Financial Planning for Transition - 2023 TAP Curriculum, Study notes of Financial Management

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FINANCIAL PLANNING FOR TRANSITION 2023 TAP CURRICULUM Table of Contents Financial Planning for Transition ....................................................................... 2 Financial Goals .............................................................................................. 3 Income ......................................................................................................... 6 Expenses .................................................................................................... 23 Debt and Credit ........................................................................................... 42 Assets ........................................................................................................ 56 Action Plan .................................................................................................. 69 Transition Assistance Participant Assessment ................................................... 81 Appendix .................................................................................................... 82 Spending Plan ............................................................................................. 86 Financial Planning for Transition – 2023 - Page 4 • MEASURABLE: Have a clear definition of success, then state the goal in clear terms, so you will know when you have reached your goal and are able to celebrate (e.g., to have credit card debt below $500). • ACHIEVABLE: Be sure you can attain the goal, but set one that shows an improvement over your current situation; having a million dollars in the bank after one week is not attainable by most standards and situations. • REALISTIC: Is the goal realistic, based on your situation? It may be achievable to save $1,000 a month when you make $2,000 a month, but is it realistic based on your life situation. • TIME-BOUND: Goals need to have a specific time limit in which to achieve the goal; add days, weeks, months, years. Examples of financial goal statements: • Decrease credit card debt by $5,000 in the year prior to transition by making an additional monthly payment of $500. • Build a transition savings account of up to $5,000 the year before transition by putting $420 per month into a designated savings account. • Pay off student loan debt in 5 years by increasing payment amount by $200 each month. • Save for a house down payment within 24 months by automatically transferring 10% of each paycheck into a separate account. • Add $350 into a savings account each month to accumulate at least 3 months of monthly expenses prior to the date of separation. Activity: Financial Goals for Transition Directions: Write your three SMART financial goals for transition in the box below: one short, one medium, and one long-term goal. (For reference, a spending plan is provided in the Appendix) 1. 2. 3. NOTES: Financial Planning for Transition – 2023 - Page 5 SPENDING PLAN In previous financial courses, you should have developed a spending plan. Now, it is time to dust it off and re-examine to help prepare for your transitions to post-military life. If you have not previously created a spending plan, now is the time. Either way, this will help you understand: • Where you are now? • Where do you want to be? • Can you get there from here? The goals you established during initial counseling can have a financial impact during transition. Employment: Education Entrepreneurship It may take a few months to find a job that will cover your living expenses and even after obtaining the job, there may still be a 2-4- week lag between starting and receiving the first paycheck. There may be a similar lag in receiving a retirement check. Even if using Veterans Affairs’ (VA) education benefits to help pay for tuition, housing, and books, you may still need additional funds to cover expenses like insurance, transportation, or housing. In addition, housing is not paid until after the start of the semester and only for those days for which you are in school. During breaks (spring, fall, winter) and summer (if not in class), you will not receive the housing allowance. When starting your own business, it could take some time to realize a profit. Remember, your spending plan is a tool to help you understand your current financial situation and to build a financial plan to meet your transition goals. Take time to review your current financial situation, identify tools that can help you understand the financial changes associated with transition, and how transition will affect your financial situation. Financial Planning for Transition – 2023 - Page 6 Income COMPETENCY Evaluate current military salary to determine salary requirements after transition. LEARNING OBJECTIVES • Determine current military income and compensation. • Compare current military income and compensation to civilian equivalent to predict future salary compensation requirements. • Determine the difference in tax liability between current military compensation and projected civilian salary. INCOME Review of the common terms used when discussing income: • Gross Income: Wages (pay and allowances) before any deductions (e.g., taxes, Social Security, insurance premiums, retirement plan contributions, etc.) • Net Income: Wages after any federal/state deductions (e.g., taxes, Social Security, retirement plan contributions, savings allotments, insurance premiums, and other deductions, etc.) For example, the Leave and Earning Statement (LES) or Payslip (for USCG) shows an income of $2,000 per month (i.e., gross income), but the amount deposited into your bank account is only $1,500 per month (i.e., net income). Total pay + allowances = Gross Income Gross Income – tax/insurance/ retirement deductions = Net Income Net income is the amount of money you take home from each paycheck Financial Planning for Transition – 2023 - Page 9 Coast Guard Payslip As you review your LES/Payslip, realize that income is any source that provides a regular supply of money, such as employment, investments, pension, etc. Consider the following: - Does your spouse have an income? - Do you have a second job? - Are you receiving income from investments or rental property? - Do you receive child support or alimony? To have an accurate picture of your finances during transition, all sources of income need to be included in the spending plan. Financial Planning for Transition – 2023 - Page 10 SPENDING PLAN UPDATE - INCOME Now is the time to review the income section of the spending plan. Follow the directions provided by your facilitator and fill in the appropriate areas of the spending plan. Include: • Income from LES or Payslip to include all entitlements • Spouse income if applicable • Income from additional sources (e.g., investments, child support, second job, etc.) CIVILIAN SALARY EQUIVALENT Now that you know your current income, we can determine the approximate civilian equivalent based on your current salary in the military. One way to determine your approximate civilian equivalent is to use the Regular Military Compensation (RMC) calculator. Note: Be aware this calculator does NOT include special pays. http://militarypay.defense.gov/Calculators/RMC-Calculator/ Financial Planning for Transition – 2023 - Page 11 SCENARIOS: Two scenarios are included as examples for use of some of the websites. Scenario 1 Scenario 2 - E-4 - Separating after 4 years - Single - Washington, DC; 20002 - 0-5 - Retiring after 20 years - Married with family - San Antonio, TX; 78150 SCENARIO 1: RMC CALCULATOR Annual basic pay is $33,440 adding in BAH and BAS brings full compensation to $60,638. This Service member will need an approximate salary of $64,967 to meet their current financial obligations and maintain their current lifestyle in Washington, D.C. Financial Planning for Transition – 2023 - Page 14 Adding the basic pay, housing allowance, and basic allowance for subsistence calculates the civilian equivalent. The calculator then figures, based on the information you provided, the taxes owed if all three were taxed (tax advantage). All four combined, base pay, BAH, BAS, and tax advantage, determine the final civilian equivalent. Note on special pay: The RMC does not include special pay (COLA, flight, language, etc.). If you receive special pay, it is necessary to add the total amount of special pay to the civilian equivalent amount to provide a more accurate representation of your civilian equivalent salary need. RETIREE PAY GAP For those entering military retirement and will be receiving retirement pay, there is an additional calculation which is needed. As retiree, you will receive retirement pay; this amount will partially meet the civilian salary equivalent. However, there will most likely be a gap between the retirement pay and civilian salary equivalent. To determine the pay gap or the actual amount needed to earn in retirement to meet the civilian salary equivalent, use militarypay.defense.gov. Retirement pay calculations are further complicated by the possibility you may receive Disability Pay. As this is not guaranteed and the amount is not known until the disability rating is determined by the VA, it recommended to view this pay as a bonus and not guaranteed. It is added for knowledge. Civilian Salary Equivalent Retirement Pay Retiree Pay Gap