Military Financial Independence

Eight Reasons Not To Worry About Military Retirement

Posted on September 4, 2014 by Doug Nordman

A new military retiree asked a very good question on a financial independence forum:

I am going through a big life transition where I’m taking about a 60% cut in pay. Fortunately, it is a military pension and my monthly budget is lower than what I will get paid. I feel that I’m set for my transition and I can take my time finding a job.

Things I worry about:

I’ve been in the military since I was 17 years old, so I don’t know civilian life.

I’ve never had to apply for a job.

I’ve always been told what to do and where to go.

I have all this freedom but nothing pulls me in a direction.

I have a ton of skills but no certifications (only real experience).

The closer I get to retirement the more worries I have.

I only have my income to rely on.

What if I find a job and it’s miserable?

Most “entry level” jobs want a college degree or a couple of years of experience.

Should I go back to school to get some hard credentials?

What if I can’t find a job?

The good news is:

I’ll have a pension.

I’m debt free (I also own my home).

I have 18 years of leadership and mechanical skills.

I have the GI Bill.

I don’t understand why I’m so worried all the time!

All of these feelings are perfectly normal.

Your “worst case” scenario is: nobody ever wants to hire you. Even in that situation, [your income] > [your expenses]. You could live nearly anywhere, keep your expenses low, and never work again.

You may already have figured out what I’m writing in the next few paragraphs, so I apologize if I’m preaching to the choir.

You will never know civilian life. I’m not even sure what that phrase means. The habits and behaviors you spent over half your life acquiring will serve you well after the military. You’ll still run your life pretty much the same way you do in uniform, only with fewer haircuts. You’ll have a lot fewer rules to follow, too, and you could really let yourself go, but you won’t because your personal (internal) standards are too high. I hear that police officers, medical professionals, university professors, and high-ranking government officials feel the same way about being a “civilian” without access to the same lifestyle and camaraderie that they used to enjoy– along with all of its stress, deprivations, and frustrations.

Many civilians envy your military life. You had purpose and mission and structure and rules and hierarchy. You always knew who to be and where to go and what to do. Some civilians think you sit on your assets all day ordering people around, and that you have no idea how to do anything for yourself. Some employers think that you can’t even handle someone saying “No” to you– except to scream at them or put them on report. They don’t understand that you can tap into a person’s internal motivations to do the things that need doing, and they’ll start by saying “Yes”.

If you miss your life in uniform (or don’t like your civilian life) then you’ll seek out your kind and join their tribe. You’ll become a member of a veteran’s group. Maybe you’ll find a job with a company that hires a lot of military veterans, or you’ll join a non-profit filled with military retirees. You may fit in with groups where there’s sports and coaching and referees. Or you’ll find a new identity with another tribe like “surfer” or “personal finance blogger”.

Start your job search here.

Nobody has offered you a job yet because you haven’t ramped up your job search. Your “available” date is too far away or you’re still on terminal leave. You have not yet put yourself out there for a full-power run of networking and resumes and interviews and a definite start date. A few employers won’t even contact you until 181 days after you’re retired (especially civil service and defense contractors) because of the military’s ethics regulations. The job search may be tedious or even discouraging but it’s straightforward (just like reaching financial independence). You’ll simply have to spend a lot of time hearing “We’ll call you” until one day it all comes together with ridiculous ease and you get an offer.

Get credit for that experience and those credentials: talk with your military base’s college support office– the one with “skills assessments” and “interest surveys” and “discovery software”. Your service’s website (the one behind the ID card login) may also have a program that helps translate your service record of billets, ranks, and training certificates to their civilian equivalent. When I was in uniform I thought the College Level Examination Program belonged to the military, but it’s run by an academic organization. Your base’s education services office can guide you toward the CLEP exams and other certifications– along with resume bullets.

You may be more suited for running a business than being employed by one. I’ve read literally hundreds of business plans over the last seven years, and most of them are boilerplate Word documents filled with business-speak. The good business plans are a few paragraphs long. The outstanding ones fit on a paper napkin. Read Chris Guillebeau’s “$100 Startup” and check out this veteran’s entrepreneurial resources spreadsheet. Your skill set may be “facility manager”, “repair service”, and “support contractor”. If you wanted to build a website then you could emulate the FixItNow.com Samurai Appliance Repair guy… another military veteran.

Do not suffer from the “military inferiority complex”. Frankly, the worst problem you’ll have to solve will be finding the people who want to work with you, and they’re probably already waiting for you a few months down the road into your retirement.

Right now your biggest “problem” is taking some time off to relax and rejuvenate. When you’re already close to financial independence then you can enjoy a few months, a year, maybe two. You will not go stale and you will not lose all of your “contacts” in your “network”. You could spend three hours a day updating your Linkedin profile and joining groups and reading books and blogs and forums. Take a well-deserved break during your terminal leave, read about “the fog of work”, and then start planning the rest of your life. You even get to change the plan every few years.

I particularly recommend chapters 8 & 9 from the book. Parts of those are archived in the blog between January-April 2011, but to enjoy all of the other personal stories you’ll have to borrow the library copy (or pay for the Kindle version).

Here’s an example of being a military veteran in the civilian world.

Last month at an investment lunch, I ran into a shipmate who I’d briefly served with over 13 years ago. We spent a few minutes catching up and then started swapping other shipmate’s names and sea stories. He’s spent most of the last decade pursuing a corporate career, and he was ready for a change. Now he’s come up with a brilliantly simple civil-engineering idea that can easily be designed into new homes or retrofitted to existing buildings.

As we parted (with more conversations to come at other lunches), one of my civilian friends mentioned that he’d seen me “light up” in a way that I rarely do. I was with a veteran who shared my background, my experiences, and my attitudes. We didn’t know each other particularly well during our earlier time together, but at that lunch we immediately bonded.

