Financial-Planning

1. FINANCIAL PLANNING
FOR TRANSITION
2020-2121 TAP CURRICULUM
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2. DISCLAIMER
The information provided herein does not constitute a formal endorsement of any company, its
products, or services by the Department of Defense. Specifically, the appearance or use of external
hyperlinks does not constitute endorsement by the U.S. Department of Defense of the linked
websites, or the information, products, or services contained therein. The U.S. Department of
Defense does not exercise any editorial control over the information you may find at these locations.
This information provides informational resource material to assist military personnel and their
families, to assist in identifying or exploring resources and options.
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3. 3

4. FINANCIAL
PLANNING FOR
TRANSITION
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Available Resources
Financial Goals
Income
Debt
Expenses
Assets
Action Plan
COURSE OVERVIEW

5. FINANCIAL
GOALS Short term: 1 month - 1 year
Medium term: between 1 - 5 years
Long term: 5 - 10 years
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6. WHY A SPEND PLAN?
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7. 7
LEARNING OBJECTIVES:
 Determine current military salary with
compensation
 Compare current military salary to civilian
equivalent to predict future salary requirements
 Determine changes in taxes based on future
salary requirement and location
INCOME

8. INCOME DEFINITIONS
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Total pay +
allowances =
Gross Income
Gross Income –
tax/insurance/
retirement
deductions =
Net Income
Net Income is
the money you
take home from
each paycheck

9. 9
LEAVE AND
EARNING
STATEMENT
Entitlements: Base Pay, BAS, BAH, Fly Pay, COLA, Dive Pay

10. 10
USCG
PAYSLIP
The middle section allows you to validate whether
or not you are receiving the correct pay and/or
allowances and the actual dollar amounts for the taxes
and deductions that were taken from your check.

11. SPEND PLAN UPDATE
 Income from LES or PaySlip to include all
entitlements
 Spouse income
 Income from additional sources
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12. 12
CIVILIAN
EQUIVALENT
SALARY
Hardy:
 Separating, E-4
 Single
 Washington D.C.
 4 years of service
Current Salary:
 $31,615
 $59,019 with
BAH, BAS
Civilian Equivalent:
 $62,756

13. 13
CIVILIAN
EQUIVALENT
SALARY
Smith:
 Retiring O-5
 Married
 Two Children
 San Antonio TX
Current Salary:
 $114,361
 $143,541 with
BAH, BAS
Civilian Equivalent:
 $151,771

14. TAXABLE
14
NON-TAXABLE
 Base Pay
 CONUS Cost of Living Allowance  Basic Allowance for Housing
 Basic Allowance for Sustenance
 Family Separation Allowance
 Temporary Lodging Allowance
 OCONUS Cost of Living Allowance
 Clothing Allowance
 Dislocation Allowance
 Per Diem

15. TAXES
 State Income Tax
 Taxable Income
 Federal Taxes: FICA, Medicare,
Social Security
County or City Tax
 Automatic extensions
 Property Taxes
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16. ESTIMATE YOUR TAXES
SEPARATING:
www.smartasset.com/taxes/income-taxes
 Determine the amount of taxes you
currently pay using your taxable income
from your LES
 Estimate the tax amount of ALL your
income (including non-taxable income)
 Estimate the tax amount with the civilian
equivalent salary
 Choose a secondary location
 Write the information in the space provided
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RETIRING:
 Estimate pre-tax retirement pay using:
http://militarypay.defense.gov/Calculators/High-3-
Calculator/
 GO TO: www.smartasset.com/retirement/retirement-taxes
 Choose the state you wish to retire in
 Complete the following information:
 SS = $0 (if not drawing SS)
 Annual Retirement = military retirement
 Annual wages = amount needed to close
the gap between retirement pay and
civilian salary equivalent
 Location = zip code
 Year of birth
 Filing Status

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LEARNING OBJECTIVES:
 Create a list of current expenses
 Compare cost of living at current and 2nd
location
 Describe the basics of health insurance
 Specify the basics of life insurance
EXPENSES

18. LIVING EXPENSES
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19. TRACK SPENDING
 Track spending for 2-4 weeks
 Record all expenses daily or weekly using receipts
 Use a paper/pen, spreadsheet, notebook,
 Use an app, such as Mint, Dollarbird, Fudget
 Review past credit card or bank statements
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20. SPEND PLAN UPDATE
ESTIMATE EXPENSES:
 Utilities
 Transportation
 Food (Groceries/Dining Out)
 Clothing/Personal Grooming
 Insurance
 Leisure
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21. LIVING EXPENSES
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NEW EXPENSES?