Disability Pay (not guaranteed) Financial Planning for Transition – 2023 - Page 15 Website Activity: Estimate pre-tax retirement pay 1. Use http://militarypay.defense.gov/Calculators/High-3-Calculator/ 2. Follow the directions on the website a. Active or Reserve b. Personal information (must first add year to Pay Entry before month) c. Retirement information d. Career progression e. Roll over the first full High-3 Pension bar to see the yearly amount Civilian Salary Equivalent Retirement Pay Pay Gap (Civilian Salary Equivalent – Retirement Pay) NOTES: The Pay Gap is the actual amount you will need to earn to keep your current lifestyle using retirement pay as a paycheck. Now that there is a clear understanding of the salary needed post-transition, let’s look at the changes in taxes which occur due to transition. TAXES AFTER TRANSITION Service member often cite taxes as one of the most surprising changes encountered after transition. To understand how your taxes may be affected, it is necessary to utilize various websites. Smart Asset, Nerd Wallet, Turbo Tax, and IRS are examples of websites that may be helpful. While these websites provide valuable information, they are for research purposes only and do not provide tax advice or a tax bill. Financial Planning for Transition – 2023 - Page 16 SALARY DIFFERENCE: MILITARY VS CIVILIAN INCOME The RMC provided an amount for the civilian equivalent salary, which is higher than your current salary. This is due to many military entitlements or allowances, which are not taxable while you are in the military. BAH, BAS, and special pays are examples of non-taxable income. In the civilian sector, all your salary and some of your benefits could be taxable. Therefore, the civilian equivalent calculation adds the BAH and BAS into your base pay and determines the taxes based on this amount. The salary equivalent is higher due to additional taxes paid on these previously non-taxable items. The graphic below visually explains the difference between the taxes paid for a military salary of $63,000 and a civilian of the same amount. For this example, federal tax includes federal income tax and FICA; it does not include state or local taxes. The amounts were determined using SmartAsset (https://smartasset.com/taxes/income-taxes). To sum it up, you will need to make MORE in the civilian sector than you did in the military to maintain your current lifestyle. Financial Planning for Transition – 2023 - Page 19 ESTIMATION OF POST-SEPARATION TAXES Website Activity: Estimate your taxes after transition Directions: Determine amounts for Federal, State, and Local taxes using: https://smartasset.com/taxes/income-taxes 1. Enter your Civilian Salary Equivalent (with special pay, if applicable) as the household income 2. Enter a location 3. Indicate filing status 4. Choose a secondary Location and repeat the calculations 5. Write the information in the space provided below 6. Provide additional notes as needed TAXES FOR CIVILIAN SALARY EQUIVALENT – when separating Civilian Salary Equivalent 1st Location (city, state, zip) 1st Location - Taxes based on civilian salary equivalent 2nd Location (city, state, zip) 2nd Location - Taxes based on civilian salary equivalent NOTES: Financial Planning for Transition – 2023 - Page 20 SCENARIO 2: TAXES WHEN RETIRING When retiring, there are other considerations, such as how tax friendly a state is for retirement pay. Some states do not tax retirement pay, others offer a sliding scale, while others fully tax, but provide alternate benefits. Using the salary information from the scenario 2, estimate the taxes for a retiree in Texas can be determined. Annual Social Security - $0 Annual Retirement Account Income (Retirement Pay) - $55,000 Annual Wages (Pay Gap) - $103,790 Resources for State Retirement Tax Information: • https://smartasset.com/retirement/retirement-taxes • https://www.military.com/money/personal-finance/state-tax- information.html Financial Planning for Transition – 2023 - Page 21 RETIREMENT TAX CALCULATIONS Website Activity: Determine your taxes with retirement pay. 1. GO TO: https://smartasset.com/retirement/retirement-taxes 2. Choose the state where you wish to retire 3. Complete the following information: - Annual Social Security Income = $0 (if not drawing Social Security) - Annual Retirement Account Income = military retirement (DO NOT put in Pension) - Annual Wages = pay gap or amount you expect to earn upon retirement (estimate using your civilian salary equivalent) - Location = zip code - Year of Birth - Filing Status 4. Choose a secondary location 5. Write the information in the space provided 6. Provide additional notes as needed TAXES FOR RETIREMENT Retirement Pay Pay Gap 1st Location for Retirement (city, state, zip) 1st Location Tax Amount State Tax Benefits 2nd Location for Retirement (city, state, zip) 2nd Location Tax Amount State Tax Benefits NOTES: Financial Planning for Transition – 2023 - Page 24 Take a minute to consider how you spend your money. • Do you stop for coffee every morning? • Do you use vending machine for something to drink or eat? • How often do you eat out for lunch or dinner? • How many streaming or gaming accounts do you have? Use this knowledge to complete the next activity. SPENDING PLAN ACTIVITY Before you transition, it is important to know where your money is going, and how it is being spent, to be aware of your spending habits. Take a moment to create or update the expenses section of the spending plan. Follow the directions provided by your facilitator and fill in the appropriate areas of the spending plan. Note: Rent/Mortgage is under debt. • Estimate utilities • Estimate grocery expenses • Personal grooming • Other expenses TRACKING EXPENSES Monthly expenses are generally known and easily identified, but it is the daily spending that can cause money issues. Even if you have a good idea of where you are spending your money, it is wise to track your expenses sometime prior to transition. This will provide detailed knowledge of where you are spending and, more importantly, know where you can make adjustments, if needed. Consider tracking your expenses for a few weeks or a month to determine where your money is spent. There are many ways to track your expenses; use what works best for you. • Use a free app to track spending; many can be found in the app store on your mobile device or tablet Financial Planning for Transition – 2023 - Page 25 • Keep a small notebook with you to record every purchase (cash/credit/ debit) • Keep receipts from every purchase and total them up at the end of the week • Create your own log using computer software such as Excel or Word How you track is not as important as the tracking itself. No matter how you choose to track your expenses, be sure to include ALL purchases. CHANGES TO EXPENSES AFTER TRANSITION As you transition, many things will change including your current expenses. How will transition affect your expenses? • Will your expenses decrease? • Will your expenses increase? • Will there be new types of expenses? Depending on where you live, expenses for groceries, gas, utilities, and housing may decrease – especially if you are moving to an area with a lower cost of living or moving in with family, friends, or roommates. However, the opposite can also be true that these same expenses may increase if you are living in the barracks and now must find a place to live or are moving to an area with a higher cost of living. Take the time to think through what a new or unexpected expense may be; these expenses can easily turn into debt. Keep in mind your income may decline for a short period of time. It is important to consider the cost of living if you are seeking to relocate after transition. EXPENSE OF RELOCATION After transition, you may still have one move provided by the military. Visit your transportation office to ensure you are aware of all requirements pertaining to your final move, such as deadlines or how to request an extension. Even if the military pays for your final move, there are still expenses associated with relocation that need to be considered. Financial Planning for Transition – 2023 - Page 26 CHANGES TO COST OF LIVING If you are seeking to relocate after transition, it is important to understand the financial impact this may have on your salary needs and expectations if you expect to retain your current lifestyle. Some factors to consider include: • Housing (rent or mortgage) • Utilities • Taxes (including tax benefits for Veterans) • Food, childcare, commuting costs, clothing, entertainment, school or college costs, climate, insurance, home or car repair To understand the extent of the differences in cost of living and the impact this will have on your salary requirements, there are a few different websites to use: • http://www.bestplaces.net/cost-of-living • https://www.bankrate.com/calculators/savings/moving-cost-of-living- calculator.aspx • https://money.cnn.com/calculator/pf/cost-of-living/index.html • https://www.payscale.com/cost-of-living-calculator • https://www.expatistan.com/cost-of-living Financial Planning for Transition – 2023 - Page 29 Website Activity: Determine the COST OF LIVING for a new location after transition 1. Use the BankRate.com website (http://www.bankrate.com/calculators/savings/moving-cost-of-living- calculator.aspx) or a different cost-of-living calculator to find the location- based salary equivalent 2. Write your new location in the box provided 3. Determine your new salary based on location using civilian salary equivalent 4. Write the amount in the box below 5. Determine a secondary location and repeat the calculations 6. Review housing adjustment. Is it higher or lower than your current housing price? 