He was “only” in the military for seven years, but I know his training and experience just from hearing his duty stations. I know that he already has a leg up on at least 80% of the other entrepreneurs I’ve met over the years. He’s using his military skills (initiative, motivation, persistence) to turn an interesting idea into a business. I know what he could accomplish when he was in uniform, and I enjoy watching him build his startup.

You’ll find your avocation and your people too. Soon you’ll have the time, and right now all you need is patience.

Posted in Military Retirement | 4 Comments

Blogging Lessons Learned From Interviews (Plus A Great Benefit)

Posted on July 3, 2014 by Doug Nordman

[Welcome new readers! If you’re coming here from the USAA Magazine article or the Yahoo Finance video, you may want to learn more about “The Military Guide” and your financial independence at the “Start Here!” page. That link opens a new tab in your browser, so you can keep reading this post without losing your place.]

All right, all right, all right. Over 40 e-mails and Facebook messages on the subject. Yes, I was interviewed by USAA Magazine. They’re a bunch of pros, it was fun, and I’d do it again in a heartbeat. Yeah, I was on the front page of a Yahoo video too, and I’d do that again in a heartbeat. Here’s what I learned from the experiences, and if you’re a personal finance blogger who wants to do this too then I’m happy to make an introduction.

I’d like to say that these events were part of my carefully-planned & globally-coordinated media campaign to spread the word about the book. Yeah, I’d look a lot smarter if I could say that.

I’m writing this post for bloggers. When I started my book and the blog, I didn’t know how to “reach out” and “network” with the media. I didn’t know how quickly to respond or when something was working. I didn’t know when to change tactics or when to just be patient & persistent. I’ll explain how this sausage got made, and you can share your own tips & tricks in the comments.

I’ll suggest specific tactics at the end of this post, but the most important one is: persistence. Like most bloggers, I just keep flinging the popular promotional techniques and hoping that something sticks to the wall. Sometimes it works great, other times… chirping crickets. The effects might be short-lived, too, so you should have other tactics ready for the publicity surge. How many of you remember my epic FORTUNE magazine interview? Yeah, didn’t think so. Even FORTUNE has forgotten about it.

I’ll also describe the sequence of events that led to the interviews. Once I’ve explained what can happen, I’ll suggest how you can set yourself up for your own media successes. Take heart– the bar is not that high!

First, here’s a few hard ugly truths:

Who you are: readers (and the media who feed the readers) want to read about interesting people. I’m a balding ponytailed middle-aged surfer & retired Navy submariner living in Hawaii. That sentence has enough unusual keywords to attract media eyeballs. It has nothing to do with years of persistent frugal living or the boring math of saving for financial independence or the hours of writing that go into a book. We humans have to read entertaining stories about people who have reached a goal, and then maybe we’ll learn about reaching our own goals.
Your audience: my geezer middle-aged demographic is hot (for now). The media has discovered that some of us younger Boomers still have money to spend for advice & services. Even better, we’ll pay for these things over and over again because we didn’t pay attention the first time and we’re trying to catch up.
Patience & persistence: it took over three years of blogging to attain overnight success with USAA and Yahoo. It took over six months between the time a freelancer suggested an interview and the day the article went to press. After the Yahoo interview, I was sure that I’d never hear from them again.

There’s a huge survivor bias built into media exposure. When you see an article in the magazine or on a website, you never see all the failed attempts. (You never see all the discouraged bloggers, either!) You don’t see the article I submitted to the financial section of Huffington Post. You didn’t see the e-mails and Skype auditions that I did for a retirement documentary.

You didn’t see the coffees & lunches that I attended to discuss how the book can help a business attract more customers. You didn’t see the two FinCons that I attended to start building a network. Regrettably, you didn’t see me gripping & grinning in the lobby of the military exchanges behind a big stack of my books with a “Meet The Author!” sign.

You probably missed the dozens of quotes & comments that I submitted on Facebook groups and other blogs to make the contacts that led to the interviews. My hit rate on interviews is about 10% these days, but it used to be one out of a hundred. 10% is actually a very good hit rate, mainly because I have the free time & energy to say “Yes!” to opportunities that might be outside my comfort zone.

The USAA interview

I’d like to tell you that I got the article because I’ve attended two USAA blogger conferences and written a dozen posts on their community website. Perhaps that made it easier for freelance writer Andrea Downing Peck to sell her pitch to USAA Magazine. I fear the fact is that I’m a 33-year USAA member (refer back to the above demographic bullet #2) who happened to be riding the coattails of a successful writer. In this case, “who you know” may apply to the freelancer, not to me.

Photo of Doug Nordman at a surfing beach for USAA Magazine | The-Military-Guide.com

Loaner board.

Andrea is a pro (we’ve already done a second interview) and the USAA Magazine staff is thorough: two fact-checkers with plenty of clarifications. The editor even hired a local professional photographer to take pictures at my home, in a cane field along the highway, and at the beach. The photographer’s stylist(!) swapped e-mails about wardrobe, special makeup for a cranial condition known as “forehead glare”, and waxing down curly ponytails. We spent over four hours taking photos. They even brought their own surfboard prop (instead of using mine) because it was a good color & size for the photo.

How much does it cost to have a pro (and his crew) spend hours at your house taking your photo? I have no idea but I happily paid $350 for his “outtake” shots. Those images are now part of my blogger social-media tools as well as in our family photo albums.

The article was published through USAA’s website (and mobile apps) while it was mailed out in hardcopy. (This publicity is a slow rising swell, not a sudden surge.) The content is a great summary of the topics and techniques in the book.

Best of all, they mentioned the title of the book and I’ve made it easy to find the book on Amazon.com. In the few weeks since the magazine was published, I’ve had a steady rise in pageviews and social media– along with a nice boost in book sales. These are the readers who like what they read, buy the book (or borrow it from a library), ask questions on the blog, and tell their friends.

The Yahoo! Finance interview

I’d like to tell you that I got the Yahoo! interview because I’m a compelling speaker with an interesting story (see demographic bullet #1). The reality is that a blogger reached out to our FinCon Facebook group in search of someone else who’d saved their salary to become a millionaire. Although that other person didn’t respond, I volunteered my story of saving my salary. A rock-star blogger (who I’ve read but never met before) arranged the introduction to Yahoo.