22. COST OF LIVING CHANGES
What could impact your financial plan?
 Salary
 Housing
 Utilities
 Taxes (including tax benefits for veterans)
 Food
 Child care
 Commuting costs
 Clothing
 Entertainment
 School costs
 Climate
 Health insurance
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23. COST OF LIVING CHANGES
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24. LIVING WAGE
 The living wage shown is the hourly rate that an individual must earn
to support themselves and/or their family
 Numbers shown on calculator are for a full time employee (2080
hours per year)
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Example: Living Wage Calculation for Raleigh, NC

25. HEALTH CARE
CHOICES AFTER
TRANSITIONING
Separating from Active Duty
 Transitional Assistance Management Program (TAMP)
 180 days, premium-free
 Eligibility requirements must be met
 Continued Health Care Benefit Program
 Up to 18 months--can be used after TAMP
expires
 Quarterly premiums to be paid
 Enrollees responsible for co-pay and
deductible
Retiring from Active Duty
 Tricare for Military Retirees
 Must enroll within 90 days of retirement
date
 Annual premium
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26. CIVILIAN HEALTH INSURANCE
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INDIVIDUAL OR SINGLE FAMILY:
 Purchased from the insurance company or
marketplace
 May be more expensive
 Health questionnaire or physical exam may be
required
 More choices on coverage plans
GROUP:
 Negotiated group rate, generally through
employer
 Less expensive
 No individual within the group can be denied
coverage
 Limited choices on plans

27. HEALTHCARE TERMS
Premium
Deductible
Co-Insurance
Co-payment
In-Network Cost
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Out-of-Network Cost
Out-of-Pocket Cost
Out-of-Pocket Maximum Limit
Flexible Spending Account (FSA)
Health Savings Account (HSA)

28. TYPES OF PLANS
Preferred Provider Organizations (PPO)
Health Maintenance Organizations (HMO)
Exclusive Provider Organization (EPO)
Point of Service (POS)
Catastrophic Plan
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Which plan is right for you and your family?

29. ESTIMATING HEALTH INSURANCE
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https://www.healthcare.gov/see-plans

30. LIFE INSURANCE
How much do you need?
Note that your needs will change over time
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31. TYPES OF LIFE INSURANCE
 Veterans Group Life Insurance (VGLI)
 Term Life Insurance
 Permanent (Whole, Variable, Universal)
 Disability
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32. 32
LEARNING OBJECTIVES:
 Determine debt-to-income ratio
 Analyze the impact of credit score on transition
 Identify ways to decrease debt prior to transition
DEBT

33. WHAT IS YOUR DEBT?
Debt: an amount that is owed to
another individual or bank
Calculate your debt: determine to
whom you own money and the
minimum payment due each month,
along with the interest rate
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34. SPEND PLAN UPDATE
DEBT:
 Mortgage or Rent
 Car Payments
 Credit Cards
 Bank, department stores, Military Star Card, etc.
 Loans
 Personal, student, consolidated loans, etc.
 Advance payments
 Military organizations, family, friends
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35. DEBT-TO-INCOME RATIO
Total minimum monthly payments
$2,050
÷
Gross monthly income (pre-taxes)
$5,308
=
The debt-to-income ratio calculation:
2050 ÷ 5308 = 0.38
0.38 x 100 = 38
DTI: 38%
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36. DEBT-TO-INCOME RATIO
Less than 33% - debt at
this level is considered
manageable by
creditors
34% - 49% - still
manageable, but is based
on personal financial
circumstances; consider
ways to lower DTI
Above 50% - over half
of income is going to
debt which may limit
the amount of credit
available
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37. CREDIT SCORES
 Influences on hiring, home
loans, insurance, applying for
government assistance
 Higher score = favorable
ability to be hired, rented,
loaned or insured
Why Should I
Care?
 Three digit number generated
by a mathematical algorithm
based on information in your
credit report
 FICO – Most common
 FICO Range : 300 - 850
What is a
Credit Score?
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38. 38
CREDIT REPORT VIEWING
WHO AND WHY
GOVERNMENT
AGENCIES
CREDITORS EMPLOYERS INSURANCE
COMPANIES
LANDLORDS