7. Provide additional notes as needed COST OF LIVING 1st Location (city, state) Salary adjustment for location Housing difference for location 2nd Location (city, state) Salary adjustment for location Housing difference for location NOTES: Financial Planning for Transition – 2023 - Page 30 HEALTH CARE AFTER TRANSITION Healthcare and health insurance could be considered two of the best benefits provided by the military. While in the Service, you most likely used TRICARE for your healthcare needs. While using TRICARE, you may have become accustomed to having your health/medical benefits completely covered, with little to no out-of-pocket expenses. There was no need to worry about the cost of medicines, co-pays or if the doctor is in your network. However, decisions about healthcare and health insurance are very important and should be considered carefully. Even with insurance, you will still have medical expenses. Be prepared, know your options, and make informed decisions. When preparing to transition your health care, be sure you have received a complete copy of your medical records prior to transition, as well as those of your spouse and/or children. These records will be necessary for continuity of care to a new medical provider or when applying for disability. The VA will provide further information on obtaining your medical records during the VA Benefits and Services brief. IMMEDIATELY AFTER TRANSITION Health insurance is different for those separating from military and retirees. If retiring, you have 90 days to sign up for TRICARE Prime, TRICARE Select, TRICARE for Life and other available TRICARE options from your date of retirement or there may be penalties or additional delays. If you plan to use a Military Treatment Facility (MTF) after retirement for health care needs, it is important to note that not all MTFs have availability to receive Retired Service members and eligible family members. Check directly with TRICARE to find out what services are available in the area you plan to live. Depending on your type of separation and if you meet eligibility requirements, you may qualify for transition healthcare insurance. Transition Assistance Management Program (TAMP) offers the same coverage available under TRICARE but is only available for 180 days after your date of separation. For those who do not qualify for TAMP, TRICARE offers Continued Health Care Benefit Program (CHCBP), which can offer coverage for up to 18 months upon separation from Service. There is an up-front quarterly premium, co-pays, and deductible associated with CHCBP. You must purchase the CHCBP within 60 days of loss of TRICARE eligibility. Financial Planning for Transition – 2023 - Page 31 A helpful website to determine the TRICARE plan you may be eligible for is https://tricare.mil/Plans/PlanFinder. For more information, to determine eligibility, or to apply for TAMP, CHCBP, or TRICARE for Life, go to www.tricare.mil. VA Benefits and Services brief will provide additional information. For members of the National Guard and Reserve, the eligibility requirements are different. Visit www.tricare.mil for more detailed eligibility information. NON-TRICARE HEALTHCARE OPTIONS For those who are not eligible for TAMP or choose not to use CHCBP, the alternate option is to use insurance from an employer or purchase health insurance off the marketplace through an insurance company such as Blue Cross Blue Shield, United Healthcare, Cigna, Aetna. This is not a whole list of health insurance providers but only a small portion of which you can choose. This next section will provide the basics of health insurance, terminology, and options available to you. HEALTHCARE PLANS AND CONSIDERATIONS When choosing a plan, it is good to know the basics. • Individual vs. Group Insurance • Basic healthcare terminology • Plan and network types – PPO, HMO, EPO, POS, and catastrophic • Estimating healthcare costs Financial Planning for Transition – 2023 - Page 34 TYPES OF PLANS Whether you enroll in a group or individual plan, there are generally only a few types of plans. Below are the most common types: Preferred Provider Organizations (PPO) Health plan where you pay less if you use providers in the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral for an additional cost. Health Maintenance Organization (HMO) Health plan that usually limits coverage to care from doctors who work for or contract with the HMO. Out-of-network care is generally not covered except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. Exclusive Provider Organization (EPO) A managed care plan, similar to an HMO, where services are covered only if you use doctors, specialists, or hospitals in the plan’s network (except in an emergency). Point of Service (POS) Health plans where you pay less if you use doctors, hospitals, and other health care providers that belong to the plan’s network. POS plans require you to get a referral from your primary care doctor to see a specialist. Catastrophic Plan To be eligible for the catastrophic plan, the individual must be under 30 years of age. This plan has lower premiums and allows the greatest amount of flexibility on the choice of provider. However, the deductible for the catastrophic plan is very high; before choosing this type of plan consider the amount you have in savings due to the high deductible. Financial Planning for Transition – 2023 - Page 35 CONSIDERATIONS WHEN REVIEWING HEALTH CARE PLANS If you can choose a healthcare plan from your post-transition employment or through another option, consider the following questions when choosing your plan. • Estimate your yearly medical needs. o How often do you visit the doctor? Is there a medical condition requiring regular visits, young children needing well-baby checks, pregnancy, and new baby? o For reoccurring or existing medical conditions, consider the number of doctor office visits, procedures, and/or hospitalizations in the past year to determine total possible out-of-pocket expense as well as the number of covered beneficiaries. • Decide which plan type best meets your needs. o Consider all types of plans— PPO, HMO, EPO, POS, catastrophic — and determine which will fit you and your family’s needs. • Size up the cost. o Compare the total cost, not just the monthly payment or deductible – also consider the cost of hospitalization and prescriptions, and balance this with your overall health and expected medical needs. • Don’t get lured by freebies. o Do your research to be sure that what is being touted as free isn’t something that is already covered by the plan. • Check the quality of the plan. o The National Committee for Quality Assurance ranks healthcare plans across the country based on their clinical performance, member satisfaction, and surveys. • Consider a healthcare savings or flexible spending account. o Save money by setting aside pre-tax money into a healthcare savings account (HSA) or a flexible spending account (FSA). These accounts can be used to pay for prescriptions, contacts, and other out-of-pocket medical expenses, but generally not the premium. o Review your yearly medical needs when considering this option. Financial Planning for Transition – 2023 - Page 36 • Check out the prescription coverage. o Not all plans include prescription coverage, and not all drugs are covered. If you have medications you take on a regular basis, be sure your prescription is included in the coverage or check with your physician or pharmacist for options that are covered. • Ask about dental and eye coverage. o Not all plans include coverage for dental or eye exams; be sure to ask, especially if you or a member of your family wears glasses and will need yearly eye exams • Family coverage vs Individual coverage. o Some plans charge premiums based per persons covered versus a family (multiple person coverage) plan. Premiums can add up quickly. Be sure to understand who and what is covered and at what cost. o Special consideration/additional research might be needed if you have a young adult in college or an adult dependent with special needs. If you don’t know or aren’t sure, ASK! Healthcare is complicated. Call the member services department of the health plan you are considering or the Human Resources (HR) department at your future employer. ESTIMATING HEALTHCARE COSTS When estimating the cost of healthcare, assume that you will be paying the entire premium and associated costs, like deductibles, for you and your family. If you obtain employment where your employer pays a portion of your insurance, your healthcare costs will be less than estimated. There are many different websites available to assist in comparing plans and estimating the cost of healthcare insurance. One example is the Healthcare Marketplace. This website will estimate the out- of-pocket expense of different plans with varying levels of coverage. While this will not provide the exact cost, it will provide a good estimation of the cost of individual health insurance. Go to https://www.healthcare.gov/see-plans/; answer a few questions to for different health insurance plans