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 21st 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 21st 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 21st 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 21st 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 21st 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:

The Military Guide cover
  • 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:
TRICARE Prime premiums and United Healthcare (May 2013)
I’m still a Tricare delinquent (July 2013)

 

Posted in Insurance | 14 Comments

Lifestyles in Retirement: Hawaii Vacation

Posted on May 1, 2014 by Doug Nordman

The Mainland weather is getting warmer and most of you seem to be thawing out. I wouldn’t torture you with this post in January, but now that spring has sprung it seems to be a good time to answer the urgent financial independence question that I get several times a month:

“Hey, Nords: what should we see & do in Hawaii next week?”

That’s a tough answer because Hawaii has so many different visitor experiences.  If you were a surfer then you wouldn’t even ask me that question– we’d be deciding whether to meet at White Plains or at Queens. If you enjoy nature then you’d be all over the hiking trails and diving/snorkeling sites. If you’re a hardcore shopper then you’ll be spending more time in the malls & stores than on the beach. A surprising number of servicemembers & veterans want to visit all the military museums and memorials. Some of you want to know where to find the best local food & drink while everyone is seeking cheap hotels with frugal entertainment. A few of you have seen enough of Waikiki and want to visit a neighbor island. Others are contemplating military transfers here, and you’re wondering how to make Hawaii your home. I even know a couple of Reservists who visited for a military exercise and then moved back here for full-time active-duty orders.

If you have no idea what you want to do here, then my default answer is the “101 Things To Do in Hawaii” website. Once you’ve wandered through its lists for a few hours you’ll come back with more questions, and then we’ll know what kind of visitor you are.

But last month I found another way to describe this: my daughter made her last visit to Hawaii for the next few years. (She graduates from college in a couple of weeks and starts paying back her Navy ROTC scholarship by “seeing the world”. But that’s a subject for another post.) She brought several friends with her for the blowout spring break that they’ve planned since 2011. Their interests cover the whole bell curve, and during one week they saw and did most of Oahu’s visitor attractions on a college student’s budget. I’ll share their itinerary and the logistics.

You won’t accomplish much during your first day in the islands. The shortest flight to Hawaii is five hours, and if you fly nonstop from Houston then it’s over eight hours. If there are any delays for repairs or connecting flights then you’re going to lose the rest of the first Hawaii afternoon, and in any case you’ll be too worn out to party. Your best bet is dinner, a walk around Waikiki or the beach, and an early bedtime. Your body is still adjusting to Hawaii time so you’ll be up at the crack of dawn anyway.

A couple of popular Hawaii attractions have limited hours. Hanauma Bay is closed on Tuesdays, and the Aloha Stadium Swap Meet is only open on Wednesday, Saturday, and Sunday mornings. (If you’re staying in Waikiki, check your hotel’s reservations desk or see if they have a free “Aloha Oahu” continental breakfast with tour & activity presentations.) Our group’s first full day on Oahu happened to be Sunday, so they planned it around the Swap Meet. After breakfast they went to the USS ARIZONA Memorial (right across the street from Aloha Stadium) and picked up tickets to the (free) shuttle boat. (If you’re setting up your itinerary in advance, you can also reserve tickets from the National Park Service website.) They had their choice of times in the early afternoon, so they spent the next few hours at the Swap Meet stocking up on cheap souvenirs, local snack foods for their dorm, and lunch. They reloaded on sunscreen and spent the afternoon at the Memorial along with the (free) Visitor Center museums and other displays. If they’d wanted to spend 2-3 days on military museums they could have also visited the USS BOWFIN Submarine Museum, the USS MISSOURI Memorial, and the Pacific Aviation Museum— all of them are right next to the Arizona Memorial or close by with free shuttles. Down in Waikiki there’s also the Fort DeRussy U.S. Army of Museum of Hawaii, and a local entrepreneur offers Home Of The Brave military-theme tours all over the island.