I swapped e-mails with the Yahoo producer, who might simply have re-worked their storyboard to save the effort that they’d already put into it. The video interview itself went badly because the producer was out sick and the rest of the team had tech issues. (We spent nearly 15 minutes just getting the lighting right on my end.) For over an hour I was only able to hear the backup interviewer asking her questions over Skype audio (with multiple repeats) while I was staring at my iPad camera and talking to a “Yahoo! Studios” logo. It was not inspiring.

After we slogged through the interview I got a “K thanks bye!” and heard nothing for a month. No fact checks, no editors, no rough-cut previews or discussions about coordinating social media promotions. Finally, one evening the producer e-mailed that the Yahoo! Finance Daily Ticker video would go live the next morning, but because of my miserable recording experience I held back on promoting it.

When it went live, my hour of Q&A had been edited down to 3.5 minutes— shared with another millionaire who I’d never known was part of the story (he’d even been interviewed separately). My name was misspelled on the video and on the transcript.

I politely e-mailed the producer about the spelling, and happily, she immediately fixed it everywhere. Then she asked for extra headshots so that she could pitch the video to the Yahoo homepage editor. I was really glad I’d bought the rest of the USAA interview photos!

Here’s an idea to try on your next interview. When a one-hour Q&A is edited down to 100 seconds, details are left out. Yahoo’s page received nearly 1800 comments, and the most common one was “Sure, easy with no kids!” I’ve posted to Internet forums for years, so I responded.

Yahoo’s commenters are a notoriously tough crowd, so I only added more detail with my own comments. On every tenth “No kids!” comment, I politely replied that we’d raised our daughter. When the interview dropped off Yahoo’s homepage and the comments ground to a halt, I posted a longer comment explaining some of the omitted details and pointing readers to this blog. That tactic paid off very well in my reader e-mails and other feedback, so I’m going to do that again on future interviews.

The results

What are the blogger benefits of this publicity splash?

Four days of record-breaking traffic
8x more unique visitors with higher pageviews per visitor
10% more Twitter followers
Book sales up 8x that week (more money to military-friendly charities!)
10% more Facebook “Likes” for the book’s page
5% more blog subscribers
A 20% boost in reader daily traffic, perhaps a “new normal”
Amazon author rank rose from 220,000 to 31,000.

The great benefit that I mention in the post title? The article and the video attracted a new crowd of my target readers: U.S. military servicemembers, veterans, and their families. I’ve had a ton of e-mails, “Contact me” messages, and other social media queries. They’re buying the books, and they’re telling their friends about them. In “just” four days, we’ve generated hundreds of dollars of AdSense revenue and book royalties for military-friendly charities. Better yet, these new readers are going to stick around to read more– and they’re going to invite their friends.

What you can try

Above all else, keep writing posts (and recording podcasts, and videos) for your audience.
Be interesting. Occasionally blog about your background, your accomplishments, your unusual hobbies, and maybe your family. Make it easy for people to learn more about you and introduce you.
Have an elevator pitch about your blog or your book. Have a separate “top three” paragraph about your topic or your techniques. Have a couple of interesting short stories about your subject or your mistakes.
Learn how to talk well on video. Listen to blogger podcasts, watch video, join Toastmasters. If you’re in the military, volunteer for instructor duty.
Join a blogger social media group. (For me it’s FinCons and the FinCon Facebook group.) Don’t self-promote or sell– just contribute and help out other posters. Be a giver.
Be ready for a big new audience, because you won’t have much warning before the spotlight goes on you. Have a “Welcome new readers!” post or a “Start here!” page on your blog. It’s the first thing readers should see after they click the link in your mainstream media article.
Be patient: this can take at least two years of building a foundation.
Try to say “Yes!” to a pitch, even if it’s not about you. (I helped the producer move forward.)
When the interview goes live, make the time to respond to e-mails and social media. They’ll find you.
Consider answering questions in the comments. Be professional, be polite, be brief. Have a thick skin and only respond to the people who genuinely have questions.

If you’ve been through one of these experiences, what else did you do that made a difference?

Military Financial Independence on Amazon:

Reach your own financial independence
Retire on your terms
Success stories and personal checklists
Royalties donated to military charities

Use this link to order from Amazon.com!

Related articles:

The Yahoo! Finance interview: How These Average Joes Retired Millionaires
FinCon, The Financial Media Conference
Should you self-publish or use a publisher?
Beginner’s guide to part-time blogging for money
“So Nords, why are you still blogging?”
Book review: “Give And Take”

Posted in Entrepreneurship | 6 Comments

How Much Life Insurance Do You Need?

Posted on June 26, 2014 by Doug Nordman

A reader writes:

Hey Nords! Hope all is well. Update: I got denied for TERA and promptly got an assignment (my first choice) 24 hours later, so I can’t complain too much.

Question for you if you don’t mind. I’ve got SGLI and a $100K policy on my wife as well. I’ve generally steered clear of life insurance. What’s your opinion on the topic? USAA does their best to tempt me, but I’m still not convinced we need it, especially after I retire. Your thoughts?

First, a side note about TERA: Last year this reader asked a question about keeping their morale up for the final five years before military retirement. When their service opened up applications for the 15-year Temporary Early Retirement Authority, he applied for it.

The smaller military pension would have meant a few years of a bridge career to reach financial independence, but he was willing to take the opportunity. However, the services use TERA as a force-shaping tool and his skills are still in demand, so his application was turned down. At least the assignment officer didn’t hold a grudge, and the reader used this opportunity to thoroughly review their finances and their lifestyle. This new duty is “good enough” for now, and they can revisit the decision in a couple of years.

Now let’s talk about life insurance.