and costs. Financial Planning for Transition – 2023 - Page 39 From that total, subtract your current saving, existing college funds, and current life insurance policies. The difference provides the amount of life insurance coverage needed. In addition to this simple calculation, there are many online calculators to help you determine your insurance needs. The VA provides one such calculator: https://insurance.va.gov/NeedsCalculator Next is to determine the right type of coverage. TYPES OF LIFE INSURANCE While in the Service, the Servicemembers’ Group Life Insurance (SGLI) provided you no cost life insurance. There was also an option to cover your family with Family Servicemembers’ Group Life Insurance (FSGLI). After transition, SGLI coverage continues for 120 days (or up to two years of free coverage if disabled and unable to work by applying for the SGLI Disability Extension). After that time, SGLI is no longer an option, but there are other options available: • Veterans Group Life Insurance (VGLI)—allows Service members one year plus 120 days, from the date of separation, to convert their SGLI coverage to term life insurance http://www.benefits.va.gov/insurance/vgli.asp. o Once enrolled in VGLI, coverage remains if the premiums are paid o Rates are determined using a sliding scale based on age • Coverage from an insurance company • Coverage from your employer • Term Life Insurance: provides coverage at a fixed rate of payments for a limited period of time or term. o Generally, coverage expiries after the limited period of time. o Renewing the policy may result in a higher rate or have added conditions. o Often the least expensive way to purchase substantial death benefits. • Permanent Insurance: covers you until your death, while the payments are made, and provides a cash value. o Under the Permanent Life Insurance umbrella, there are four types:  (1) Whole Life (2) Variable Life (3) Universal Life and (4) Variable Universal Life. Financial Planning for Transition – 2023 - Page 40 o Payments are made until the coverage matures, generally around age 100 of the insured. o Payments are generally less expensive the earlier the insurance is purchased and as long as the payments continued to be made. o Frequently more expensive than term life insurance and maturity values may be different from term policies. o Ensures a guaranteed financial support. Determining whether term or whole life insurance is better for you and your family is a decision you need to make and should be based on research you have conducted. Finally, ensure you have identified a designated beneficiary. This is the only way to ensure the life insurance is paid to whomever you choose. A beneficiary designee will supersede any designations made in your will. Final thoughts on Life Insurance: • Finding the best life insurance company takes time as there are hundreds competing for your business. • Shop around and get life insurance quotes from a few different companies. However, realize that you will be required to provide them basic information including your contact information to obtain a quote. This may lead to phone calls or emails from the company. • By comparing quotes, you can discover the differences in cost and in coverage, as well as how much premiums will increase as you age. • Depending on how long you wait to find life insurance coverage, and the life insurance company you choose, you may be required to take a physical. The results of the physical can affect the cost of the premium. If you intend to purchase life insurance, it is recommended that you do so within 240 days after date of discharge. Within this window of time, proof of good health may not be required for converting from SGLI to VGLI. Companies may offer life insurance with similar policies but with different time frames and requirements. Do the research and be an informed consumer before inquiring or purchasing life insurance. For any questions, the Personal Financial Manager on your installation can provide additional information and guidance. Financial Planning for Transition – 2023 - Page 41 DISABILITY INSURANCE One other type of insurance to consider is disability insurance. When an Active- duty Service member becomes ill or injured, he or she continues to receive pay and benefits. This type of coverage is not automatic in the civilian sector. Generally, an employee must elect to have disability insurance to receive some or all their pay while in recovery. Many employers offer some type of disability insurance as part of the compensation package, or it can be purchased separately. WRAP UP QUESTIONS • Why would tracking your expenses for a period of time prior to transition benefit you? • What is a co-pay? • What is a deductible? • What insurance expenses will you add after leaving the military? Financial Planning for Transition – 2023 - Page 44 HOW TO CALCULATE YOUR DEBT-TO-INCOME RATIO  Step 1: Add up all your required MINIMUM monthly debt payments. This may include: • Rent/mortgage • Monthly minimum credit card payments • Loans: student, personal, auto, etc. • Child support or alimony  Step 2: Divide the amount from step one by your gross monthly income (pre-tax income).  Step 3: The result is your DTI. Scenario 1: Calculated total monthly MINIMUM debt payments (including rent, car loan, credit card payments) as $2,050; gross monthly income (pre-taxes) is $5,495. The DTI calculation is: • 2050 ÷ 5495 = 0.37 • 0.37 x 100 = 37% DTI ratio is 37%. Activity: Determine Debt-to-Income Ratio 1. Determine the total amount of your monthly debt payments and write them in the box below (remember to include your rent/mortgage). 2. Write your gross monthly income from the spending plan in the box below. 3. Divide payments by income and multiply by 100. 4. The result is your DTI. Write it in the box provided. 5. Provide additional notes as needed. Financial Planning for Transition – 2023 - Page 45 DEBT-TO-INCOME RATIO Total recurring monthly debt payments Gross Monthly Income DTI NOTES: DEBT-TO-INCOME RATIO – WHAT DOES THIS MEAN? Now that you have determined your DTI Ratio, the next step is to understand what that ratio means. The previous example determined a 37% debt to income ratio. Using the following guidelines, you can determine how this percentage ranks compared to a “safe” level of debt: • Less than 33%: Acceptable – debt is manageable. • 34% - 49%: Work to lower your DTI – it would be better to be below 33%. • Over 50%: Seek financial assistance immediately. With over half your income going to debt, any life event requiring additional funds could cause serious financial hardships. Generally, a DTI of 41-43% is typically the top end for approval for a mortgage. This DTI limit is also true of VA loans. Consumer Finance provides an explanation as to why this is important, located within this link: https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to- income-ratio-why-is-the-43-debt-to-income-ratio-important-en-1791/ Financial Planning for Transition – 2023 - Page 46 There are times when a DTI within the middle range of 34% to 49% is still considered acceptable; for example, if the number is in that range due to a mortgage payment. If you are seeking to purchase using a loan, a lower DTI can sometimes result in a lender offering you a lower Annual Percentage Rate (APR/interest rate). It is highly encouraged for you to seek assistance with developing a debt management plan prior to transition, especially if your DTI is 34% or higher. Having your debt in control as you enter transition will allow for more financial flexibility during the transition period. SPENDING PLAN UPDATE – DEBT-TO-INCOME RATIO (DTI) Now is the time to update the DEBT-TO-INCOME RATIO section of the spending plan. Follow the directions provided by your facilitator and fill in the appropriate areas. MANAGING YOUR CREDIT FOR TRANSITION Just as it is necessary to understand your debt prior to transition, it is just as important to understand and manage your credit. This section will be a review of information provided during previous financial literacy courses on your credit report and score. Then move forward to include information to ensure you are aware of how a credit score and report can affect your transition—positively and negatively. CREDIT SCORES are widely available to consumers from sources such as banks and credit card companies. Credit scores generally range from 300 to 850; the National average for a FICO score is 695 - 700, with most in between 660 and 720. Remember, higher credit scores may result in better credit terms such as lower annual percentage rates (APR). Financial Planning for Transition – 2023 - Page 49 ANALYZE YOUR CREDIT REPORT AND SCORE BEFORE TRANSITION To check your credit report, request a report from each of the three crediting agencies, Equifax, Experian, and TransUnion, which is located at www.annualcreditreport.com. Closely review the reports, and if married, review them with your spouse. Check the following items: Review all personal information is accurate. Closely check your name, first, last, and middle to include spelling. Check to ensure the address is correct, and spelled correctly, as well as previous addresses. Finally check to see if the current employer is correct. Review every open account. Is this one you or someone in your family opened? Also look at closed accounts. Should there be an account open that you did not open, take