ACP Member Blogs

ACP Member Blogs

  • As you transition from active service, life insurance is an important, yet overlooked aspect of your post-military financial planning.  In a previous article, I discussed five considerations about your military life insurance needs .  To build on those relevant points, this article focuses on things that may not present themselves until your transition. Life Insurance Consideration #1:  Your income (and insurable need) will probably change.  However, it might take some time for you to understand exactly how. The one constant of a military career is income predictability.  While you’re in the service, you can make career-related estimates based upon promotion rates in your community.  Even if promotion opportunities are slight, you can usually rest assured that your income won’t go down (unless you’re PCSing to a location with a lower housing allowance, and presumably lower costs).  While you might not be able to predict your income in the long-term, you know that your paycheck will come on the 1st and 15th of each month. All this is subject to change as you leave the service.  There are two changes I’ll discuss here:  near-term and long-term. Near-term:  Most people have no idea of what their near term income will look like.  Furthermore, many people may find that their post-military employment changes at least once.   Also, many people may decide to go back to school in order to improve their job prospects.  All of these factors (and more) can confuse the picture for what your long-term insurance needs are.  Since there’s a direct correlation between age and insurance premiums (see Point 4 below), you might end up spending more money over the long term if you wait for the long-term income picture to fully develop. Long-term:  While many people experience a near-term dip in income, income levels generally go up as you age.  Even if you can’t exactly project your long-term earnings or family needs, you can make educated guesses that will help inform your insurance decision.  For example, if you take a year off to finish your MBA so you can get a job with a consulting firm, and you’re planning to have a child in the next 3-5 years, you can still factor those things into a life insurance decision. Perhaps you don’t think you’ll obtain a life insurance policy now.  In that case, you could at least run the numbers. That way, you can see if you’re better off locking in a lower rate today, or if you’ll be better off waiting.  The longer you plan to wait, the more profound a difference this will be. Life Insurance Consideration #2:  Your life insurance benefits should be coordinated with your Survivor Benefit Plan benefits (if you’re eligible). If you’re eligible for the Survivor Benefit Plan (SBP), you may be inclined to look at that decision as separate from any life insurance decisions you make.  You should not.  Both life insurance and SBP serve to protect insurable needs, although they do so in different ways.  Before making a decision on either, it’s important to evaluate how SBP and insurance may fit into your planning, and what the associated costs are.  Only then are you likely to come to a decision that is right for your family. These articles may help inform the decision-making process as you decide what is right for your particular situation: Survivor Benefit Plan-What Does it Mean to Me? Why You Should Strongly Consider Not Participating in the Survivor Benefit Plan Term Life Insurance Vs. Survivor Benefit Plan (SBP)—A Side By Side Comparison Additionally, the Military in Transition Guide to the Survivor Benefit Plan presents several case studies, and some detailed analysis, which might be useful. Life Insurance Consideration #3: VGLI is not as compelling as SGLI.  Therefore, you need to think about the long-term cost of your insurance. The decision to obtain Servicemember’s Group Life Insurance (SGLI) is a no-brainer.  At $7.00/month per $100,000 of coverage, there is no cheaper insurance alternative, anywhere.  However, once you transition, rates start to go up for the same coverage under Veteran’s Group Life Insurance (VGLI).  At its cheapest (for ages 29 and under), coverage starts at $8.00/month per $1,000 in coverage.  This goes up in 5-year increments until age 75 and older.  The increases are as follows: 30-34: $10.00/month per $100,000 35-39: $13.00/month 40-44: $17.00 45-49: $22.00 50-54: $36.00 55-59: $67.00 60-64: $108.00 65-69: $150.00 70-74: $230.00 75+ $460.00 In comparison, the insurance rate outlined in my term life insurance article amounts to $195/month for $1.5 million in coverage, or $13.00 per $100,000.  This rate is roughly in line with VGLI for a 35-year old.  