In Consideration of Living Abroad

Photo Credit: Dreamstime.com

The popularity of HGTV's House Hunter International program demonstrates that Americans are at least intrigued with the idea of living abroad. The images of beach-side hideaways and cobblestone streets are appealing, and all the real estate agents speak English without an accent.

Marketwatch published an article about the world's top 10 retirement locations. They go from Asia to Europe to South America. Each location offers something completely different than the American model of retirement. Here you may still be able to golf, but you're probably not going to do it every day.

Probably the best advice that you can get is that if you are considering an overseas lifestyle that you remember to be flexible, adapt to the local surroundings, and not expect to have things look, smell, or taste the way they do "back home."

Postscript: The Peace Corps recently withdrew 150 volunteers from Honduras due to a lack of local security. This suggests that Americans spending extended stays outside the country should continue to monitor US State Department travelers advisories and be prepared to move if conditions deteriorate.

New Raise...Keep It

If you're an active duty military member, you just received your first paycheck for 2012. Like me you saw a raise of 1.6%. If you haven't already done so, consider contributing this increase to your personal savings program, whether that's your TSP, a ROTH IRA, or just a savings account. Over time this process of increasing your savings will lead to big improvements in your overall wealth building capability.

I have posted previously about the 8% challenge. This technique allows you to save a month's pay per year. Over a three year assignment, you can create a 3 month emergency fund that will anchor your financial life as you prepare for your next move, whether that's to a new duty station, discharge, or retirement.

Perhaps this is the year that you get on the 8% Solution, and the Government will get you started with the first 1.6%.

Happy New Year,

YMM

Max Out Your TSP in 2012

We've just updated the "Max Out Your TSP" table for the proposed 1.6% military active duty pay increase for 2012. Here's the link.

Here's how you use it. In this example, a Major (O-4) with more than 18 years of service would go to MyPay.gov, select the TSP link, and select 19.8% as their monthly contribution.

Similarly, a Lieutenant Colonel with 16 years of service would contribute 18.2% of their base pay to max out their TSP for the year.

Here are a couple of notes. First, this table assumes that the Congress will approve the 1.6% increase and that the President will sign the bill into law. Second, it assumes that you will want to max out the TSP at $17,000 for the year. If you are older than 50 the max contribution is $22,500. This table does not account for the extra $5,500 catch up provision.

TSP Limit for 2012

Internal Revenue Code (IRC) 2012 contribution limits — You can contribute up to $17,000 in tax-deferred money to the TSP in 2012. If you are a member of the uniformed services, you can contribute a total of $50,000 in tax-deferred and tax-exempt money. If you will be age 50 or over in 2012, you can also contribute up to $5,500 in additional "catch-up" contributions, as long as your regular contributions for the year are expected to reach the $17,000 limit. (The catch-up contribution limit has not changed from 2011.)

Source: TSP.gov

SBP DIC Offset Headlines Making Headlines

If you're a military member now or a disabled retiree you have probably been watching the recent headlines about spouses of now deceased veterans having to remarry to collect benefits.

First, let's think about the Government's intent. The intent is to provide every surviving spouse a stipend in the event of a military member on active duty or suffering a duty related disability.

The minimum benefit from the VA is the Disability and Indemnity Compensation, or DIC.

For those military members who elected to pay premiums for the Survivor Benefit Program and retired due to a duty related disability, their SBP is offset by the DIC dollar for dollar. If the DIC payment exceeds the SBP benefit, then they receive only the DIC and the SBP premiums are refunded.

There is a loophole, however, that allows surviving spouses aged 57 and older who remarry to collect both benefits concurrently. The Military Officers' Association of America did the best job of explaining this situation.

There are a number of Veterans Associations who are lobbying Congress to eliminate the offset and allow surviving spouses to receive both the DIC and the SBP benefits. This will be a challenge in a shrinking budgetary environment, however noble the cause might seem.

The important thing for military members to consider is to protect their spouses from the worst possible situation. Plan on SBP or offset it with life insurance and the DIC if you have a service related disability. Don't count on any change to the current policy (except the possible end of the dual payment option for remarried spouses!)

TRICARE Supplement Policies

Here's my current list of available TRICARE Supplements. Please comment on any/all of them if you have experience with the companies.

• Air Force Association
• American Military Retirees Association
• Uniformed Services Benefits Association
• Military Officers Association of America
• Military Benefits Association
• Retired Association of the Uniformed Services
• Reserve Officers Association
• TRICARE Reserve Select
• Association of the US Army
• Society of Military Widows
• Naval Enlisted Reserve Association
• AF Sergeants Association
• Marine Corps Association
• CHAMPVA AMRA Supplement

Federal Publishing has a chart online that allows you to compare the costs associated with the different plans.

Before purchasing a policy, TRICARE recommends that you consider several aspects of the available coverage. Check their web site for details.

Finding the right Post-Military Health Care Insurance

I've been researching the private health and dental options for our family, specifically as my oldest is about to graduate from college. Fortunately, Tricare Young Adult will help us bridge the gap, but I thought I could do better than $180+/Mo, with a 20% co-pay and deductable. Turns out that unless we spring for a high deductable plan, TRICARE will be the best bet.

Also, because my son is still looking for work, we are not eligible to participate in a Health Savings Account.

There are significant differences in coverage based on your region and needs. Also, it will be more difficult if you have an existing health issue that needs to go with you and your new coverage. I'll continue to report on what I find. Please add your comments if you have health and dental coverage recommendations.