the necessary steps to close it. Your credit report will also list all credit you have applied for such as a car, home, or other credit such as a credit card. Review these applications for credit to ensure you are the one who applied. Look at the account history for each account. Ensure payments were captured and reflected accurately. On time payment one of the largest determining factors for a credit score. Review all Personal Information 01 All open accounts are yours 02 Inquiries from credit you applied for 03 Account history listed for your accounts 04 Financial Planning for Transition – 2023 - Page 50 Review any negative information listed. Is it accurate? Is this you? Some negative information will be removed after a determined period of time; other negative information will remain indefinitely. Should you have any bankruptcy, ensure all debts that were cancelled due to bankruptcy are listed accurately. Most major creditors subscribe to one or more credit bureaus. Therefore, it is important to request and analyze a report from each credit bureau. It is your responsibility to review information on your credit report and to request corrections. Use www.AnnualCreditReport.com to print your credit reports. If you have already used the free credit report from one or all three agencies, an installation personal financial manager or counselor (PFM or PFC) may be able to assist you with obtaining a current report. CORRECTING CREDIT REPORT If you find incorrect or inaccurate information on your credit report, immediately start the process to have it corrected. It is best to contact both the credit-reporting agency and the creditor that provided the information. The fastest and easiest way to resolve an inaccuracy on your credit report is through the online credit report dispute process. Listed below are the dispute websites for the three credit agencies: TransUnion: https://www.transunion.com/credit-disputes/dispute-your-credit Experian: https://www.experian.com/disputes/main.html Equifax: https://www.equifax.com/personal/credit-report-services/credit-dispute/ If the inaccurate information is more complicated, the Federal Trade Commission (FTC) has detailed instructions and sample letters for both the credit company and the information provider at www.consumer.ftc.gov. You can also visit your local installation PFM to assist you in understanding your options. Negative information 05 All debts discharged in bankruptcy are listed that way 06 Financial Planning for Transition – 2023 - Page 51 Additionally, you can submit a complaint to the Consumer Financial Protection Bureau (CFPB), and they can assist you in resolving the errors. Use the following website https://www.consumerfinance.gov/complaint/. CLEAN UP INACCURATE PUBLIC RECORD INFORMATION The most damaging information on your credit record is sometimes sourced from public records, such as arrests, judgments, foreclosures, tax takings, and liens. The best way to remove the inaccurate information from your file is to do so at the source. This requires contacting the government agency supplying this information to the credit bureau, and then ensuring the corrected information is updated in the credit bureau’s files. EXPLAIN DAMAGING ITEMS It can be helpful to send a statement to the credit bureau explaining damaging items. Credit bureaus are required to accept these statements if they relate to why information in the report is inaccurate. Another approach, often more effective, is to explain the delinquency to the lender from whom you are applying for credit, rather than to the credit bureau. Federal law requires that creditors at least consider your explanation. NEGATIVE INFORMATION When negative information on your report is accurate, only the passage of time can assure its removal. Financial Planning for Transition – 2023 - Page 54 to assist with financial issues and telephonic financial counseling is also available at all sites. You can generally do a better job cleaning up your credit record on your own, at no cost. While you are still in service, take advantage of the free credit monitoring available to you: https://www.equifax.com/personal/military-credit-monitoring/ FAIR CREDIT REPORTING ACT To ensure fairness when it comes to credit reports, the federal Fair Credit Reporting Act (FCRA) was created to promote the accuracy, fairness, and privacy of information in the files of consumer reporting agencies. There are many types of consumer reporting agencies, including credit bureaus and specialty agencies (such as agencies that sell information about check writing histories, medical records, and rental history records). You must be told if information in your file has been used against you. • You have the right to know what is in your file. • You have the right to dispute incomplete or inaccurate information. • Consumer reporting agencies must correct or delete inaccurate, incomplete, or unverifiable information. • Consumer reporting agencies may not report outdated negative information. • Access to your file is limited. • You must give your consent for reports to be provided to employers. • You may limit the “prescreened” offers of credit and insurance you receive based on information in your credit report. • You may seek damages from violators. • Identity theft victims and active-duty military personnel have additional rights. For more information, including information about additional rights, go to https://www.ftc.gov/about-ftc. ASSESSING YOUR FINANCIAL READINESS Both the debt-to-income ratio and credit scores are indicators of financial well- being. However, when analyzing both scores, it is important to note that no single score accurately reflects your current financial situation and that your situation changes over time. Financial Planning for Transition – 2023 - Page 55 Everyone has different expectations when it comes to finances. Some feel they can never have enough in savings, while others are good with a small amount. Others want their IRA and 401(k) to be extremely robust, while others are perfectly fine with a more modest amount. Some will drive a car that is older because they do not want the car payment, while others buy or lease a new car every few years. A financial situation is very personal and involves your personal financial choices. Look at your entire financial situation and gain a good understanding as you enter transition. Are there any numbers you would like to change? Start making those changes now. However, it is important to remember that change may be slow. During and after your transition, revisit this activity to ensure your financial situation has remained steady. WRAP UP QUESTIONS • How important is the DTI for obtaining more credit? What other factors are used in the decision-making process? • What is the FCRA? Will this have an impact on your transition? • What are the two most important factors which affect your credit score? A Financial Planning for Transition – 2023 - Page 56 Assets COMPETENCY Evaluate your assets and understand options available during and after transition. LEARNING OBJECTIVES • Define assets and calculate value of personal assets. • Calculate net worth as it pertains to assets and evaluating current financial situation. • Illustrate the difference between a defined-benefit plan and a defined- contribution plan. • Analyze options available for the Thrift Savings Plan (TSP) when transitioning. • Recognize the reasons a savings account is essential during transition. ASSETS An asset is anything of value that you own that can be converted into cash. Examples include savings, real estate, personal property, and investments such as IRAs, mutual funds, etc. Even a retirement pension can be considered an asset, as can an annuity, such as a Survivor Benefit Plan (SBP). During transition, it is important to know your assets and their current value. SAVINGS, INVESTMENTS, AND RETIREMENT PLANS Three types of assets are savings, investments, and retirement plans. During transition, you will need to make financial decisions concerning your existing savings and retirement accounts. After transition, it becomes important to understand the nuances of each type of retirement plan so that when you are confronted with a decision as a new employee, you will have the basic underlying knowledge to be able to ask specific questions and make informed decisions. SAVINGS AND INVESTMENTS Savings and investments are an important part of the financial picture and can ease the financial burden that might occur during transition to civilian life. Savings will help to retain your financial stability should you have a gap in employment during transition. It can also be used in a financial emergency, such as when the car breaks down or if the roof leaks. Savings (savings, emergency savings, and goal Financial Planning for Transition – 2023 - Page 59 BRS: • Combines elements of the legacy retirement system with benefits similar to those offered in many private-sector 401(k) plans • Defined-benefit plan – calculated at 2% times years of services times the highest 36 months • Defined-contribution – Service member contributes and government matches funds up to 5% Additional information: https://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocument s/A%20Guide%20to%20the%20Uniformed%20Services%20BRS%20December%2 02017.pdf?ver=2017-12-18-140805-343 TSP AND BRS Since BRS is a combination of a