If you had to come up with $1,000 right now for an emergency, could you do it?
If you had to save $1,000 in the next two months for an emergency, could you?
The military has a contingency plan for every scenario imaginable. But when those same soldiers head home at night, often the most long-term plan their families have made is what is being served for dinner.
That’s the findings of Gary Ward, retired Navy chief and certified financial planner and owner of Government Personnel Financial Services in Aiea, Hawaii.
My husband and I turned to Gary’s company this summer when we learned that we were most likely on the list to be forced into retirement as the Army draws down its forces.
Our retirement plan was not in motion. We expected to have another three to six years to prepare but with a quick signature on a general order that time has decreased to a staggering seven months. Let’s be honest, we have nothing.
And apparently, we are not alone.
“There are two things the military does not do well,” Gary said. “They don’t do a great job helping you career plan and they do nothing to help you financially plan.”
Naively, I assumed that as military retirees, we would have great benefits. And, there are decent benefits. But what I didn’t look at was the fine print.
For example, I never asked the cost of the monthly premium for Service Members Group Life Insurance upon retirement. Now, as a soldier, we pay $26.
As retirees, the same coverage, for our age bracket, starts at $68 a month and increases every few years. By the time we are 60, we will pay $432 a month, just for life insurance.
Ouch.
At that point, I feared it was too late for us. Gary has assured me otherwise. We were behind on planning but our future wasn’t set to be destitute, if we started now.
“You can’t become successful financially by accident,” he said. “You have to make it happen.”
The hardest part, he explained, is choosing to put the money aside and then leave it alone.
Military families especially have so many added expenses that pop up such as buying restaurant meals during PCS, purchasing new household items each time they PCS and paying for extra babysitters and yard help TDY and deployment. It can be hard to put the money aside and leave it alone.
And, Gary said, military families are frequent victims of scams, a trend that Gary is trying to stop by offering military members free advice through his business.
“Those people in the military today are my brothers and sisters and I’ll be damned if I’m going to sit back and let anybody scam them if there is anything I can do about it,” he said.
Military and federal employees are offered free consultations to look over the options and compare what the government offers in retirement benefits to what is available in the civilian sector.
Gary said two things are common among soon-to-be retirees: they are terrified to enter the civilian world and they are broke financially.
The first step, ask yourself what you want out of your future. Then, build your financial plan.
Gary suggests beginning by investing, even if it is just $25 per month. The website www.morningstar.comlists all the mutual fund companies and graphs their activity to make it easier to choose where to begin.
Once families become accustomed to investing that $25 a month, they eventually can adjust their budgets to add more over time.
He also never advocates for paying off all your bills, especially by taking money out of a retirement fund. Over time, you are actually losing thousands of dollars.
For example, if you take $3,000 out of a retirement fund to pay bills, in seven years that money would have been worth $6,000 in the fund and in 14 years it would have been $12,000.
“If you look at it over time, paying that bill didn’t cost me $3,000, it could have cost me tens of thousands,” he said.
He also suggests that clients check with the better business bureau and the state they live in to verify the legitimacy of the financial planner they choose to work with.
In the end, financial planning is about making choices.
“Try to evaluate your urges. A new car feels good for about two months but the payment lasts a lot longer,” he said. “If you plan your finances, anyone can be successful.
“You obviously need a cash reserve but you really need to look at long term saving options in investing,” he said. “Where to invest, in what and how much - those are issues a financial planner can help you with.”