Since the insurance underwriting process will produce different results depending upon your circumstances, you’ll want to at least do enough work so that you can compare the numbers in your situation. Which leads us to the last two points. Life Insurance Consideration #4: The older you are, the more expensive a commercial policy will be to start. The first three points in this article outline some of the factors that might influence how much commercial insurance coverage you may need.  This point is that by delaying their decision to obtain an insurance policy, many people drive up the cost of insurance when they eventually obtain one. Using USAA’s online life insurance estimator, you can run the numbers yourself.  If you dont like USAA, there are many insurance companies that offer similar tools.  Below are the monthly premiums that I pulled up (as of 3/19/17) on USAA’s website for a 30-year, $500,000 policy, for a non-smoker with no significant medical issues and with normal weight.  The only change is for age: Age                             Premium 40                                $57.49 41                                $62.49 42                                $67.07 43                                $72.90 44                                $79.99 45                                $90.40 Disclaimer:  Since these numbers are purely an online estimate, you may (and probably will) find different quotes for your personal situation.  These examples are not intended to constitute insurance advice, but merely for educational purposes to illustrate the impact that age has on insurance rates.  Also, quotes from an online tool may (and probably will) differ from the quotes after the underwriting process has been completed. With that said, in this scenario, merely waiting for 5 years drives up the cost by $32.91 per month, or 57%.  Over the course of a 30 year policy, this would end up being a difference of almost $12,000.  Even a delay of 1 year can result in a 5-15% increase in rates. Why 5 years?  Let’s think about it.  In many cases, the best opportunity to purchase insurance for post-military life is a year or two BEFORE separating.  This is particularly true if you’re filing a VA disability claim.  However, if you haven’t already done so by the time you separate, you’ll probably be inclined to wait to see what post-military life looks like (salary, location, etc) before you actually get a policy.  This period could be about 5 years. There’s also an unintended secondary effect.  Merely postponing the execution of a decision (in this case, purchasing a 30 year policy) without making the appropriate adjustments (like adjusting to a 25-year term, if that’s part of a financial plan) could leave you: Woefully underinsured during the years where you need coverage Drastically overinsured in later years after you’ve achieved financial independence To clarify, the point is to: Emphasize the importance of planning for your insurance needs early in your transition Realize the impact that age plays in the price of life insurance Life Insurance Consideration #5: If you decide to pursue commercial life insurance, you should do so before you file a VA disability claim. As I discussed in a previous article about my personal life insurance policy experience , one of the questions that insurance underwriters ask is: “Have you ever, or are you currently, filing for disability benefits?” I don’t presume to know anything about insurance underwriting, but I imagine that answering ‘Yes’ to that question may warrant a more thorough search of your medical records.  Being able to say ‘No’ doesn’t guarantee that anything will go smoothly, particularly if you have conditions or diseases that you have to disclose. However, there are many conditions that people worry about, which insurance companies determine to be non-issues.  During my underwriting process, I disclosed my asthma, high blood pressure, and a variety of other factors.  My premiums came back at a preferred rate, meaning that I qualified for the lowest premiums for my demographic. Maybe this would have happened if I checked “Yes.”  However, I’m glad that I didn’t have to find out. Conclusion Figuring out how life insurance fits into your financial plans can be a daunting process.  Trying to figure it out while you’re transitioning can be even more difficult.  However, taking some of these factors into consideration might help you make the decision that’s right for your situation. What do you think?  What other factors should you consider when looking at life insurance as you transition from the military?  Feel free to post your comments below or join the Military in Transition Facebook Group ! Save Save Save The post 5 Life Insurance Considerations for Your Military Transition appeared first on Military in Transition .