defined-benefit, or pension, plan and a defined- contribution plan, TSP is an important part of your retirement planning, regardless of how long you serve in the military. As a defined contribution plan, both you and the government contribute to your TSP. • Service member contributions to TSP taken directly from pay • Government matches up to 5% of basic pay contributions Enrollment in BRS is automatic for those who joined the service after January 1, 2018; accordingly, creation of a TSP account is also automatic. For members who joined after Oct 1, 2020, automatic deductions of 5% of your basic pay is deposited into your TSP. This 5% each month continued throughout your time in the military unless you did one of two things. Either you increased the percentage deducted each month to be deposited or you stop the deduction each January. *Note: automatic re-enrollment at 5% occurs each January unless you stop the deduction. In addition to any contributions you made, the government matches up to 5% of your contribution, deposited into your TSP account. It is important that you access your TSP account prior to transition to prepare for the options available for your TSP post-transition. Access your account at TSP.gov A video explaining TSP and BRS is available; “The TSP: What’s It All About?” The video can be found at https://www.youtube.com/watch?v=YUbyMJTwCk4. (Note: This video is especially for spouses of Service members covered by BRS. However, the information is relevant to all who are in BRS for retirement and have a TSP account.) Financial Planning for Transition – 2023 - Page 60 RETIREMENT PLANS FROM EMPLOYERS Many employers offer a 401(k) or other similar plans intended to help you save for retirement. Some employers may even match up to a certain percentage. Most personal retirement planning will occur via a 401(k) or similar account as pensions become rarer as a benefit. More often, employers may offer matching contributions into your company retirement plan to assist you with funding your retirement. Many companies require what is known as a vesting period. A vesting period is the waiting period required before an employee can keep funds contributed into their account by the employer. For example, any money you contribute to your retirement fund from your paycheck is 100% yours. The company’s matching funds may vest (or change ownership from the employer to you) over a period of time. Vesting can occur in many forms, such as incremental vesting. For example, at year one you will be vested at 25%, year two at 50%, year three at 75%, until full vesting of 100% at 4 years. Some employers have a cliff vesting schedule that includes full vesting after a specified period of employment. This means, if you leave the company for any reason prior to the full vesting period, you forfeit the matching company funds. The Blended Retirement System requires a period of 2 years before the Service 1% contribution is considered vested and wholly owned by the Service member. Financial Planning for Transition – 2023 - Page 61 THRIFT SAVINGS PLAN (TSP) Regardless of whether you are in the legacy retirement system or BRS, participation in the TSP is a benefit of Service and enables you to help build retirement wealth. When you retire or separate from the military, you have multiple options for your TSP account. • Stay: Provided you have at least $200 in your TSP account, you can continue to participate in the TSP by leaving your current money in TSP. • Roll over: Rollover your funds from the TSP to an IRA or another eligible employer retirement plan or • Distribution: Remove your funds as cash from TSP and not rollover into another similar account, though withdrawal or distribution could trigger negative tax consequences. While you are currently serving, you can contribute up to the Elective Deferral Limit, Catch-up limit, and Annual Addition Limit. For more information go to: https://www.tsp.gov/making-contributions/contribution-limits/. POTENTIAL BENEFITS OF STAYING IN TSP • Low administrative expenses • Ability to rollover to a Traditional IRA, Roth IRA, or eligible employer plan • Option to change your investment mix with reallocations and fund transfers • Defer federal income taxes on any tax-deferred amounts remaining in the TSP After you separate or retire, you will still have access to your TSP and the ability to review your TSP balance and prior contributions, and to rebalance your investment mix. In addition, you will be able to rollover contributions from an eligible employer plan to your TSP. While you can rollover, you are not able to contribute directly into TSP from your non-military paycheck, even as a federal employee. Federal employees have a separate TSP account, separate from the military TSP account. Make any adjustment or changes through the TSP Mobile App and TSP website, www.tsp.gov. Financial Planning for Transition – 2023 - Page 64 TSP RESOURCES TSP Publications: • TSP Distributions Booklet • TSP Tax Booklet • USERRA Fact Sheet TSP YouTube Channel: TSP4Gov TSP Online Learning: https://www.tsp.gov/online-learning/ SURVIVOR BENEFIT PLAN - SBP The Survivor Benefit Plan (SBP) is an elected benefit, which provides designated, eligible dependents of military retirees’ monthly payments for the lifetime of the beneficiary. This benefit is an option available only by election and is generally enacted at the time of retirement. Since the monthly payment continues after the death of the retiree, there is a monthly payment in the form of a deduction taken from the Veteran’s pre-tax retirement pay. When electing SBP, the amount of coverage is chosen by the military Service member retiring, however, there is a minimum level of coverage. If you are married and choosing to decline SBP or choose less than full SBP coverage, it is required for your spouse to show concurrence with this decision. For those who are not married, there are other eligible beneficiaries such as children, former spouse, or a natural interest person. Once enrolled, you do have the ability to cancel or terminate your SBP election beginning on the 25th month and ending on the 36th month - or the third year - of your retirement. During this time, you can only cancel, not enroll. As with declining at retirement, spousal concurrence is required. For more detailed information, consult the websites listed below or make an appointment with your PFM on the installation. Defense Finance and Accounting Services (DFAS) – SBP: https://www.dfas.mil/retiredmilitary/provide/sbp.html DFAS – Spouse Coverage: https://militarypay.defense.gov/Benefits/Survivor- Benefit-Program/Costs-and-Benefits/Spouse-Coverage/ DFAS - Eligible Beneficiaries: https://www.dfas.mil/retiredmilitary/provide/sbp/coverage.html Financial Planning for Transition – 2023 - Page 65 Financial Readiness SBP: What is the Survivor Benefit Plan? https://finred.usalearning.gov/planning/SurvivorBenefitPlan Military Compensation SBP Overview: https://militarypay.defense.gov/Benefits/Survivor-Benefit-Program/Overview/ HOME AS AN ASSET OR LIABILITY A home can be your largest asset or your biggest liability during transition. Deciding where to live and if relocation will be necessary can be one of the biggest decisions made during transition. If you are renting and plan to stay in the area, it may be a good time to buy. Your ability to show income to qualify for a loan to purchase a house may be easier while you are still in the Service. On the other hand, if you do not know what your income will be or do not have employment lined up for after separation or retirement, it may be dangerous financially to have this house payment obligation unless you have adequate savings. If you own a home and find yourself relocating, renting out your current home and renting in the new location may be an option. Once you can show a year of rental income on your tax return it will be easier to investigate buying a home in your new location if that is desired. There are online calculators that you can use to help make an informed decision about your housing plan and whether to rent or buy. • https://www.consumerfinance.gov/owning-a-home/ • https://finred.usalearning.gov/Benefits/HouseHunting • https://finred.usalearning.gov/ToolsAndAddRes/Calculators/Housing • http://www.knowyouroptions.com/ • http://myhome.freddiemac.com/resources/calculators.html For information on buying a home, attend the Home Buyers course available on most installations. Ask the personal financial counselor/manager for more information if the course is not available. Financial Planning for Transition – 2023 - Page 66 NET WORTH AND ASSETS Having discussed different types of assets, you have the knowledge to determine which types of assets you need to include when calculating your net worth. One of the challenges in calculating the value of your assets is assigning accurate values to each item. To avoid inflating your net worth (i.e., having an unrealistic view of your wealth), it is important to make conservative estimates when placing value on certain assets. As you prepare to make a list of your assets and the value of each, here are some categories of assets to consider: • Your home: there are various websites which help determine the current value of your home • Vehicles • Checking and savings accounts • Investments, TSP, IRA, mutual funds • Annuities, life insurance policies • Personal property: high-value