Like all insurance, life insurance is for catastrophes where you can’t afford to self-insure. Nobody enjoys shelling out perfectly good money for life insurance that they’ll never use, but it certainly helps the survivors sleep better at night. I think humans also have a huge behavioral psychology block at accepting our mortality, which makes us reluctant to investigate life insurance.

One way to get past the mortality issue is by asking your spouse how much money they want to have in the bank account after you’re gone. Some guys (and it’s almost always guys) feel obligated to carry enough to set their spouses up for years, possibly even for life. That may also be more money than the couple can afford to spend on insurance premiums.

Some parents want enough insurance to handle years of childcare plus the college fund. (Again, that may dramatically reduce their savings rate and extend their journey to financial independence.)

Many frugal couples opt for just enough insurance to pay for childcare or until the surviving spouse can resume their own career. They choose not to try to save for their kid’s college degrees but rather let the teen figure it out with scholarships and work/study.

I would not use life insurance for a survivor to “win the lifestyle lottery” or as an investment. I don’t want to include insurance premiums in our budget only so that I’d be worth more dead than alive. In financial terms, I’d use life insurance only to hedge our human capital while it was needed to support someone.

How Much Life Insurance Do You Need?

Here are some practical insurance examples from three generations of Ohana Nords.

Starting Your Military Career

Our daughter just commissioned last month and reported aboard her first ship. She’s single with no kids, and nobody will suffer financially if she’s not around– so we suggested that she decline Servicemember’s Group Life Insurance.

If she marries then she and her spouse would have to decide what expenses would need covering if one of them died. If they both have careers then they could decide not to insure each other until they have financial responsibilities like a mortgage or kids. If one of the married couple is unable to work (due to disability or chronic health issues) then the other should carry enough insurance to provide support (perhaps a lifetime annuity) beyond Social Security Disability Insurance.

Life Insurance During Your Career

Nearly 30 years ago my spouse and I were a dual active-duty couple when we married, and we declined SGLI until we became parents. (We could cover our mortgage on one income.) When we were raising our daughter, we each carried SGLI on each other to cover the childcare and the college fund. (In that order.)

When my spouse left active duty for the Reserves (our daughter was eight years old), we had a long discussion about insurance. I kept my SGLI and we dropped hers because I was only about 18 months away from my pension. We were financially independent, I could cover childcare out of my salary, and the college fund was on track.

If I died then insurance would give my spouse enough savings (along with her Reserve drill pay) to cover childcare and replace most of my pension until our daughter was 18 years old. Otherwise, we felt that we had enough assets to self-insure.

Life Insurance After Your Career

When I retired from active duty, I dropped my SGLI. We were financially independent, the college fund was still on track, and our living expenses were actually dropping. The only other insurance decision that we discussed was on our pensions– the military’s Survivor Benefits Plan.

When I retired in 2002 it was already apparent that my spouse would have her Reserve pension in 2022 (at age 60), so she decided not to carry SBP on my pension. (By law, SBP is the choice of the surviving spouse.) The premium is “only” 6.5%, and it wouldn’t break our budget, but the SBP payout would not make a lifestyle difference.

We’d rather have that money to spend on ourselves now. Another dual military retiree couple opted to decline SBP and carry term life insurance on each other until they reached age 70, when they’d drop the policies and start their maximum Social Security payouts. They chose this option because they only wanted about 25 years of cheaper term insurance instead of paying SBP premiums for 30 years.

SBP is a wonderful insurance policy because half of the premiums are subsidized by the federal government, but if you’re financially independent and the payout does not change your lifestyle then you have no need to buy it in the first place.

The final reason for life insurance is estate planning, and most families use it to balance the inheritance of their heirs. For example, one adult heir would inherit the family home (worth $400K) while the other would get the $400K life insurance payout. That’s considered better than forcing the heirs to divide up the real estate (and agreeing on the rest of the probate issues).

Another estate-planning benefit of life insurance could pay the federal/state estate taxes or the cost of probate– the popular media stereotype for this situation is not having to sell the family farm or business to pay the taxes and probate fees. My spouse and I are planning to (1) spend enough money while we’re alive to avoid estate taxes when we’re dead and (2) use a revocable living trust to avoid probate fees.

Term, Whole, or Permanent Life Insurance?

In almost all of the examples above, I’d buy the cheapest policy: term insurance. Term is strictly insurance instead of a hybrid insurance/investment policy like permanent insurance or whole life insurance. The key to buying cheap insurance is making sure that you continue to save for financial independence and grow your ability to self-insure. If you’re saving money with a cheaper term insurance policy, then make sure you actually invest those savings instead of frittering them away on lifestyle.

Whole life is almost always a worse investment than “buy term and invest the premium difference”. Most people don’t have the discipline to invest the difference, so whole life (and its growing cash value) can become a form of forced savings for those who would otherwise save even less. If you’re managing your own finances and saving for financial independence, then you probably have the skills & discipline to use term insurance and skip whole life.

My father is another example of the frustration of a whole-life policy. When my brother and I were toddlers, my father bought whole-life policies and named us sons the beneficiaries. In the early 1960s that was probably considered a good investment (or at least a feel-good investment), but by the 1980s (as long-term interest rates began a 30-year slide) the invested funds of the policies were not supporting the premiums.

Dad chose to pay more money into the policies to keep them active because they had a cash value– and because he was suffering from the sunk cost fallacy.

When I started managing his finances in 2011, I found a two-inch stack of 25 years of correspondence between him and the insurance company. They were bickering over the policy cash values and the additional premiums required to maintain them– and I could tell how angry my father was.

Today, as a cold-hearted financial engineer, I can see that Dad should have canceled the policies when he retired in the 1980s. (Or he should never have bought them in the first place.)

My brother and I both had our own careers and didn’t need any support, and we wouldn’t have needed any extra funds to handle estate probate. (I wish he’d discussed it with us.)

As a parent, though, I can understand the sentimental reasons that Dad would want to keep the cash value for “us kids” instead of cashing out the policies. After Dad maintained the whole life policies for over 40 years, another insurance agent talked him into converting them to a single-premium permanent policy.