  • The understanding of addiction as a health care crisis is growing in society. For purposes of this article, we’ll define addiction as a compulsion to use a habit forming chemical, such as alcohol, heroin, cocaine, meth, or prescription drugs, and drugs will be considered to include alcohol. In addition to the emotional trauma that addiction can bring to an individual and family, monetary impacts can be huge. Chemical habits can be expensive. Money intended for household expenses might be diverted to buy alcohol or drugs. With intensive drug use, assets might be sold, accounts deleted, and credit cards charged to the limit. If someone other than the addict isn’t monitoring finances, financial repercussions can be devastating. Regardless of who is in charge of day-to-day money decisions and investing, both spouses should be familiar with how to access accounts and check them regularly. Even after an addict is drug free, it’s wise to keep a close watch on accounts and potential theft. Addicts occasionally relapse – sometimes more than once. Another potential impact of addiction or chemical abuse is poor job performance. While some addicts are relatively high functioning or don’t use drugs at work, if there is impairment that negatively effects their job, it can result in missed work, lost promotions, reduced wages, or ultimately job loss. This can impact the individual as well as the entire family. There are various forms of treating addiction. Several twelve step programs are free, although donations are accepted. There are counselors and therapists who specialize in addiction treatment. These services, generally with appointments at least weekly to begin, can cost a few hundred to thousands of dollars per month. If inpatient treatment is appropriate, a 21 to 30 day stay is often recommended with follow up treatment after discharge. This intensive treatment may cost tens of thousands of dollars, with health insurance policies under the Affordable Care Act generally covering some of these costs. With extreme use, an addict might resort to illegal acts to obtain drugs. Stealing from others, selling drugs, and violence to get money or drugs can result in arrest. Only individuals of limited monetary means are eligible for a public defender and legal fees to defend from charges can easily run to thousands of dollars. Any criminal record can impact future earning capacity and limit job eligibility. Some employers, through legal limitations or corporate policy, won’t hire an individual with a felony record. Ignoring or denying a problem is one of the most expensive mistakes you can make. If you’re suffering from addiction, get help. Many people operate in our Happy Hour and Party Drug Society without drinking or using drugs. If you care about someone who is an addict who’s succumbing to the compulsion to abuse drugs or alcohol, encourage treatment. You can’t make an addict stop using, but you can set your own boundaries. And you can emotionally support your loved ones as they fight to overcome challenges.
  • Andrew Faas Can we really afford the price of unnecessary workplace stress? According to a 2015 Harvard University study published in the journal Management Science, more than 120,000 deaths a year may be due to stress at work resulting in approximately 5-8 percent of annual healthcare costs.   The desperate need to create psychologically healthy workplaces has come to the attention of major
  • Growing Up

    For years, kids hoped to grow up to be a ballet dancer, President, a cowboy, or a world famous author. That’s not new. And while many are tired of hearing about what’s wrong with participation trophies, the concern might not be completely misplaced. As school is starting up, it’s an excellent time to talk to kids – no matter where they are in their education – about how to hone in on a career. What someone does professionally is an integral part of life. It’s the biggest single commitment during our waking hours and determines what lifestyle we can afford. Too often the choice of a career path starts in a backwards way. It’s reasonable to focus on lifestyle, but when someone pursues an occupation strictly based on how much money can be made, it can result in a miserable life. Many lucrative professions require more time than a regular workweek to become established. So doing something just for the money can leave little time to enjoy that money and make the long hours of work tedious. If you have children who are still in school, find out which subjects they enjoy the most. Encourage them to look into careers that use the skills involved in those subjects. Part of exploring a career field is finding out the pay scales. There are a few jobs that don’t pay a living wage. But generally an occupation that provides full time employment provides pay that ultimately will provide the worker with enough money to live on. There are two big problems for children in finding the right career. One is kids not knowing what they want to do. They haven’t given intentional thought to the productive activities and school subjects they enjoy. The other, which is even more dangerous, is failing to set up a lifestyle that matches what they are making. A young woman who gets a teaching degree won’t make the same income as if she went to law school. The teacher can live a good life on what teachers make. And if she’s a public school teacher, she’ll be eligible to retire with a nice pension after 20 or 30 years of teaching. And, if she wants, she can pursue a second career, making even more money. But if she spends more than her teaching salary provides, the future income from that teaching pension won’t be enough for her overspending. One of the best things about finding a career that you like is that work is enjoyable. Sure, everyone has days that they wish they could stay in bed or go for a hike instead of going to work. But having a livelihood that’s interesting and gratifying is a benefit of its own. The money is important, but the pleasure of doing work that’s emotionally and intellectually rewarding flows into the lifestyle that the income supports. And if you do what you love, you never really work for a living.