The next day was a little busier: Waikiki. Rush-hour traffic was gone by 8:30 AM so they started with the morning hike up the inside of Diamond Head Crater for panoramic views of Oahu– and on a clear day you can see Moloka’i. There are literally dozens of places to lunch around Waikiki, but a local frugal favorite is the Wailana Coffee House and its kitschy 1970s decor. (It’s also open 24/7.) They spent the rest of the day shopping around Waikiki and over at Ala Moana Shopping Center. (They’d already scored cheap souvenirs at the Swap Meet, so this was mostly window shopping.) They stayed in town to avoid the afternoon rush hour, and by 5 PM they were at the Hale Koa Hotel to pick up their luau tickets. The Hale Koa is a military resort requiring a military (or DoD civilian) ID card. The island’s other popular luau are at the Polynesian Cultural Center, Paradise Cove, Germaine’s, or the Hilton Hawaiian Village. (No, it’s not really a state law to enjoy a luau before you can fly home, but it’s worth the price.) Be aware that hula and fire-knife dancing are professional cultural activities in the Pacific Islands, and you’re likely to encounter champions at these events.

Tuesday was an outdoors day: hiking Maunawili Falls and hanging out at Kailua Beach Park. (More sunscreen.) We’d had several inches of rain the day before so the Maunawili Falls trail was a mosh pit and the waterfall pool was icy cold, but everyone had a great time. There had been talk of kayaking around Kailua Bay and visiting the Mokulua Islands, but that turned out to be just talk. They spent the rest of the day watching the windsurfers and standup paddle surfers and walking around downtown Kailua. We barbecued at home that night: teriyaki chicken, ahi filets, mahi mahi, burgers, and all of the trimmings. After all the calories burned that day, there was a pack of starving wolverines swarming through the diningroom & back lanai.

Wednesday was another trip to the east side for Hanauma Bay snorkeling and Makapu’u Point. (Bring extra sunscreen.) A couple of the women needed snorkel masks (Wal-Mart) but they still arrived early enough to find a parking spot. Hanauma Bay is one of the island’s most heavily used nature preserves and has seen extensive human damage over the years, so visitors watch a conservation video at its Marine Education Center before being allowed down the steep slope to the beach. Makapu’u Point went especially well because several whales were still cavorting close to shore. They usually hang out in the islands from November through February but by March they head back north to colder Alaska waters for the food. I’m referring to the whales, not the college students.

On Thursday the women finally got down to business: surfing White Plains Beach at Kalaeloa. I’d stocked up on used longboards from Craigslist so all five were in the water for a mass surfing lesson. Or at least that’s what eventually happened– along the way half of our group diverted to the parking lot of the Waikele Shopping Center to catch an early batch of Leonard’s Malasadas (at the “MalasadaMobile”) for beach snacks. (My daughter loves Houston dining, but she really misses local food.) By the time the malasadas straggled on to White Plains I had the first group in the water learning how to paddle in to the knee-high surf. Waikiki is a great spot to learn surfing, too, and there are plenty of beach concessions with boards and instructors, but White Plains is a quiet local beach with very wide & safe breaks right offshore. It’s much less crowded than Waikiki, too, so it’s an easy day of surfing just a few miles from Kapolei and Disney’s Aulani resort. I thought everyone would run out of steam in a couple of hours and head over to Kapolei Shopping Center for lunch at L&L or Zippy’s, but instead we stayed out all day. (It was my daughter’s last surf session for a while. In a few months she could be literally halfway around the world, so she won’t be surfing a Hawaii beach again until at least 2016.) Everyone straggled home tired, sore, and happy.

A word of advice: when you’re planning your trip, put the surfing early in the schedule. A couple of the women turned out to be surf monsters, and they regretted not having more time for it. If you’re not a surfer (or a competitive swimmer) then you’ll need an extra day between sessions for your muscles to recover.

Five hours in the water left me desperately seeking ibuprofen and a recliner, but these women are college experts. After cleaning up the gear they went down to Waikiki for drinks & sunset at the Halekulani Bar. I knew better than to wait up for their return, and I was down hard by 8:30 PM after this particular day of retirement. “Whaddya DO all day?” indeed.

Friday was their final day so they kept it short & sweet: North Shore and seven miles of surf breaks. They stopped at Dole Plantation on the way up but eventually worked their way through the pineapple fields to Haleiwa. After the mandatory pilgrimage to Matsumoto’s Shave Ice they drove a couple of miles further out to Laniakea Beach to see the honu. The island’s population is slowly recovering so there are usually several near the shore and out at the reefs in the surf. (This time I’m referring to the sea turtles but I guess this would apply to the visitors, too.) After learning to handle White Plains’ two-footers, everyone had a new appreciation for the 20-foot winter surf– by watching it from the beach.