It’s permanently paid up but it will never gain any additional face value to offset inflation. His four decades of premiums have been a terrible investment– almost as bad as investing all of an IRA in CDs. It might even be worse than CDs because insurance companies invest most whole-life and permanent policies in long-term bonds.

Other Insurance Situations

Several of my friends have children with lifetime health conditions or disabilities. Their kids may receive some SSDI, state care, Medicare, or Medicaid benefits, but their parents are also heavily insured to fund a special needs trust for lifetime income. One of them was able to provide insurance with his military pension by using the SBP “insurable interest” benefit for adult (disabled) children.

Finally, if you were planning to leave the military but wanted Veteran’s Group Life Insurance during your bridge career, then it makes sense to have SGLI in effect before you resign. You’d be able to convert the SGLI to VGLI without a physical exam or underwriting, but VGLI is not always as cheap as term insurance. It’s simply easier for a veteran to purchase VGLI, especially if the veteran is concerned about a disability rating or a pre-existing condition.

Figure Out Your Life Insurance Needs!

If you’re trying to settle on a dollar figure then I’d balance USAA’s life insurance calculator (and premium quotes) against the quotes from the Navy Mutual Life Insurance website and this list of the best life insurance companies on Good Financial Cents (Jeff Rose is a military veteran, personal-finance blogger, and CFP).

They’ll help you estimate the amount of insurance you want. Then they’ll give you a wide range of quotes as well as the details of physical exams, pre-existing conditions, high-risk sports/hobbies, and underwriting. If you’re a member of MOAA or any other military support organizations then you’d also want to investigate their affiliated insurance programs.

So get over your mortality, think about your insurance needs, run the calculators and get quotes, and buy a policy if you need one!

A little insurance help?

After you help yourself with your insurance needs, I could use your help with other military readers. This post will become part of an eBook about making good insurance decisions, and readers love the advice and personal stories of military families. If you’d like to contribute your advice & stories to the eBook, then you’ll have a vote on what military charities receive the royalties (currently Wounded Warrior Project and Fisher House Foundation). Please share in the comments below or contact me or e-mail NordsNords at Gmail!

Military Financial Independence on Amazon:

Reach your own financial independence
Retire on your terms
Success stories and personal checklists
Royalties donated to military charities

Use this link to order from Amazon.com!

Related articles:

Military insurance: SGLI, VGLI, SBP, and other benefits
Reader Question On Veterans Group Life Insurance

Posted in Insurance | 11 Comments

The Pitfalls of Your Parents’ Finances

Posted on May 29, 2014 by Doug Nordman

Have you had the financial independence talk with your parents?

(No, I don’t mean the one about college costs and student loans, or the one about helping out with your down payment on your first house.)

I’m talking about the one where you hope they’ll talk about their health and tell you how to manage their finances.

Photo of three generations of family around the dining table | The-Military-Guide.com

Getting ready for “the talk”

The advice is in dozens of blog posts. (With eye-opening comments.) You’ve seen it in commercials and magazine ads. The layout shows two or three photogenic generations enjoying a meal around a table, perhaps at the ol’ homestead or in a restaurant. Their clothes all match the decor. The older couple is “Medicare age” while another couple is in their 30s. Everyone seems relaxed and friendly, perhaps celebrating a holiday. Maybe one of the elders has just gently shared that they’re having trouble with their memory or the younger adults are asking how the older folks are doing at home. Everyone looks concerned. Eventually the elder father talks about their health and finances and tells the adult children where to find “the folder” in the file cabinet. Everyone gathers ’round dessert to sign powers of attorney and healthcare directives, smiling happily with relief. Whew, everything is going to be just fine!

Yeah, right. Maybe in a movie or a TV commercial, but not for most people.

In our family it started three years ago with the midwatch phone call from a trauma surgeon in the emergency room. Dad would recover but he could no longer live independently. When the hospital discharged him in a few days, what skilled nursing facility would we like to use for his therapy?

I’m 53 years old, and my pounding on a keyboard gives me lots of opportunities for introspection. I’m shocked to realize I’m the same age that my Dad was when he retired. He’s now 80 years old and deep into mid-stage Alzheimer’s. He’s happy and reasonably healthy and he’s doing well at an excellent full-care facility. He has long-term care insurance and other assets. My brother is his guardian and I’m his conservator. We’ve handled the crises and we’re all getting along fine.

[2018 update: My father passed away peacefully in November 2017 from late-stage Alzheimer’s. That last paragraph held true to the end.]

Outside of our family, however, it’s not so harmonious.

A note for those whose parents have passed on

My sympathies if your parents passed away suddenly or if you didn’t get the chance to care for them in their final days. We never have enough time to say goodbye, and it’s much better to be a guardian or a conservator than to be an executor.

Please bear with me– I do not intend for these complaints about eldercare to make light of loss and mourning. My mother died over 25 years ago after her brutal and lengthy battle with breast cancer, and I know how grief feels. This post’s frustration about caring for our elders is directed at the political, judicial, and legal systems– and not at our families. As much as I kvetch about the problems, I hope that this post provides a warning and offers some solutions. However, difficult it may be to take care of my Dad, I’m still grateful that we can care for him. I just wish that the systems intended to protect our elders were a little more sympathetic (or at least a little less bureaucratically zealous) in that pursuit.

Legal powers

You would think that you could help with your parents’ finances by using a simple joint checking account or by signing a power of attorney. Once their cognition starts to slip, however, eventually that will no longer legally suffice. Even the fabled “durable” POA is largely ignored by most banks and financial institutions. The best legal document for this situation appears to be a revocable living trust with the elders assigned as trustees and the younger adults designated as alternate trustees. (I don’t have any experience with RLTs— yet.) A RLT may cost a few thousand bucks to draw up.

