education benefits for clients or the children of clients is a big planning topic. Also, talking about the VA home loan and when may or may not be the best time to use it is something that I like to go through with clients. Many Air Force members default to always going with the VA loan when that may not be in their best interest.

Deciding what to do with your TSP as a part of your investment plan. Applying for a VA disability claim is usually a key part of the transition as well for those leaving active duty. Getting life and potentially disability insurance in place before transitioning out of the Air Force is another key item. Another would be to make a 12 month cash flow plan to account for changes in living circumstances and changes in your tax bill that come with transitioning out. Lastly, updating your estate documents if you are moving locations or have any other life changes is a critical part of your financial plan.

Typically, there will be a portion of guaranteed income between pension, disability, and social security. To make up the gap after that, it is crucial to construct a well diversified portfolio that you can draw income from. This can include a TSP, IRA, or other investments as well as investment real estate. It is important to construct a concrete plan of exactly where that income will come from, and what makes the most sense to minimize your lifetime tax bill while meeting all of your lifestyle needs.

Working with an advisor is really for those that have some complexity in their financial lives or realize that there is just too much at stake to do it themselves. Many who work with an advisor would be plenty fine on their own, but they recognize their unique ability does not lie in personal finance and want to outsource this work to a trusted professional, as well as have a thinking partner for all of the financial decisions to come.

A lot of the families I work with become accidental landlords from moving all over the country every three years. I help them assess the health of their real estate portfolio in the context of their overall financial situation, as well as make the best decisions on that portfolio going forward.

Ask them if they are independent or if they work for a larger firm. Ask them as well how they are compensated, and if they receive commissions of any kind. Ask them how many people they work with, and how many people are similar to you.

Most people don’t have an estate plan of any kind, even those with children. This is surprising because this is a free service that is offered on base and it is so vitally important to get done.

For those who are highly compensated and may be over the Roth IRA contribution limits, it might make sense to do a Backdoor Roth IRA after contributing the maximum to their Thrift Savings Plan. It also might be smart to automate contributions to a taxable brokerage account or savings account for rental real estate. The key is finding ways to automate income toward goals. Looking for tax saving opportunities such as tax loss harvesting, donor advised funds, and real estate deductions is also a key part of planning for highly compensated employees.