And then it was back home for one last meal. After a few hours of frenzied packing and social media updates, we hauled everyone back down to the airport for the Houston redeye. Mission complete.

During the week they made heavy use of a classic local resource and three newer ones. Their driving navigation was mainly by mobile phone apps, but they also used a hardcopy Franko’s Oahu Guide Map. They’re printed in full color on water-resistant paper and they show what to see & do at a glance. (I’ve kept a copy of the Franko’s Oahu Surfing Map in the car for nearly a decade.) You can get around the islands with typical street maps or a mobile device, but the Franko Maps of Hawaii are one of the cheapest vacation-planning tools you’ll ever find.

The women also downloaded HulaCopter and other last-minute-bargain apps.  Both offer breaking deals and online discounts. HulaCopter is especially good for last-minute visitor attractions like luau tickets or sunset cruises or fishing trips– the vendors want to fill the last few seats and they’ll offer a 75% discount if you can make it in 30 minutes. You download the app, sign up for the alerts that you’re interested in, and see what’s available. You will get great discounts, and the only question is where you want to go.

Happy Hour Pal helps you find the island’s best dining & drinking attractions, along with navigating local events like First Friday or live music. You may think it’s a new way to get hammered cheap drinks in Waikiki, and it does a fine job. However, it also offers plenty of detailed menus and last-minute meal deals. You can check in or share your experience for extra loyalty points and discounts. You’ll be seeing this app at Mainland restaurants & bars in a few months.

Before you visit the islands, make your plans with the help of 3D Hawaii. It’s another vacation-planning tool based on Google Earth and augmented reality. Instead of the typical two-dimensional Google Map, 3D Hawaii has built a realistic model of the islands using imagery from Google and visitor attractions. You can literally fly around a hotel to check out the grounds and the balcony view from your room, or find additional things to see & do in the area. They even label the surf breaks and the streets to help you navigate the unfamiliar territory.

After your first trip to Waikiki, it’s time to plan a neighbor island vacation. Check the links below for a couple of starting points.

Share your Hawaii “after action report” in the comments below, or ask me a question!

Disclosure: I’m a tiny little investor in Franko Maps and 3D Hawaii. They’re great products and a part of my life that I share with all of our guests.

 

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Military Financial Independence on Amazon:

The Military Guide cover
  • 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:
Lifestyles in early retirement: Hawaii long-term travel
Lifestyles in military retirement: learning to surf in Hawaii
Lifestyles in military retirement: surfing photos
Lifestyles in military retirement: surfing
Lifestyles in military retirement: Living in Hawaii
Good reasons NOT to live in Hawaii
Lifestyles in military retirement: Haleakala Crater
Lifestyles in military retirement: Haleakala Crater redux
Lifestyles in Hawaii: Hawaii Island (the Big Island)
Lifestyles in Hawaii: “Naked on the beach”

Posted in Travel | 6 Comments

Book Review: “When She Makes More”

Posted on April 24, 2014 by Doug Nordman

I’m financially independent, but I’m blissfully ignorant of popular culture. (Maybe those two facts are related?) I had never heard of Farnoosh Torabi.

I first noticed her work a few years ago when she interviewed blogger buddy Darrow Kirkpatrick for Yahoo! Finance about his early retirement. (Yeah, I know now that she wrote for Money magazine and covers financial topics on TV, but I don’t read Money magazine or watch TV.) I dropped track on her after Darrow’s interview until Farnoosh popped up again to interview Mr. Money Mustache for Yahoo! Finance about his early retirement. Then she agreed to be the keynote speaker for FinCon14 this September, and I realized that she’s a major personal finance guru.

More importantly (to me, anyway), she writes books. I like books. I know those accelerate financial independence.