Regrettably, you can’t set up a RLT or even notarize a POA in the hospital’s ICU. When the financial institutions decide that the elder no longer seems competent to handle their own affairs, then the state probate court steps in. We’re very fortunate that Dad gave us the keys to his apartment, and after a day’s search I found his list of financial account logins and passwords. We still had to spend nearly $14,000 in medical exams and legal fees to prove to the probate court that Dad needed a guardian & conservator. Then we had to convince the judge that his sons were the right people to do it. We have to continue to prove our worthiness every year.

Pro tip: when you help your elder pay their bills, then either set them up with online payments or make sure that only their handwriting is on the bill and their check. Otherwise an account manager will freeze an asset and (politely) insist on a POA or other legal authorization. If your elder lives in a small town then the bank manager may already have flagged the account when they heard that your parent was hospitalized. Let’s not get into how I learned this.

Conservator “power”

The probate court’s appointment order is not a magic wand. Bank managers (especially in another state) will ask for more forms. You’ll have to prove to them that you’re not laundering money or supporting terrorism. Insurers and medical billing companies don’t want to talk to you because their staff are excessively conservative about HIPAA privacy. You can’t even give them money, let alone receive a copy of the bill or persuade a supervisor. You’ll spend several days faxing court documents (and each company’s special additional forms) back & forth before you’re finally authorized to speak for your loved one.

Healthcare and insurance financial systems are charmingly antiquated. Supervisors are reluctant to use e-mail (no HIPAA privacy guarantees) and few of their websites support secure e-mails or uploads. Fax machines are still de rigueur in this bizarro 1980s universe. (Pro tip: Use FaxZero.com or, assuming you still have an actual land line, pick up a free fax machine on Craigslist.) Dad’s long-term care insurance company has finally implemented direct deposit of his payments and stopped snail-mailing paper checks– nearly two years after they began paying his claim. Small companies won’t even do that, and you’ll either need to mail them a check or have your credit union’s bill-paying website mail the check.

Medical billers are notoriously inefficient and uncommunicative. Hospitals and doctors use up to a dozen subcontractors to handle their tests and invoicing, and none of them seem to coordinate their databases. If you’re lucky, the statements will be forwarded to your loved one’s new billing address instead of to their old address or their care facility. Your first notification that a bill exists, let alone that it’s delinquent, might be when the collection agency calls. (They apparently don’t have to worry about HIPAA privacy.) Even after you pay the bill you may still have to slog through the process of stopping the collection calls.

Merely the simple act of opening a CD at a bank or credit union can take several weeks. My father’s checking account was frozen for over nine months, and even after the probate court’s appointment it took his bank’s staff another two weeks to give me access to his Social Security and pension deposits. Unfortunately for their business model, when I inquired about opening a CD they required me to start the identification & verification process all over again. Three years later I’m still reluctant to try to move his pension & SS deposits to another bank, but I transfer the funds out of that account as soon as they’re credited.

I took the rest of Dad’s financial business to other banks and credit unions. USAA has been absolutely outstanding with their financial services, including secure website uploads and e-mail. They understand the conservator vocabulary, and the customer service representative actually executed fund transfers for me while I was on the phone. Another huge military-friendly credit union is relatively hassle-free, but a smaller national military-friendly credit union argued with me for over a month. They wanted a “notarized original copy” of the guardian (not conservator) appointment, and both the regional and national offices insisted that was their procedure without understanding the vocabulary.

I’m not even going to get into:

the charity mailing lists and phone call lists that Dad was on,
the monthly fees he was paying for years on services that he didn’t use,
the life insurance policy that he didn’t need but was upsold by a “friendly” agent,
the 12-year-old vehicle that he was driving on 12-year-old tires in snow & ice,
the newspapers and magazines that he was “saving” in a closet,
sorting through file cabinets and boxes to discover photos and info I’d never known,
my brother and I taking care of all his apartment furnishings and ending the lease,
closing his credit-card accounts, or
doing his annual tax returns.

He was living very frugally on his Social Security and his pension, so his investments were concentrated over 80% in equities. I’m relieved that he didn’t own real estate or a business, and that he wasn’t a landlord. Diversifying his investments (and preparing the tax returns) turned out to be the easiest part of being a conservator.

As you can imagine, my first year of conservator took 10-30 hours/week of paperwork, phone calls, and mail. After three years I now have it down to an hour or two a week.

Does setting up a revocable living trust still seem like an expensive and time-consuming hassle? Well, let me show you a little glimpse of the conservator’s world.

Dealing with the probate court

Dad’s finances are mostly on autopilot and now my time is spent on conservator’s reports– yet the probate court has nearly fired me twice in the last three years. On one hand, the probate court does a very good job of protecting Dad’s health and financial welfare. On the other hand their technology is at least a decade behind, they’re understaffed, and they could occasionally be tempted to execute their duties a little too zealously. The probate court provides a large and helpful conservator’s manual, but it’s clear that they would prefer to deal with professional conservators. (That’s a booming business.) Their customer is my Dad, not me, so conservator customer service is minimal. It’s a legal system, of course, but the court’s electronic filing system is not available to “civilians” like me. There’s not a secure website upload feature. I have to enter my conservator data on their forms (which happily are on their website) but I have to mail a printout through the U.S. Postal Service. The court staff still has to scan those 13-page annual reports into their electronic system, but the numbers are treated as PDFs instead of spreadsheet data.

The conservator’s relationship with the court is coercive, not collegial. Most Americans struggle to manage their personal financial affairs– imagine having to do it under a judge’s supervision! I had to pass a criminal records check and an interview, followed by the judge’s questioning. My appointment is only good for one year, renewals are at the court’s discretion, and I can be “fired” at any time. I didn’t have to post a bond, but I did have to agree that I can be extradited from Hawaii (4000 miles away) at any time the probate court wants to see me. I’m allowed to move Dad’s money around, but if I make mistakes then the court can order me to request their permission before each & every disbursement. I had to file an initial inventory of Dad’s assets followed by a financial plan and annual reports. Unless you’re a lawyer or a CFP, the process can be overwhelmingly intimidating.

