Dave Ramsey encourages military members to make costly mistake

I am a Dave Ramsey fan. His method of eliminating debt and accumulating wealth is virtually foolproof, and that's the appeal. I don't agree with everything he says, however. For example, on at least two occasions, Mr. Ramsey has encouraged military members to take the CSB/REDUX retirement option, trading reduced retirement benefits in return for a one-time $30,000 payment. If you've followed this blog for a while, you know that I think the REDUX is a terrible idea for military members. Read Tom Philpott's article on REDUX and you'll understand my concerns.

I actually e-mailed Mr. Ramsey and sent him this article, but apparently I didn't convince him. Military members need to research this option completely before making their decision. A great place to do this reseach is the Department of Defense Pay and Benefits web page.

Mr. Ramsey does make a point when he argues that military retirement benefits stop with the death of the retiree. Military members should consider a combination of the Survivor Benefit Plan and term life insurance to reduce the risk to their dependents.

Start a Vanguard College Savings Plan with just $50

The Military Officers Association of America (MOAA) has teamed up with mutual fund giant Vanguard to offer a low cost 529 college savings account. It has waved the usual $3,000 minimum investment fee for servicemembers and will let you start with just $50. After your account reaches $3,000, Vanguard will waive the annual maintenance fee of $30. To sign up, visit the MOAA 529 Web Page or call 800-870-8419.

Should you sign up for the Survivor Benefit Plan?

USAA recommends taking some or all of the SBP benefit. If you trust their advice, like I do, you should review their guidance from their web site.
They mention that there are many insurance salespeople who are anxious to get you to purchase their product, but the SBP has several attributes that make it tough to beat.

1. SBP premiums are paid with pre-tax dollars. If you opt out of SBP, the money that would have gone to it will be subject to income tax.
2. Your spouse is guaranteed lifetime income. Alternatives like life insurance may expose your survivor to the risk of missing a lump sum death benefit.
3. Benefits automatically increase with inflation. A life insurance policy would have to be significantly larger to replace SBP.
4. SBP is paid up after 30 years. Once you reach age 70 and have participated for 30 years, you no longer have to pay premiums.
5. Social Security adjustments are being eliminated. Until recently, survivor benefits decreased at age 62, but this reduction will be completely phased out after April 1, 2008.

These features are really important to military retirees, particularly if they retire early. I'm taking the full benefit!

Career Site Web Sites

The American Legion Magazine has some great ideas for Veterans at the back of their magazine in the Rapid Fire Section. Here is a list of job seeker web pages.

• Bureau of Labor Statistics
• US Dept of Labor
• American Legion Webpage
• Hire Vets First
• Hoovers
• Infousa
• Profile Research
• The Ladders
• Execunet
• Netshare
• Career Management Alliance
• National Resume Writers Associate
• Visual CV
• Linkedin
• Jibberjobber

National Personnel Records Center

The American Legion reports that the National Personnel Records Center makes it easier for retirees to obtain copies of documents, like their discharge certificates. Here is a link to the National Archives site.

Transfer of GI Bill Benefit

As mentioned in my earlier post on this topic, news regarding transferability of Post 9/11 GI Bill benefits will be service-dependent. According to Valerie Virgil, writing for the American Legion Magazine in January 2009, the program will offer educational benefits to spouses and children if the service member serves, or commits to serve, at least 10 years. Stay tuned for more details.

Disney Salutes US Military Servicemembers

Disney is offering a rare opportunity for military service members to obtain a free 3-day pass to a US Disney resort. They can also obtain low cost tickets for their family and get significant discounts on rooms at the resort. Check out the official Disney Resort website for all the details!

Consider the lowly I Bond

US Savings Bonds have consistently gotten a bad rap. Over the years I purchased small quantities of bonds as the cornerstone of my emergency fund and for tax-free educational savings. Sure, most of the EE bonds I purchased in the mid-90s have earned 4%, which lag behind inflation. But, the I Bonds that I purchased in 2000 are earning more than 8% now! I want to know where anyone can get a guaranteed 8% rate right now on a short term investment?!

Now, to be accurate, the current rate, according to the US Treasury web site is 5.64% and bonds must be held for a minimum of 6 month. So how does that compare to 6 month CDs with purchase prices of less than $50,000? According to Bankrate.com this week that rate was 2.07% and remember that it taxable!

So, if you an individual investor looking for some safe investment options, consider the lowly US Treasury I Bond.

Waiting for Post-9/11 GI Bill Transferability Rules

According to the VA website, each of the individual services will be able to set their own rules for the Post-9/11 GI Bill. Congress has authorized the VA to pay tuition benefits to the veteran's immediate family, but I believe that the services will use this as a retention tool. In other words, active duty military members will likely incur active service duty commitments in order to pay educational benefits to their children. Spouses of active duty members may be treated differently, so check back often. I'll post any information as soon as it becomes available.