39. 39
ANALYZING YOUR CREDIT REPORT/SCORE
www.annualcreditreport.com

40. FICO SCORE COMPONENTS
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41. IMPROVING A SCORE
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 Limit Inquiries
 Stay Within Credit Limit
 Pay Down Installment Loans
 Make All Payments Promptly
 Ensure Credit Report is Accurate
 Match Credit to Appropriate Purchase
 Don’t exceed 10% of the Limit on a Credit Card
 Don’t Add New Accounts to Lower Balances on Older Ones
 Establish New Credit Only if You Have Little Existing History

42. FAIR CREDIT REPORTING ACT
The Fair Credit Reporting Act provides protection to
the consumer by regulating the collection,
dissemination and use of consumer information
It does this by:
 Giving you the right to know what is in your credit report and
given a chance to dispute
 Not having incorrect or outdated information remain on your
credit report
 Consent must be given for credit reports to be provided to
most
 Ability to seek damages if there is a misuse of the credit
report
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43. CORRECTING A REPORT
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Use online credit report dispute
process provided by each of the credit
agencies:
 TransUnion
 Experian
 Equifax
Use the Federal Trade Commission
website for instructions and sample
letters: www.consumer.ftc.gov
Consumer Financial Protection Bureau
(CFPB) can also assist in resolving errors:
www.consumerfinance.gov
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44. CLEANING A CREDIT REPORT
Clean up Public Record Information
Explain Damaging Items
Accurate Negative Information
 7 years for negative information
 10 years for bankruptcy
AVOID CREDIT REPAIR AGENCIES
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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 TSP when
transitioning
 Recognize the reasons a savings account is
essential during transition
ASSETS

46. WHAT IS AN ASSET?
Items of ownership convertible into cash; total resources
of a person or business, such as cash, notes and accounts
receivable, securities, inventory, goodwill, fixture,
machinery or real estate
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Source: www.dictionary.com

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SAVINGS AND INVESTMENTS
IRA
TSP
RESERVE
EMERGENCY
INVESTMENTS
WAYS TO SAVE

48. RETIREMENT PLANS
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Traditional company pension plan; ultimate retirement
benefit is definite and determinable as a dollar amount
Example: Military Retirement Pension
 Funded mostly by the employer
 Employer assumes all responsibility for the payment
of the benefit and all the risk on funds invested to
pay the benefit
 Considered a type of compensation
DEFINED–BENEFIT PLAN

49. RETIREMENT PLANS
DEFINED-CONTRIBUTION PLAN:
the contribution is defined yet the ultimate benefit to be
paid is not
Examples are 401(k) and 403(b) plans, TSP, SIMPLE IRA,
Roth IRA, SEP, Employee Stock Ownership (ESOP), and
profit sharing
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 Contributions are from the employee and are portable
 A portion may/may not be matched by employer
 Each participant has an individual account
 Benefit at retirement depends on amounts contributed +
investment performance of account
 Investment risk may rest solely with the employee due
to opportunity to choose from a number of investment options

50. BLENDED RETIREMENT SYSTEM
Combines a defined-benefit plan with a defined contribution plan
Defined-Benefit:
 Calculated using 2% multiplied by number of years
 Available only after 20 years of service
TSP (defined contribution):
 Service member contributes percentage of pay into TSP
 Government contributes matching funds up to 4% into Service
member’s TSP
 TSP belongs to Service member, even after transition
 Government contributions are vested after 2 years of service
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51. THRIFT SAVINGS PLAN (TSP) OPTIONS
 Leave funds in TSP account (if balance is more than $200)
 Transfer your TSP into another eligible account
(i.e., IRA, civilian 401k)
 Transfer your TSP account into a qualified annuity
 Withdraw your TSP funds completely
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Some funds may include tax-exempt contributions Contact TSP:
1-877-968-3778
www.tsp.gov