The court clerk will confirm a mailing address or the receipt of a report, but all other business has to be conducted in a legally documented manner. One year the conservator’s report was misfiled in the electronic system, and my first indication that there was a problem arrived in the form of a court order to appear before the judge and show cause. If I want to ask the probate court’s permission for anything, the request has to be filed as a legal motion and may require a hearing. If I deviate significantly from the approved financial plan then I have to submit a new nine-page financial plan for the court’s approval. The response comes in the postal mail in the form of a court order. If I do a good job, my reward is a court order extending my appointment for another year.

Creating a revocable living trust or a durable power of attorney can seem to be a huge hassle. (I sure used to feel that way.) However, the amount of work involved in either of those documents pales in comparison to the labor of being a conservator.

What you can do now

So let’s return to that cheery family discussion at the beginning of this post. I hope you can pull it off. Our daughter is now an adult, and someday she could be one of the adult “kids” in that cheery holiday photo.

I manage the finances in our family, but the last three years with my Dad have convinced me that it’s time to have my own financial talk with the next generation. My military pension is automatically deposited to my checking account, and I have all of our bill payments automatically deducted from that account. (I don’t use a credit card for that– they expire and their new numbers can change.) Even our credit card balances are automatically paid each month. (I still reconcile the accounts to check the charges.) If my spouse and I died of simultaneous heart attacks in the Jacuzzi, none of our creditors would notice. Even our estimated income tax payments are automated– it would literally take years for the state and the IRS to realize that I was delinquent on filing our tax returns.

My spouse is a joint owner on all our accounts, of course, and she has all the logins & passwords. If I’m disabled in a tragic surfing accident then she doesn’t have to do a thing financially. I update her on our investments and our asset allocation, but I trade less every year and those accounts are on autopilot too. She’s not interested in writing covered calls or other exotic investments, and there’s no reason for me to complicate our financial life just to make a few extra bucks for another longboard.

Our next step is setting up our own revocable living trust with our daughter as an alternate trustee. We’ll have to retitle some assets into the trust, but now I know that’s a minor hassle compared to appointing a conservator.

In a few more years I’ll turn all the financial management over to my spouse– I’ve had it for over 30 years and she’s patiently waited for her turn. All that she’ll really have to do is tweak the autopilot occasionally. (I’ll spend more time surfing.) In another 20 years she’ll turn most of those duties over to our daughter so that there won’t be any confusion when the time comes.

So… have you had the financial independence talk with your parents? Do you know how to log in to their accounts? Have they already set up a joint checking account with you, along with powers of attorney and a revocable living trust? For your sake (and theirs) I hope it goes well.

For everyone else who’s trying to set up “the talk”, here’s my advice: forward this post to your siblings and your parents. Share your worries and ask them to arrange their finances for an easy turnover. There will be fear and resentment– and maybe a little hostility– but you’ll be glad that you’ve made the attempt.

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How To Get Kicked Out Of Tricare

Posted on May 8, 2014 by Doug Nordman

I’ve carried a military ID card since 1978. I’m financially independent. You would expect that I’d understand my benefits by now, but a few months ago I was nearly dis-enrolled from Tricare for not paying my premiums. To make matters even worse, I managed to thoroughly screw up our college daughter’s Tricare benefits. I’ll explain how this happened, and you can learn from my mistakes.

No Longer A Tricare Delinquent

A year ago UnitedHealthcare (yeah, that’s how they spell it, no spaces) took over Tricare’s western region (which includes Hawaii). The transition was ugly and there was confusion among their staff about the administrative procedures.

As part of the turnover, in March 2013 (over a year ago) UHC mailed out new Tricare Prime enrollment forms. I’ve had Tricare Prime for over a decade and saw no reason to re-enroll just because the contractors were switching. I was happy to supply my bank information for the automatic deduction, but they also wanted two months of premiums in advance. I could imagine a double-payment scenario where they’d cash my (paper) check for two months’ premiums (April and May) and then automatically deduct the April & May premiums from my checking account. To avoid this double-payment problem, I marked the advance-payment box “N/A” and mailed in the form.

That was my first mistake. It turns out that setting up an automatic deduction can take nearly two months. (Hence the two-month advance payment.) UHC would have completed the paperwork in April, the bank computer would have initiated the first automatic deduction in late May, and the premium would have been properly drawn from my account on 2 June. If I had just trusted the UHC system, I would have been fine. Those of you who’ve dealt with Tricare Prime contractors can understand why I was reluctant to trust the new Tricare contractor.

Instead, my “N/A” initiative caused the UHC computer to kick back my application. The customer service staff couldn’t figure out the problem but a supervisor eventually explained how an automatic deduction enrollment works. I finally paid the delinquent premiums with my credit card (plus another two months in advance) and marked my calendar for the July automatic deduction.

The deduction didn’t happen, and in mid-July I received yet another past-due notice. When I called another UHC supervisor, it turned out that they’d incorrectly entered my checking account number and the system wouldn’t process it. Even worse, they wanted me to pay a “refused transaction” fee. Supervisor #2 was able to review my original application and verify that I’d supplied the correct numbers, so we processed another credit-card charge and she agreed to re-enter the automatic deduction application. She even offered to personally check in October that the deduction went through.

The deduction didn’t happen. To make matters worse, Supervisor #2 had updated my file with a completely different version of the events than we’d discussed on the phone. She had also been promoted to another department of UHC. Due to my apparent repeated delinquency, supervisor #3 was ready to dis-enroll me and make me apply all over again. I suggested that they review their phone recording and she said that she’d look into it.

This time UHC wanted their premium in advance, and they’d only accept a quarterly payment. We processed a credit-card charge for October-December, and then I filed yet another application (with two months’ advance payment for January-February) to begin the automatic deductions in March… nearly a year since we’d started this turnover.

I filed a grievance with Tricare about Supervisor #2 and asked them to review the recordings. A month later, Tricare responded with a boilerplate letter assuring me that they’d resolved the matter… whatever that means.

