By Sandra Block
From Kiplinger’s Personal Finance
Mike Hunsberger, former member of the U.S. Air Force and founder of Next Mission Financial Planning, in St. Charles, Missouri, breaks it down.
Question: Faced with a tough labor market, military recruiters are offering potential recruits bonuses and incentives. What should a young person consider before joining the military?
Answer: People should think about their long-term goals. You get to do things you never imagined when you are in your late teens or early 20s—the places you might go, the people you’ll interact with. The experience and job training you get have a lot of application to careers outside the military.
In my case, I qualified for a three-year ROTC scholarship for the last three years of undergraduate studies at Rochester Institute of Technology in New York. I got my commission and started active duty right after I graduated. When I was in college, I was pretty sure I would leave after my four-year commitment. I ended up staying 25 years.
Question: What does the military offer from a financial standpoint, particularly when it comes to the cost of housing?
Answer: New recruits may be living in a dorm-type setting, in which case they receive free housing in addition to their base pay. Once they move out of the dorms, they’ll qualify for a tax-free housing allowance, a monthly subsidy covering all or part of their monthly rent or mortgage payment.
If they buy a home, they’ll qualify for a VA home loan, which offers competitive interest rates and requires no down payment (although there’s a funding fee of up to 3.6 percent).
Question: What about educational benefits?
Answer: The Post-9/11 GI bill will pay for the equivalent of a four-year college degree—or up to a certain amount per academic year for private colleges and foreign schools; currently, it’s $26,381. You’ll also get a housing stipend and money for books and supplies. (Longtime service members may also transfer the benefits to their spouse or children.)
In addition to the GI bill, there are scholarship programs that will fund your degree while you’re in the military. Most bases have one or more programs that offer college classes on base, and there are a lot of virtual classes too. And when you leave the military, you can use the Post 9/11 GI bill for graduate school or to get another degree.
Question: We know that members of the military receive a pension after serving 20 years or more, but many people leave the military much earlier than that. What benefits are available for individuals who choose not to make the military their career?
Answer: In the past, you needed to serve 20 years before you were eligible for any kind of retirement benefits. Now, service members can receive matching funds when they contribute to the Thrift Savings Plan. Everybody qualifies for that, and they vest fairly quickly.
So if you don’t serve 20 years, you’ll have a 401(k)-like plan to take with you, and that gets you off on the right foot. You can go into the service at 18 and come out at 23 and be far ahead of people who didn’t serve.
As long as you leave with an honorable discharge, you’ll continue to be eligible for other veterans’ benefits.
(Sandra Block is a senior editor at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.)
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