jewelry, electronics, artwork, rare coins, collectibles • Retirement pension: To determine value, use the current amount (at retirement) of the pension you will be receiving to add to your net worth. If you will not complete 20 years of Service, this number will be $0. Your net worth is the amount that your assets exceed your liabilities. In simple terms, net worth is the difference between what you own and what you owe. If your assets exceed your liabilities, you have a positive net worth. Conversely, if your liabilities are greater than your assets, you have a negative net worth. Calculating your net worth annually is a great way to track financial progress over the years. Activity: Determine Net Worth 1. Determine the value of all your assets that could have a cash value 2. Determine the total of your liabilities (debt owed) 3. Subtract liability from asset to find your Net Worth Financial Planning for Transition – 2023 - Page 69 Action Plan COMPETENCY Understand the entirety of the financial situation and create a financial plan leveraging resources available during and after transition. LEARNING OBJECTIVES • Create a plan containing next steps in the financial journey to prepare for transition • Identify ways to manage credit and debt • Identify reliable financial resources after transition • Interpret information to discover possible scams FINANCIAL ACTION PLAN There are some basic steps to take when working through and creating your financial action plan. This presentation and the work you have done today will provide most of the information you need to create your action plan for financial success during your transition. 1. Analyze current financial situation During this course, you completed the following: reviewed your current income, determined your civilian equivalent salary, created a list of your expenses and debts, determined your assets, and figured your debt-to-income ratio. Transfer the information from the previous exercises into the boxes below or review the summary page on the spending plan: Financial Planning for Transition – 2023 - Page 70 CURRENT FINANCIAL SITUATION Total Current Income Civilian Equivalent Salary Monthly Expenses Total Debt Debt-to-Income Ratio Total Assets Net Worth NOTES: Take a minute to reflect on your current financial situation. Financial Planning for Transition – 2023 - Page 71 2. Re-examine your financial goals At the beginning of this course, you determined your financial goals for transition. They may have included paying down debt, saving money for a down payment on a house or car, or even saving for a vacation. Take a minute and review the goals you wrote at the beginning of this class. Are those goals still valid? Are they reasonable with your current financial situation? Should these be changed to reflect a more prudent goal? Using your knowledge of your financial situation, take a minute to determine if your previous goals are still valid. If your previous financial goals are still valid, excellent, but if you need to revise your goals, write your new financial goals for transition below or update the goals in the spending plan: FINANCIAL GOALS Short-Term Goal: Medium-Term Goal: Long-Term Goal: NOTES: Financial Planning for Transition – 2023 - Page 74 4. Create or Update your post-transition spending plan (Career Readiness Standard for this module) You have now researched all the information required to complete your spending plan. Consider the following: • Civilian equivalent salary • Location after separation/retirement • Sources of income (spousal income, retirement, investment income, alimony, child support) • Transition expenses/debts • Debt-to-income ratio • Net worth Update the Action Plan section of the spending plan. IMPORTANCE OF PREPARING FOR TRANSITION TRANSITION RESOURCES Take advantage of free services available on the installation while you are still in the Service. The Personal Financial Management Program staff (i.e., PFM, CFS and PFC) are available. Military OneSource continues to be available to you one year after your transition. It is a 24/7 connection to an accredited financial counselor. You can also get support evaluating savings programs, learn how to talk to creditors and get help weighing your financial options through this resource. Legal services are free while you are in the military, so take advantage of these resources to create/update your wills, power of attorneys, etc., before you leave active duty. You can save hundreds of dollars by not having to pay the costs of these services in the civilian sector. These items will save you and your family a lot of work and money to protect your assets and your family. After you retire or separate, there are certain programs, which provide protections, or advantages, which will no longer apply. Understand the implications of losing the following protections: • Servicemembers Civil Relief Act (SCRA): While on active duty, you were entitled to protection under this law for areas of financial management, rental agreements, security deposits, evictions, installment contracts, credit Financial Planning for Transition – 2023 - Page 75 card interest rates, mortgages, civil judicial proceedings, income tax payments, and more. Once you are no longer on active duty, certain protections may no longer apply. • Military Lending Act (MLA): Ensures Service members aren’t charged more than 36% Military Annual Percentage Rate, does not allow mandatory waivers of consumer protection laws, or mandatory allotments from Service member’s paycheck. A creditor cannot charge a penalty for prepayment of loans in certain circumstances. • Internal Revenue Service (IRS): While on active duty, there are special tax breaks and incentives for which you were entitled. After transition, these benefits may no longer apply. One of the most important is the automatic deadline extensions for filing your taxes. In addition, the uniform deduction, reservist travel deduction, and the moving expenses deduction may no longer be applicable. FRAUDS AND SCAMS As you transition, you become more enticing to those trying to commit fraud or scams. Frauds and scams change over time to become more effective in separating you from your money, but you can learn to protect yourself by identifying the red flags that signal a scam. • Sounds too good to be true • Pressures you to act “right away” • Guarantees success • Promises unusually high returns • Requires upfront investment – even for a “free prize” • Requesting overpayment for an item and have you send the difference Protect yourself by being alert to the fact that scams and scammers exist. Understand that even though someone claims to be part of a Veteran Service Organization or a Military Service Organization, still conduct due diligence. Take the time to thoroughly research and vet any product, idea, or organization. Especially if it sounds too good to be true! The Consumer Financial Protection Bureau (CFPB) has provided more information on Spotting Frauds and Scams (https://www.consumerfinance.gov/consumer- tools/fraud/ Financial Planning for Transition – 2023 - Page 76 ACCESSING AND APPLYING FOR RETIREMENT PAY As you prepare for retirement, visit the DFAS website (www.dfas.mil/retiredmilitary.html) for information on retirement pay. For information on the steps to applying for retirement pay, go to https://www.dfas.mil/retiredmilitary/apply/how-to-apply.html. ACCESSING PAY INFORMATION AFTER TRANSITION As you prepare to leave Service, it is important to update your personal information in myPay and payroll accounts or in Direct Access for the Coast Guard. This will allow you to easily access your pay and tax information without your Common Access Card (CAC). To ensure access, 30 days prior to transition, log on to myPay using your personal device. Follow the steps listed below to review your personal information for accuracy for AFTER transition. If any information is incorrect, it can cause delays in access to your W2 or retirement payments. 1. Update your email address • Select “Email Address” on the main screen • Under “Personal Email Address,” enter and then re-enter your personal email address • Select the “Primary” bubble to the right of your newly entered email address • Select “Accept/Submit” to save the change 2. Update your mailing address Active-duty Army and Navy members contact your respective Personnel or Finance Office to update your correspondence (mailing) address. All others • Select “Correspondence Address” on the main menu • Enter and Save your new correspondence address • Click “Save” NOTE: Address changes will take 3-7 days to become effective. Financial Planning for Transition – 2023 - Page 79 Prior to Transition: • Visit the Self-Service page review and update if necessary: • Mailing address • Phone number (should be a personal number) • Email address (to a personal email) • Delivery options • Password • Federal and State Tax Financial Planning for Transition – 2023 - Page 80 PRE- AND POST-TRANSITION RESOURCES If you need assistance creating a spending plan or financial strategy for transition, or if you are having financial difficulties, ASK FOR HELP. If you are retiring, you will have access to financial assistance on the installation. However, if you are separating, you will need to understand the resources available off the installation for after your transition. In addition to the installation financial professionals, there are other