52. EARLY TSP WITHDRAWAL
 Withdrawal is subject to both income tax
and, if the employee is under age 59½, the
early withdrawal penalty tax of up to 10%
 Cost of Early Withdrawal Example:
$10,000 withdrawal - $2,000 (taxes)
$1,000 (early withdrawal penalty – 10%)
= $7,000 actually amount received
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53. SURVIVOR BENEFIT PLAN
The Survivor Benefit Plan (SBP) is an elected benefit which guarantees
dependents of military retirees monthly payments for the lifetime of the
beneficiary. 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.
 Guaranties monthly payments for beneficiaries by deducting a % from
retirement pay
 Available only to retirees
 Election or decline made prior to retirement
For more information visit your installation PFM or:
https://www.dfas.mil/retiredmilitary/provide/sbp.html
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54. YOUR NET WORTH
Assets: What You Own
Liabilities: What You Owe
RESOURCES FOR ESTIMATING NET WORTH:
www.savingsbond.gov
www.zillow.com
www.nada.com
www.tsp.gov
www.myPay.dfas.mil 54

55. SPEND PLAN UPDATE
ASSETS:
 Current cash amount in saving/checking
 Estimate current value of house/home/real
estate
 Estimate current value of car, jewelry
 Estimate current value of TSP, mutual funds,
stock, bonds, etc.
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56. SOCIAL SECURITY AND RETIREMENT
Social Security entitlement is based on age and
amount withheld from paycheck during your
working life
 Open a “My Social Security” Account:
www.ssa.gov/myaccount/
 Social Security Administration Retirement Estimator
www.socialsecurity.gov/estimator/
 Age to begin withdrawal from annuities chart
www.ssa.gov/planners/retire/retirechart.html
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57. 57
LEARNING OBJECTIVES:
 Create a plan containing next steps in the financial
journey to prepare for transition
 Identify ways to decrease debt
 Identify reliable financial resources after transition
 Interpret information to discover possible scams
ACTION PLAN

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ACTION PLAN

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ACTION PLAN
Ways to
increase
income:
Ways to
decrease
expenses:
Ways to
decrease
indebtedness:

60. PREPARING FOR TRANSITION
VISIT BASE LEGAL TO UPDATE:
 Will
 Power of Attorney (POA)
 Trusts (as needed)
 Medical directive or medical POA
 Living Will
Ensure information on designated
beneficiaries is current and correct
NO LONGER PROTECTED BY:
 Service Member Civil Relief Act
 Military Lending Act
 IRS – special tax breaks
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61. ACCESSING myPAY
TIME TO ACCESS:
 Separating
 13 months only
 Retiring
 13 months for statements from in
service period
 New Login credentials will arrive when
your retired pay account is established
TO MAINTAIN ACCESS:
 Log on using a personal device to:
 Update email and physical address
 Update security questions and review
personal settings
 Print/save a copy of all W2s for the last 13
months
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62. 62
DIRECT
ACCESS
Log in through: www.dcms.uscg.mil

63. PRE-TRANSITION RESOURCES
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64. This slide is included for sites to add site-specific
information about Installation Resources.
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INSTALLATION RESOURCES
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65. POST-TRANSITION RESOURCES
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66. FINANCIAL PLANNING WRAP UP
CRS: Complete a post-separation budget
Make an appointment with installation financial
counselor, if necessary
Complete the TAP Participant Assessment for Financial
Planning for Transition
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https://www.dodsurveys.mil/tgpsp/

67. 67
QUESTIONS?
Reminder:
We are here to help YOU! If you have
any questions at any point during your
transition, please let us know.

68. TAP
PARTICIPANT
ASSESSMENT
 Use computer or mobile device
 Go to: https://www.dodsurveys.mil/tgpsp/
 Select Financial Planning for Transition
 Complete assessment
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