The title of Ms. Torabi’s latest, “When She Makes More” immediately hit a chord with me. My spouse and I started our Navy careers only a year apart, and for the first 15 years my submarine pay meant that I was earning more money for our marriage. However, that all changed when my promotions stopped– and hers kept going. Intellectually I know that more promotions (and more money) are a very good thing for everyone in a marriage. (Hers certainly accelerated our financial independence.) But deep down inside, a whiny little testosterone-poisoned inner He-Man was occasionally kvetching that I wasn’t hauling home my share of the bacon anymore.

Cover of When She Makes More by Farnoosh Torabi | The-Military-Guide.com

Pre-order now for 1 May!

Those feelings turn out to be common among both men and women. It happens more often today, too: during my life, the number of higher-earning wives has quadrupled. In 25% of today’s American marriages, the woman earns more— and the percentage is even higher for recently-married couples.

In the last 20 years, financial researchers have verified that behavioral psychology is a huge factor in managing our finances. We all know that we’re supposed to track our spending, make a budget, and save for financial independence– but behavioral psychology gets in the way. (To learn more about this issue, see Jason Hull’s large collection of studies on “Monkey Brain”.) This is not just a matter of sternly lecturing ourselves about behaving like adults. Our brains have survived the jungles for millennia by developing dozens of shortcuts, and we are not evolved for the modern world of rational reflection and logical financial decisions. We have way too many hormones and reflex responses hijacking our brains to make us feel a certain way when we should be thinking a different way. When we start to act on our financial feelings instead of our analysis, that starts trouble.

Ms. Torabi’s book also got my attention for another reason: my young-adult daughter is smarter than me, she has engineering skills, and she’s going to earn a lot more. She needs to know about these issues so that she can avoid society’s pressure to live out a stereotype.

Unfortunately, women seem to be hindered by their behavioral psychology almost as much as men, but both genders experience it in different ways. This is not feminism or gender equality– it’s about relationships where each of the couples responds to the same situation in different ways, and with very different feelings. We have to understand our own reactions before we can appreciate what our better half is feeling.

When she makes more, it can turn into a vicious spiral. Whether her career blasts off or his career hits an air pocket, their relationship takes a non-traditional (yet more common) turn. She’s spending hours at a high-pressure job yet may still feel obligated to manage the house & kids to the ridiculously high standards that society has encouraged for generations. He has his own high-pressure job (it just doesn’t pay as well) while he’s almost always more relaxed about cleanliness & parenting. He’d like to manage the finances (as so many men prefer) but he’s bothered by not having the majority vote. Friends & family (especially mothers and mothers-in-law) are constant reminders of the roles that everyone’s expected to fill. Tired & stressed couples find themselves even more unhappy with their home lives.  He withdraws (as guys do), she pursues, the arguments escalate, and eventually, the fateful question is considered: “What do I need him for?!?”

They both know that her higher income is no longer unusual. They both realize that traditional gender roles have shifted. Yet neither one of them really understands what brought them to this crisis.

Ms. Torabi supplements the psychological research and surveys with hundreds of her own interviews and stories of couples, families, and counselors. This is not pop-psych self-help buzzword encouragement. This is a wake-up call with stark facts, clear trends, and rising awareness– by marriage counselors and psychologists. It’s a 200-page read, but it moves very quickly. You either know that couple, or you are that couple.

The first two chapters present the problem, but the next eight discuss the solutions. The first step is awareness: there’s a problem, and each gender perceives it differently. Yes, men and women have different standards, but that’s just one part of the problem. Once that’s recognized, the solutions are much easier to see and the book shows you how to make it happen. The magic takes time, and gender reflexes will still kick in at the worst possible moments, but there’s less arguing and more problem-solving.

[Guys, no worries. This is not a male-bashing polemic. Ms. Torabi is living the situation in her own marriage, and she’s sharing the solutions. She actually advises women to relax their standards a little and even cut the man some slack. She helps each person understand what the other is thinking and what will make both of you happy. If you’re wondering what’s causing the arguments and how to deal with your own feelings, then this book has the answers.]

The solution starts (as in so many relationships) with the money. She shows how to divide up the financial chores and run the house like the business that it’s always been. The book explains how both of you can contribute to the financial needs while still having your own money for your own wants & entertainment. You’ll both feel responsible and accountable for using the income to reach your shared goals, no matter who earns it.

