Welcome back to the TheraFIRE podcast summaries. In this post, our colleague and friend, Mark Tiu, will share with us everything from his goals in achieving financial independence and to the challenges he faced when he began his career in the Navy.
Mark immigrated to the U.S. to practice his profession as a physical therapist, but he didn’t see himself being a PT for a long time. Financial independence has always been his goal because he values a life of adventure.
The military surely gave him the adventure that he sought but it took away some of the freedom that he enjoyed as a civilian. A small sacrifice for the full benefits that he could enjoy after a few years in the military. He and his future family could have a chance of living a comfortable life in early retirement, living in a farm as he envisioned.
Military Path to FI
Cost of Living Adjusted Retirement Pay
After 20 years of service in the military you will be entitled to receive a lifetime monthly pay that is determined by the years you served at percentage of your highest months of basic pay.
Some members even take this to the next level by locking a civil service career after retiring from the military. This effectively gives you two pensions (double dipping) in addition to Social Security if you do your research and tick the right boxes.
Medical Insurance for Life
TRICARE is an insurance that provides medical benefits to active duty or retired uniformed service member and their families. Unlike other insurance providers, TRICARE covers members’ health care needs anywhere around the world. This includes preventative care, vision, dental, mental health, pharmacy, and programs for individual with disabilities.
When a TRICARE-eligible beneficiaries becomes eligible for Medicare Part A and B you are automatically enrolled to TRICARE for Life at no cost.
Thrift Savings Plan
The TSP is a retirement savings vehicle available to government employees like the 401(k) in the private sector that has the same contribution limits and tax deferral options.
As an eligible participant, you also receive Agency/Service Automatic Contributions that is equal to 1% of your basic pay directly deposited to your account every pay period. You get this free money even if you don’t contribute to the TSP.
College Degrees and Tuition Assistance (tax free)
Members of the military could also pursue further education through the Post-9/11 GI Bill. Given to those who served on active duty 90 days or more (after September 10, 2001), this benefit pays for expenses towards your education and will depend on the how much time you are in active duty.
Benefits can be transferred to a spouse or child. It can be used for college degrees, vocational training, certification, licenses, monthly housing allowance, book stipends and a one-time relocation allowance.
VA-backed home purchase loan
This lifetime benefit could help military members and their families purchase, build, or improve a home with no money down. It is accessible to members through any lender once standards for credit, income and any other requirements are met, granted that you will live in the home you’re financing.
Apart from the sweet deal of $0 down payment, you will have access to better terms, interest rates, buy without a private mortgage insurance, fewer closing costs, no penalties if you pay-off the loan and use the same benefit to sell or refinance the home, making your military path to FI easier.
Basic Allowance for Housing (tax free)
If you are not yet ready to buy a home, the BAH gives members equitable housing compensation based on geographic duty location, pay grade and dependency status within the U.S. when government quarters are not provided.
Basic Allowance for Subsistence (tax free)
The BAS is a monetary package that offsets the costs of meals for enlisted members (not their family). The amount is linked to the price of food as measured by the USDA food index each year.
Family Separation Allowance (tax free)
One of the drawbacks of being in the military is that you can be away from your family for stretches of time when on duty. When this happens a service member could apply for an FSA. This gives you additional $250 a month if you are unaccompanied by your dependents in a tour of duty.
Hazardous Duty Incentive Pay
When you serve in the military your life is in the line. Service members are compensated for putting their lives in dangerous situations. One of these is the Hostile Fire / Imminent Danger Pay, where uniformed service members are paid $225 a month for any month the member is and entitled to basic pay and is sent to a determined dangerous assignment.
Combat Zone Tax Exclusions
Another incentive of working in the line of fire is the CZTE. This benefit is triggered when service members are assigned in a combat zone. All earnings earned during this period is excluded from taxes. Just spending a single day in a combat zone excludes your whole month’s pay from taxes.
Servicemembers Civil Relief Act
This benefit smoothens the military path by providing defense in legal or financial events that adversely affects servicemembers. Some of the most important protections include:
- Reduction of all interest rate and pre-service loans (credit cards etc.) to 6%
- Waived all fees associated with credit card use
- Protection against default judgement, foreclosure on their home and repossession of their property
- Termination of residential housing and car leases without penalty
Despite the staggering benefits, I couldn’t help but wonder when I see patients who were in the military still struggling to get food or even stay in their homes. Yes, it is more nuanced. Many life events, like health problems could derail financial stability.
Also, the brave servicemembers are just like everyone. Prone to the same money pitfalls and attracted to the same glittery things that could forsake our financial future. This highlights the importance of having a level of financial literacy even before receiving your first paycheck. Fortunately, this is now part of the military on-boarding in a comprehensive class called Life Skill.
A Rich Life
With the doors of opportunity opening before him left and right, how does Mark imagine a rich life?
Mark’s life and views were completely changed, joining the ranks. He now believes that challenges and adversity make us grow. He believes that life isn’t all about the money. It is just a means to an end.
It ties back to an important question. How do you spend your non-renewable life energy? Answering this question is easier if a clear goal is set in front of you. Working ceases to be a race to amass the most money just for the sake of having it. We begin to see a place called Enough. A state of mind that could be the key to a life of Happiness
We are a Pinoy Physical Therapist duo living somewhat unconventional but intentional lives. In this podcast we want to learn how Filipinos all over the world in different industries and walk of life earn, spend, save and invest money to achieve Financial Independence.
We are NOT certified financial advisors, analysts, or CPAs. Investing strategies shared in this article and the website are not financial advice, but our own opinions that are for educational purposes only. We want you to treat our content as a preview to do your own research so you can make smart financial decisions.