The March premium deduction went through. The April deduction went through too. I appear to be finished with this problem… although the stench memory will linger for quite a while!

Lesson learned: when signing up for Tricare Prime (or switching to a new contractor), be ready to pay two months’ premiums in advance until their system is set up for an automatic deduction.

Tricare When Your Adult Children Reach Age 21

Our next Tricare problem totally blindsided me.

Let me backtrack a couple of decades. When my spouse and I married, we were both on active duty with our own ID cards and our own Tricare benefits. When our daughter was born, we made her my family member in the Defense Eligibility Enrollment Reporting System because I’d receive the bigger “with dependents” housing allowance. Eight years later when my spouse left active duty later to become a drilling Reservist, she also picked up a family ID card (for Tricare benefits). Whenever my spouse had to show an ID then she’d use either her Reserve military ID or her family member ID. There have been times over the last decade when her family member ID has expired, but she could always use her Reserve military ID for base access or (when she was on Reserve orders) for medical care. To us, an expiring family member ID card was no big deal.

Then our daughter joined the Navy on her ROTC scholarship and got her own Reserve ID card. When your teen is five time zones away at college and their military family ID expires in the middle of the semester, it’s a colossal pain to have a new ID issued by their local military facility. We saw that problem coming and we renewed her family member ID before she left the island. Problem avoided, right?

When she was home last summer after her junior year of college, her family member ID only had six months left before expiration. We didn’t think that was a problem since she had her Reserve military ID. During the fall semester of senior year she even mentioned to me that her family member military ID card was expiring, but we decided that didn’t matter because she had her Reserve military ID card. She turned age 21 in the middle of the semester and her family ID card expired. We didn’t renew it after the semester because we spent her entire Christmas break in Bangkok. (One last blowout family vacation before she starts her Navy sea duty.) None of us saw any reason for her to have a family member ID card any longer.

Some of you more experienced parents are already groaning…

In February (months after her 21^st birthday) she called me in a panic. She needed to have a minor medical test for her commissioning physical, but she couldn’t get a doctor’s appointment because she no longer had Tricare benefits. She wasn’t even in DEERS. To make things even worse, her Mainland college is in another Tricare region. Since she’s an adult, the other Tricare contractors didn’t want to discuss her medical benefits with us parents.

As we all now know, it turns out that the 21^st birthday is a really big freakin’ deal for a military family member. The ID card expires at age 21 to force the sponsor to validate their family member’s DEERS status for medical benefits.

The UnitedHealthcare representative said that they send the sponsor (and the family member) a letter warning that the young adult is about to turn age 21 and needs to update DEERS. However, our daughter attends college in a separate Tricare region, so UHC didn’t did have her in their files and didn’t send a letter to us parents. It’s possible that our daughter’s Tricare contractor mailed a letter to her college address, but if she got it then she wouldn’t have appreciated its significance. (Hey, we’d discussed it, and she has her military ID. Why would she need to update DEERS?) It turns out that the DEERS update can only be done for full-time college students when they’re within 90 days of their 21^st birthday. The good news is that since they’re adults they can renew their own ID card and don’t have to have their sponsor present.

DEERS, of course, won’t accept a college’s student ID as verification of full-time enrollment. The college has to supply an enrollment verification letter (for a $5 processing fee) which took a day to obtain. While our daughter was working on that I filled out the DEERS application, printed out the PDF, scanned it, and e-mailed it to her. She took the documents to her local military ID card issuing facility, and they gave her a new family member ID.

Getting back into DEERS was only the start of the hassle. Now that she was back in DEERS, UHC was ready to return her to Tricare– sort of. Her Tricare Standard access was available immediately, but Tricare Prime would take until the beginning of the following month. When I inquired whether this happened with all 21-year-olds, they admitted that it was only because she was a “new” member of DEERS.

When I called the DEERS help line, it turned out to be just the database support contractor. They said that any changes to the system had to be made by the facility that issued the ID card. When I tracked down that facility, an extremely helpful Army Sergeant Peltier came on the line. He had actually issued the new ID card to my daughter, and he remembered her. (He’s planning a Hawaii vacation so they’d talked about Waikiki.) When I explained the Tricare situation (which seems to happen fairly often) he backdated the issue date of the ID card to her 21^st birthday. (And then I gratefully answered every other question he had about his vacation plans.) The DEERS database updated overnight.

The next day UHC discovered that they could immediately reinstate my daughter in Tricare Prime, but first they wanted a UHC Reenrollment/Reinstatement Request Form. I also had the usual HIPAA debate with the customer service representative, who didn’t want to talk to me about my adult family member’s healthcare arrangements without her permission. I faxed the reinstatement form and e-mailed my daughter an authorized representative form for her to sign and send to UHC.

When I called UHC the next day, they hadn’t received the forms. I repeated the fax process and put another copy in the postal mail. Both of those applications disappeared too.

I finally asked whether I should call the Tricare contractor in my daughter’s Tricare region. UHC eventually understood that she was in a different region and immediately declared that I’d have to call the other region. The other Tricare region contractor (Humana) said that they needed UHC to put my family member back in their system before Humana could transfer her enrollment to the other region.

This administrative hilarity continued for two more days of phone calls and “supervisory research” between the two contractors. When they were finished, I finally had all my family members back in Tricare Prime.

Lesson learned: up to 90 days before their 21^st birthday, your full-time student needs to procure a college verification letter and take it to a military ID facility for a new ID card. If they’re not a full-time college student then they’ll have to sign up for Tricare Young Adult or find their own insurance through a PPACA healthcare exchange.

Our daughter graduates and commissions in a few weeks. She can’t wait to start her life in the real Navy!

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Military Financial Independence on Amazon:

Reach your own financial independence
Retire on your terms
Success stories and personal checklists
Royalties donated to military charities

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Related articles:
TRICARE Prime premiums and United Healthcare (May 2013)
I’m still a Tricare delinquent (July 2013)

Posted in Insurance | 14 Comments

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