Another part of the solution is communication. As a guy, I see the domestic situation differently. I know that when the trash can is “full” it still has at least 10% remaining capacity. Maybe the kids are filthy from a great soccer practice after school, but it’s homework time and they can take a bath after dinner. The house might be a mess and the sink is full of dirty dishes, but we’ll pick up for 10 minutes after dinner. Tomorrow I’ll take out the trash and clean the bathrooms. Sure, things are less than perfect, but none of this bothers us guys because I have a clue and a plan.

Yet when Mom comes home from (another very long day at) work she sees a full trash can, filthy kids and– oh great– someone’s left her a sink full of dirty dishes.

How do you think the next 10 minutes is going to go? It all depends on communication: learning what’s important to each other, what triggers our emotional reflexes, and what we can do to make each other feel better. I was just optimizing the trash & cleanup, but now that I understand how she feels about a full trash can and the kitchen sink then I’ll gladly clean up sooner for a happier relationship. She caters to my preference to run the finances, and I can certainly cater to a few of her preferences.

The third part of the solution is dealing with your environment. If a shiny clean home is important, then you both have to make the effort. If that can’t happen then the next step is either changing the standards or hiring a housecleaner. Figure out what’s really important, but be willing to pay for it if necessary. If you can’t afford it then the standards have to change. The key to this decision comes from both of you agreeing on your financial priorities and then communicating about the choices.

Once you’ve turned your relationship back into a strong team and then cleaned house (so to speak), you’re ready to deal with the rest of society’s stereotypes. You’re going to have to handle workplace expectations– and the expectations of family & friends. Ms. Torabi lays out the statistics, the research, and the stories to help explain the situation. You have to set boundaries with work and have a plan for the inevitable daily schedule disruptions. You have to respond appropriately to the commentary from mothers-in-law and deal with the rest of the relatives. Your real friends will understand your relationship, even if it’s not their choice. “When She Makes More” shows you how to navigate these situations– and when to move on.

Got a handle on all of that? Great: now you’re ready to talk about kids. See Chapter 8 (of 10).

My spouse and I have known each other for nearly 35 years, been married for nearly 28 years, and (thanks to the military) lived together for over 25 of them. We’re a great team, but I still learned quite a bit from this book. Our daughter is going to have an eye-opening experience with it, and now we all have the vocabulary to discuss it. You will too.

I’d normally recommend that you wait for this book to show up in your local library. However, this time I suggest that both of you read the book at the same time and keep your own copy handy for future reference. And if you’re the parent of a young adult, I strongly recommend that you buy them their own copy. They’re going to enjoy their own relationships no matter how you feel about them, but at least you can equip them with the understanding and the vocabulary to deal with it.

If you’re a visual learner then take a look at the trailer for “When She Makes More“, and order the book.

If you’re a military spouse, let us know what you’ve learned from it and what you’ve changed. I’d most especially love to hear from the men military spouses!

Related articles:
Book Review: Liz Weston’s “The 10 Commandments of Money”
Book review: “All The Money In The World”
Book review: “Pocket Your Dollars”
Dual military couples
Book Review: “Give and Take”
I wrote this post on 5-10 April but was scooped again by J$!  Enjoy his link for more Farnoosh quotes.

Posted in Reviews | 2 Comments

Can I Count On A Military Pension?

Posted on March 6, 2014 by Doug Nordman

A reader asks:

“Thank you for your words of wisdom in your blog and being a source of motivation. I have a quick question and I would appreciate your advice. I have 18.5 years towards my military retirement and plan to go another 10 years or so. That would put me at 50 years old which is my goal retirement age. Unfortunately along the way I have not saved quite as well as I should. I am debt free but only have about $150,000 saved in several Vanguard index funds. I also have $20,000 cash in a money market. That’s it. I do place $1500/month into my TSP and Vanguard index funds (some of which are Roth IRAs) and plan to do so until I retire from the service in 10 years. My current plan to be able to retire is completely reliant on my military pension. My question is this: if you were in my shoes would you trust having this military pension for the rest of your life or would you continue to work past 50 in order to have the actual assets in your portfolio to retire without having to rely on this pension? Basically, how solvent is the military pension in your opinion? Thanks!”

