James Groh can help you answer these 3 big questions.
1) SHOULD YOU PARTICIPATE IN THE VETERANS’ GROUP LIFE INSURANCE (VGLI)?
“The Veterans’ Group Life Insurance (VGLI) is the only group insurance program the government offers to veterans. Veterans often must obtain new life insurance coverage because they lose the Servicemembers’ Group Life Insurance (SGLI) after they leave the military. The VGLI is an increasing premium term policy, i.e., the premium will get more expensive as you get older. The full table of premium rates is available on https://www.benefits.va.gov/INSURANCE/vgli_rates_new.asp.
The maximum death benefit you can purchase in the VGLI is $400,000. Instead of the VGLI, you can obtain a less expensive commercial life insurance policy.
” I recently secured $400,000 in coverage for a 47-year-old-male veteran and—unlike the VGLI—it was a 30-year level premium policy, i.e., the premium will stay the same for 30 years. Over the next 30 years, he will pay $154,608 less than what he would have paid in the VGLI. Participating in the VGLI can be a poor decision for many veterans, and it may be less expensive for you to obtain a commercial life insurance policy. The easiest way to ensure you get an inexpensive policy is to allow an independent financial advisor like me to shop the market for you. There is no cost for this service”.
2) SHOULD YOU PARTICIPATE IN THE SURVIVOR BENEFIT PLAN (SBP)?
” When you separate from military service, you can either receive your full retirement pension or participate in the SBP. If you participate in the SBP you will receive a reduced pension but your beneficiary; typically the spouse will receive a survivor benefit if you predecease him/her. If you elect for the full pension, you can use some of the additional benefits to purchase life insurance as a substitute for the survivor benefit.
There are several drawbacks to participating in the SBP:
• Once you start you cannot stop . . . Outside of a short window. You cannot change your mind about the SBP, except in the third year of the program (and only the third year). You can change your mind about life insurance any time you want.
• Which would your spouse rather have, a lump sum of tax-free money (life insurance benefit) or a taxed stipend (SBP benefit)?
• If your spouse dies one year after you, then successor beneficiaries get nothing. If you use life insurance, your spouse could leave a legacy to family or charity.
• Life insurance premiums can stay the same, or even go down to zero in certain policies, but the cost of the SBP is linked to COLA so it will go up every year.
• The SBP directs life events. If your spouse remarries after you die, then he/she loses the SBP. If you divorce, then you may have to keep your ex-spouse as beneficiary on the SBP. You can change life insurance beneficiaries anytime you want.”
3) WHAT DO YOU DO WITH YOUR THRIFT SAVINGS PLAN (TSP) ACCOUNT?
“After you leave military or civilian government service, you can roll over your TSP account into an IRA/Roth IRA with a financial professional. Should you leave your money in the TSP system or move it?”
” There are numerous disadvantages to leaving your account in the TSP system including lack of diversification, lack of guidance, and possible tax consequences. Many veterans have “tax-exempt” contributions in a tax-deferred TSP account. The tax-exempt money will not be taxed when it is withdrawn from the TSP system, but the earnings this money makes will be taxed. If you leave your account in the TSP system, you could accumulate decades of earnings that will be taxed upon withdrawal. By rolling over this money into a Roth IRA, you can ensure that all your future earnings will be tax-free upon withdraw. If you have $50,000 in tax-exempt money today and earn 7% per year, then in 20 ½ years you will have $200,000. Would you rather have your $150,000 in earnings taxed or tax-free when you withdraw them? ”
” There are numerous advantages to rolling over your old TSP account to an account which I manage, including increased investment options and comprehensive financial planning. As a financial professional, I not only provide my clients with a diversified portfolio but take the time to understand their needs and goals, look at their entire financial picture, and explain analysis clearly.”
“If you are interested in Insurance, Investments, or Financial Planning. I provide a Complimentary Analysis of Your Specific Situation.”
For more information go to http://thesummitgroupadvisors.com or call James Groh at 210-970-5871.
” Investment advisory services offered through The Summit Group, a registered investment adviser. This information discussed in this article is provided as a courtesy for informational purposes. The Summit Group does not offer legal or tax advice. Please consult the appropriate professional regarding your circumstance.”