resources for assistance: • American Job Centers (AJC) • Non-profit, financial education organizations • Military OneSource • Resources by State This does not constitute a formal DoD endorsement of any company, its products, or services. ACTION PLAN WRAP UP QUESTIONS • Name one way to increase income, decrease expenses, and decrease debt. Why is this important during/after transition? • Do you have an alternative plan if the current plan is not effective for a successful transition? • Where can you seek financial assistance while still in the military? After you transition? SUMMARY You now have additional tools and resources to facilitate your successful financial transition to civilian life. As you get closer to your transition, you may find you have more questions and concerns about your specific spending plan. Be sure to make an appointment to see your installation personal financial counselor for assistance. One of your Career Readiness Standards (CRS) is the completion of the post- transition spending plan. You have already begun the process of creating or updating a spending plan, and you have a strong foundation of knowledge to complete this CRS requirement. Financial Planning for Transition – 2023 - Page 81 TRANSITION ASSISTANCE PARTICIPANT ASSESSMENT At the end of each module, you are encouraged to complete an online Participant Assessment specific to that module. Follow the directions below or see the next page for more details. The assessment is completely anonymous; demographic information is not stored and must be reentered for every module. • Access the Participant Assessment at https://www.dodsurveys.mil/tap • Select the box Financial Planning for Transition and complete the assessment by answering all the questions • Information is gathered and analyzed quarterly, and participant feedback is used to make improvements/updates • The Participant Assessment can be completed on your personal mobile device Thank you for your feedback—your opinion matters to us! Financial Planning for Transition – 2023 - Page 83 Federal Trade Commission - Credit:https://www.ftc.gov/business-guidance/credit- finance/credit-loans FCRA: https://www.ftc.gov/about-ftc TransUnion: https://www.transunion.com/credit-disputes/dispute-your-credit Experian: https://www.experian.com/disputes/main.html Equifax: https://www.equifax.com/personal/credit-report-services/credit-dispute/ Federal Trade Commission: www.consumer.ftc.gov Debt Relief Articles: • https://www.consumer.ftc.gov/articles/0145-settling-credit-card-debt • https://www.consumer.ftc.gov/articles/0084-debt-relief-or-bankruptcy Consumer Financial Protection Bureau: www.consumerfinance.gov Consumer Financial Protection Bureau – Know your rights: https://www.consumerfinance.gov/f/CFPB-Servicemembers-Know-Your-Rights- Handout-Debt-Collection.pdf Military Credit Monitoring: https://equifax.com/personal/military-credit-monitoring/ ASSETS Retirement Pay: http://militarypay.defense.gov/Pay/Retirement/ Reserve Retirement Pay: http://militarypay.defense.gov/Pay/Retirement/Reserve.aspx Legacy Retirement Information: https://militarypay.defense.gov/Pay/Retirement/ BRS Information: https://militarypay.defense.gov/BlendedRetirement.aspx TSP: https://www.tsp.gov/making-contributions/contribution-limits TSP: www.tsp.gov TSP Withdrawal Options: https://www.tsp.gov/living-in-retirement/withdrawal- options TSP Loans: https://www.tsp.gov/new-tsp-features/summary-of-changes/#Loans TSP Online learning: https://www.tsp.gov/online-learning/ SBP Information Websites: • Defense Finance and Accounting Services (DFAS) – SBP: https://www.dfas.mil/retiredmilitary/provide/sbp.html • DFAS – Spouse Coverage: https://militarypay.defense.gov/Benefits/Survivor-Benefit-Program/Costs- and-Benefits/Spouse-Coverage/ • DFAS - Eligible Beneficiaries: https://www.dfas.mil/retiredmilitary/provide/sbp/coverage.html • Financial Readiness SBP: What is the Survivor Benefit Plan? https://finred.usalearning.gov/planning/SurvivorBenefitPlan • Military Compensation SBP Overview: https://militarypay.defense.gov/Benefits/Survivor-Benefit- Program/Overview/ Financial Planning for Transition – 2023 - Page 84 Housing Calculators: • https://www.consumerfinance.gov/owning-a-home/ • https://finred.usalearning.gov/ToolsAndAddRes/Calculators/Housing • https://finred.usalearning.gov/Benefits/HouseHunting • https://finred.usalearning.gov/ToolsAndAddRes/Calculators/Housing • http://www.knowyouroptions.com/ • http://myhome.freddiemac.com/resources/calculators.html Home Value Estimates: www.zillow.com or https://www.realtor.com/myhome Car Value Estimates: https://www.nada.com/ or https://www.kbb.com/ ACTION PLAN Power Pay: https://powerpay.org CFPB: https://www.consumerfinance.gov/consumer-tools/fraud/ CFPB – How to spot fraud and scams: https://www.sgbconline.com/assets/files/wu1HjCek/2016/12/21/ CFPB –Avoid fraud: https://www.consumer.ftc.gov/articles/0060-10-things-you- can-do-avoid-fraud DFAS for Retirement: https://www.dfas.mil/retiredmilitary/ DFAS for Separation: http://www.dfas.mil/militaryseparations.html MyPay: https://mypay.dfas.mil/mypay.aspx DFAS Questions: https://www.dfas.mil/dfas/AskDFAS/ Coast Guard – Direct Access: https://www.dcms.uscg.mil/ppc/ras/ MILITARY PROTECTIONS AND CONSUMER AWARENESS RESOURCES Service members Civil Relief Act (SCRA): https://scra.dmdc.osd.mil/ SCRA and Bankruptcy: http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/SCRA.aspx Consumer Financial Protection Bureau: http://www.consumerfinance.gov/ CFPB for Service members: http://www.consumerfinance.gov/servicemembers/ ASSISTANCE PROGRAMS Navy-Marine Corps Relief Society: http://www.nmcrs.org/ Military One Source: http://www.militaryonesource.mil/ Air Force Aid Society: https://afas.org/ Coast Guard Support: https://www.cgsuprt.com/ Coast Guard Mutual Assistance: http://www.cgmahq.org/ Army Emergency Relief: https://www.armyemergencyrelief.org/ Financial Planning for Transition – 2023 - Page 85 MILITARY FINANCIAL EDUCATION AND COUNSELING RESOURCES Military One Source: https://www.militaryonesource.mil/financial-legal/personal- finance Office of Financial Readiness: https://finred.usalearning.gov/ FINANCIAL EDUCATION FDIC- Money Smart – Financial Education Program: http://www.fdic.gov/consumers/consumer/moneysmart/index.html Consumer Protection Basics: http://www.consumer.gov/ Army Financial Readiness Program (FRP): Financial Frontline - FinancialFrontline.org MILITARY-CIVILIAN TRANSITION OFFICE (MCTO) Transition Assistance Program Participant Assessment: https://www.dodsurveys.mil/tap Financial Planning for Transition Participant Guide (fillable PDF): https://www.TAPevents.mil/Assets/ResourceContent/TAP/Financial_Planning_Transi tion.pdf Follow us on LinkedIn: https://www.linkedin.com/showcase/military-civilian- transition-office Financial Planning for Transition—Online course: https://TAPevents.mil/courses Financial Planning for Transition – 2023 - Page 88 ENTITLEMENTS CURRENT PROJECTED Monthly Pay BAH (Housing) BAS OHA COLA Special Pay Hazard Duty Pay Flight Duty Pay Foreign Language Pay Family Separation Allowance Military Retirement Pay Rental Home Income VA Benefits Child Support/Alimony Other Take Home Pay/Second Job SPOUSE GROSS INCOME -$ -$ DEDUCTIONS CURRENT PROJECTED FITW (Federal Income Tax Withheld) FICA (Social Security) FICA (Medicare) State Income Tax AFRH (Armed Forces Retirement Home) SGLI and T-SGLI SGLI Family/Spouse TSP SDP Partial Pay Advance Payments Montgomery GI Bill Child Support/Alimony Paid SPOUSE DEDUCTIONS -$ -$ SPOUSE NET INCOME -$ -$ MONTHLY CURRENT PROJECTED GROSS INCOME -$ -$ DEDUCTIONS -$ -$ NET INCOME -$ -$ ANNUAL CURRENT PROJECTED GROSS INCOME -$ -$ NET INCOME -$ -$ TOTAL INCOME SPOUSE MONTHLY INCOME Financial Planning for Transition – 2023 - Page 89 CURRENT LOCATION POTENTIAL LOCATION LIVING EXPENSES CURRENT PROJECTED REMARKS HOUSING TOTAL -$ -$ Fees/HOA Fees/Pool Fees Furniture/Decorations Home Maintenance/Repairs Taxes UTILITIES TOTAL -$ -$ Cable/Satellite Cell Phone/Phone Cards/Landline Internet Electricity Natural Gas/Propane Garbage Water/Sewage TRANSPORTATION TOTAL -$ -$ Gasoline Parking Taxes/Registration/Licensing Taxi/Bus/Uber/Lyft/Train Vehicle Maintenance/Repairs FOOD TOTAL -$ -$ Dining out Groceries Lunches Vending Machines INSURANCE TOTAL -$ -$ Auto Insurance Dental Insurance Health Insurance Life Insurance Renters/Home Insurance HEALTHCARE -$ -$ Dental Doctor/Hospital/Urgent Care Eye Care Prescriptions/Medications CLOTHING TOTAL -$ -$ Laundry/Dry Cleaning New Clothing Purchase CHILD CARE TOTAL -$ -$ Allowance Child Support Day Care Diapers/Wipes/Etc. MONTHLY EXPENSES City or Zip Code Financial Planning for Transition – 2023 - Page 90 PET CARE TOTAL -$ -$ Food/Supplies Prescriptions/Medications Veterinarian/Grooming/Boarding PERSONAL TOTAL -$ -$ Beauty Shop/Barber Shop/Salon Health Club/Organizational Dues Nails/Massage/Personal Grooming Personal Spending Fund Personal Supplies Tobacco/Alcohol EDUCATION TOTAL -$ -$ Books/Supplies Educational Materials Lessons/Tutor LEISURE/HOBBIES/ENTERTAINMENT TOTAL -$ -$ Athletic Events/Sporting Events Books/Magazines Computer Products Concerts/Theater DVDs & CDs Movie/Music Downloads Streaming Services Toys/Games Travel/Lodging CONTRIBUTIONS TOTAL -$ -$ Charities Religious Donations GIFTS TOTAL -$ -$ Holiday/Birthday/Anniversary MISCELLANEOUS TOTAL -$ -$ ATM Fees/Bank Fees Deployment/TAD Expenses Membership Fees GRAND TOTAL -$ -$