It’s interesting that you ask these questions after Congress tried to whittle down the military retiree COLA. It’s the worst attack on retirement benefits since REDUX, and it took over a decade for the military to persuade Congress that REDUX wasn’t working. This COLA controversy was totally unpredictable (political risk) and changes to the military compensation system might still return someday to bite future military recruits.

Personally, especially after the COLA controversy, I’d trust the military pension for the rest of my life. (Nearly 12 years so far, so good.) It’s an entitlement in federal law. Military pension payments come from a special-purpose Treasury bond that DoD is required to fund, and it’s probably more financially secure than Social Security. (It’s definitely more stable than Medicaid or Medicare.) The other side of your question is that if DoD stopped paying military pensions, then other aspects of life in America would have become so bad that you’d no longer be concerned about the pension.

As we’re learning, benefits are more negotiable than entitlements. MOAA and other military advocacy groups are constantly educating our elected representatives on how a “small” benefits cut will affect readiness and trust. Keep yourself informed– subscribe to their website and e-mails for news that could affect your pension and other benefits. Join the national organization or a local chapter and help keep legislators aware of the effects of their budget votes.

However, we also need to watch out for our own finances and have alternate plans. If a retirement plan can be derailed by a single failure, then the plan needs to be stronger. During the next decade our Tricare Prime fees will continue to rise, some bases and commissaries may shut down, and federal long-term care insurance premiums will go up. As the military draws down, senior servicemembers who have not promoted may be voluntold to retire. Nobody wants to spend their entire retirement worrying about a part of our finances that we can’t control.

Take a look at your “worst case” minimum retirement assumptions. For example, you may decide that the fun has stopped and you’d like to retire at exactly 20 years of service. Calculate your pension for that rank. If your spouse elected full Survivor Benefits Program then your pension income would drop by 6.5%, and after federal taxes it would drop by another 10%-15%. If you’re not ready to retire this year then you can estimate your future High-Three 20-year retirement much more precisely if you assume that the military will have a 1.0% pay raise in 2015 and 2016, and manually average your highest 36 months of pay.

Once you’ve reached the 20-year point, you can decide whether you’re still having fun in uniform or whether you want to start your bridge career. If you’ve pushed hard for financial independence, you may determine that you don’t even need a bridge career. Maybe you’ll pull down a six-figure income in a defense industry related to your military skills. Maybe your military pension covers your expenses, and you’ll find a totally different (yet still fulfilling) way to spend your time. Take a harsh look at your expenses and make sure that you’re spending your money where you feel it has the most value. If you’re happy with your spending then you’ll be willing to work for it (either in uniform or in civilian attire). Don’t cross the line into deprivation, but cut spending on the things you’re not willing to work for. The more you can boost your savings today then the quicker you’ll compound the investments to financial independence.

Ideally you’d find work you love while it delivers a huge income. Until that happens, financial independence is your top priority. As you continue to optimize your spending and maximize your savings, at some point your military pension will fund a bare-bones lifestyle. It’s an inflation-adjusted annuity which serves as your safety net, and later it’ll be augmented by Social Security. Once you reach a safety-net level of annuity income then you can keep growing your other investments until they fund the rest of your lifestyle. You could certainly go with a 4% safe withdrawal rate by accumulating assets that are 25x the annual spending shortfall between your military pension and your budget. Statistically that works over 90% of the time (for at least 30 years), and the worst case is that you’ll have to live on “just” your pension & Social Security. In practice your retirement spending will vary, and that will cover any gaps in the 4% SWR’s future expectations.

There’s no magic number at which you’ll be able to declare your financial independence. Instead you’ll reach the point where one or two unpleasant surprises (like shrinking military benefits) will not bankrupt your planning and force you back into the workplace. Until then, if your plans can be derailed by a single point of failure like a smaller COLA, then you should keep working or finding more ways to cut expenses.

Related articles:
The regulation for calculating an active-duty military pension
Frugality is not deprivation
How many years does it take to reach financial independence?

Military Financial Independence on Amazon:

The Military Guide cover
  • Reach financial independence
  • Retire on your terms
  • Publisher’s royalties donated to military charities

Use this link to order from Amazon.com!
Posted in Military Retirement | 8 Comments

Financial Independence and The Cost of Raising a Family

Posted on February 27, 2014 by Doug Nordman

A few weeks ago, Darrow Kirkpatrick blogged about the cost of raising a family while you’re saving for financial independence. Before I read his post, I had just finished emptying our 529 account with the final payment for our daughter’s college room & board. This seems like a great opportunity to compare our parenting expenses to the national statistics.

Raising a family is worth every penny, but finances are the wrong reason for starting a family. Hopefully, you make your decision to have kids (or not) for all the right reasons in your situation. Nobody has to start a family– there are already plenty of people in the world who need your love & support. Families are a personal choice, and financial fears should not hold you back.

Yet starting a family might even improve your finances.

Before we justify that bold assertion, I highly recommend that you click the link to Darrow’s post. (It’ll open a new tab in your browser so that you can switch back & forth between our blogs.) He and I reach the same conclusions, although we got there by different paths.

For those of you reading on a tiny mobile device, here’s a key quote from Darrow’s post:

According to the USDA’s 2012 Expenditures on Children by Families, child-rearing expenses to age 18 across the U.S. averaged $241,080 per child in two-child middle-income families. Higher-income families spent $399,780 per child. (Expenses for an only child were greater by a factor of 1.25, while those for 3rd and subsequent children were lower by a factor of 0.78.)

Photo of baby sticking out its tongue at parent.

Setting a good example.

That cost doesn’t even include college! Are you really going to spend a quarter-million bucks on your child? More importantly, how much sooner could you retire if you invested that money?!?

First, let’s see whether those numbers are realistic. According to the government’s agricultural experts, my spouse and I should have spent at least $300K raising our little bundle of joy. If we’d elected to stay childless and invest that $16,700 per year in the S&P500 between 1992 and 2010, then we’d have a cool $543K in our Fidelity account.

We reached financial independence in the late 1990s, so even by the end of 1997, we would have saved a minimum of $85K. That would have substantially improved our net worth, generated a few thousand dollars a year in dividends, or made a nice down payment on a Hawaii rental property.

Yeah, but who even bothers to track 18 years of expenses, let alone the costs of raising a child?

Photo of a parent holding a baby upside down.

Future Navy officer.

Hey, I’m a nuclear-trained submariner. I like taking logs.

My spouse and I have recorded our spending since 1986. By the time we started a family, I was rockin’ Quicken 5.0 for DOS on our PC-XT. That database is getting a little creaky today with over 150,000 transactions, but it includes everything from the crib (garage sale, $10) to the college fees.

How much did it cost to raise your kid?

I’ll spare you the suspense: just under $156,000. (The data table is at the bottom of this post.)  You can also scroll down there to see the USDA’s infographic on the cost of raising a family, which breaks down the numbers in much more detail.

Photo of young girl eating a slice of pizza.

Mmmm… pizza.

Raising our daughter cost barely more than half of the USDA estimate. Admittedly I didn’t track her food expenses separately for all of those years, but our happy & healthy darling cost at least as much to feed as a full-grown adult. If you check the prices on formula & baby food, and if you’ve seen a teen eat, then you’ll know that this figure is conservative. That hammered our spending harder than anything else, and at 22% it’s well above the USDA’s 16% average.

I also included over $27K for the price of starting college and, in our case, nearly a semester of room & board. The USDA data goes up to age 18 but they didn’t consider all of the expenses for Kumon math tutoring, AP classes & exams, SAT/ACT fees, college visits, and applications. (If you’re doing it from Hawaii then add extra for airfare.)

You could spend far less on your own teen’s college prep, or you could spend far more on private high schools, but I bet we’re pretty close to the middle of the bell curve. I think it’s also a fair compromise on the perpetual debate over whether to pay full retail for Harvard– or make them pay their own way through college.

Photo of teen driver changing oil on car.

“My first oil change.”

I should point out that the USDA also spends way more than necessary. They claim that “housing” a child is nearly a third of the total cost, but we had already bought a home that we were perfectly happy with. We didn’t buy a bigger place just because we were parents, and we were already in a great school district because we shopped for a nice neighborhood.

The USDA also claims that transportation is 14% of the total, but our daughter only rode the school bus for three years out of 12. She wore out some sneakers and bicycle tires, but when she got her driver’s license she paid that back that investment by running all of our household errands. We did some driving for sports and other activities, but we could have stayed local and ridden a bicycle.

The real payoff

You might be reassured to know that the cost of raising a family is a very wide bell curve with fat tails, and it’s a relief to know that you can do it for even less money than we spent. But if you could spend “only” $100K to launch your first child from the nest, how can this expense possibly improve your finances?

Yeah, I know, some of you more experienced parents are snickering: “Because you won’t have any spare time in your life to spend more money on anything else!” I can’t argue with that. Raising our daughter involved far more trips to the park and the library than to Bangkok or Europe.

But we parents didn’t just trade our liberty cards for a pile of food & diapers. Nearly every new parent has experienced this feeling on the first day after labor & delivery: “Holy crap, I’m exhausted we’re responsible for a human life. We’d better grow up and get our act together!” Starting a family makes you get a handle on your lifestyle, whether you’re competing for “Parents of the Year” or just trying to improve on your own upbringing. Before kids, you might not have wanted to examine the details of your entertainment budget. Once you have kids, however, you start tracking your spending just to figure out where it’s all going.

You also behave more responsibly. Admittedly you’re also too tired to get into as much trouble as you used to, but nothing improves your driving more than strapping a baby seat into the vehicle. Racy sports cars are eventually replaced by larger, more crash-resistant kid haulers. You spend less money on expensive home furnishings and instead you focus on baby-proofing. Your old wild weekend behavior that might have resulted in a visit to the emergency room is now spent at the doctor’s worrying about a cough or an ear infection. You even eat healthier. Worst of all, you now have to set a well-behaved example for a new little person who will try to imitate everything you do.

Better yet, you start planning for everyone’s future. It’s not just getting the kids out of the house and over to the park to burn off a little energy before nap time. You not only take fewer risks with your lifestyle, but you cut back on risky behavior with your money. You not only continue saving and investing, but you may become more thoughtful with your career planning. You might still quit your corporate cubicle for a startup or self-employment, but you’ll be much more analytical about the decision– and you’ll work a lot harder to make it pay off.

When we had our daughter, our planning for financial independence changed from a fantasy to a reality. I wanted to spend less time working for a paycheck (and deploying to the Western Pacific) and more time helping my daughter grow up.

Photo of parent and daughter surfing together.

High five at the end of a wave.

I’d like to think that my spouse and I would have saved for financial independence with or without starting a family. However, starting a family made our goals much more compelling, and our daughter motivated us every day.

So don’t let the USDA scare you about starting a family, let alone have money anxiety. If you decide to start a family then it’ll be for all the right personal reasons– and it’ll be a good decision. The USDA’s “average expenses” reflect more about America’s hyperconsumer lifestyle than the true cost of feeding a few more mouths at the table. (Amy Dacyzcyn, the original Frugal Zealot, raised six kids on her spouse’s enlisted Navy paycheck.) Instead, you can apply the same techniques to family budgeting that you do for financial independence– track your expenses and then spend the money only where you find the most value. Before long you’ll have your expenses more in line with your priorities, you’ll be spending far less, and you’ll be on your own path to financial independence.

Darrow, thanks again for inspiring this post!

Here’s the cost of raising our child to her 18th birthday:

Total

$155,948.78

100.0%

Allowance

$5,972.90

3.8%

Childcare

$12,516.22

8.0%

Clothing

$4,704.35

3.0%

College

$27,228.41

17.5%

Daycare

$22,567.20

14.5%

Girl Scouts

$837.77

0.5%

Groceries

$35,205.78

22.6%

Horses

$10,187.49

6.5%

Hula

$448.58

0.3%

School

$22,207.35

14.2%

Sports

$11,482.26

7.4%

Toys

$2,590.47

1.7%

The infographic of the USDA’s cost of raising a child (PDF)

Related articles:
“Can I Retire Yet?” blog post: Having Kids vs. Retiring Earlier
USDA’s cost of raising a family
Retiring early– with kids?
Book review: “All The Money In The World” (includes a section on raising kids)
Old-school frugal (part 2 of 2) (Amy Dacyczyn)

Posted in Financial Independence | 10 Comments