2022 AFBA Financial Planning Guide

2022 Financial Planning Guide retirement • life insurance • health benefits • survivor benefits veterans benefits • savings & investments • annuities social security • wills & trusts • taxes

YOUR 20 2 2 AFBA FINANCIAL PLANNING GUIDE

© 2003-20 2 2 5Star Financial, LLC All rights reserved. No part of this book may be reproduced or transmitted in any manner, shape, or form, or by any means electronic or mechanical, including photocopy recording, or by an information storage or retrieval system, without the express written permission of the publisher. Printed in the United States of America

5Star Financial, LLC 909 North Washington Street Alexandria, VA 22314

For Financial Planning Guide inquiries and/or orders, please call 703-706-5971.

The information contained in this publication is intended for the use of individuals who want to develop and implement a personal financial plan. However, the book is distributed based on the understanding that the publisher is not engaged in rendering any legal, professional, or other service. The information contained herein is as up-to-date as possible, but it must be realized that the benefits and entitlements discussed herein are constantly changing. For this reason, the book is intended to be used only as a planning guide and it is not a final authority on benefits and entitlements.

Table of Contents

PART I —Military and Civil Service Topics

Chapter 5. The Survivor Benefit Plan The Survivor Benefit Plan (SBP) Who Can Participate? Who Can Be Beneficiaries? How Much Does The Beneficiary Receive? How Much Does It Cost? Disenrollment Dependency & Indemnity Compensation (DIC) Eligibility Requirements Additional Provisions of the SBP Taxation of SBP Annuities Chapter 6. Veterans Benefits Veterans Benefits In General Educational Support Vocational Rehabilitation & Employment Program Disability Compensation Pension Benefits Health Care Assistance Home Loan Guaranty Program Life Insurance Other Veteran Benefits Burial Benefits Survivor Benefits Telephone Assistance Chapter 7. Civil Service Pay & Retirements Overview Pay Systems General Schedule Pay Increases Health, Life and Long Term Care Insurance Retirement Systems Thrift Savings Plan (TSP) Mistakes to Avoid When Planning Your Retirement PART II — General Financial Topics Chapter 8. Principles of Financial Planning The Need For Financial Planning How To Start A Financial Plan Financial Ratios Debit or Credit Some Thoughts On Financial Planning Personal Data Worksheet List of Important People Worksheet Family Balance Sheet Budget Worksheet

Chapter 1. Military Pay & Allowances Military Income & Benefits In General Armed Forces Comparative Ranks Active Duty Basic Pay Other Types of Pay & Allowances Access To Your Pay Account Thrift Savings Plan (TSP) Military Information & Pay Worksheet Chapter 2. Reserve & National Guard Introduction Categories of Service & Duty Requirements Pay Retirement TRICARE Education Benefits Reserve Component Survivor Benefit Plan (RCSBP) Life Insurance Chapter 3. TRICARE Overview of TRICARE Active Duty Members and Dependents Retirees and Dependents TRICARE For Life (TFL) TRICARE Young Adult Pharmacy Benefits DEERS Treatment Priorities at Military Facilities Dental Care TRICARE Telephone Numbers TRICARE Regions and Contacts TRICARE Cost Table Medicare/TFL Cost Share Table Chapter 4. Military Retirements Retired Pay Background DIEMS Retired Pay Systems Retired Pay Increases Enlisted Personnel Retirements Officer Retirements Disability Retirements CRSC and CRDP Programs Retirement Services Offices (RSO) Retirement Pay Schedule

Financial Goals Worksheet Planning Actions Worksheet

2022 TABLE OF CONTENTS

Table of Contents (Cont)

Chapter 9. Important Papers, Wills & Trusts Important Papers Wills Estate Planning Trusts Personal Record System Health Care Decisions Location of Important Documents Worksheet Chapter 10. Savings & Investments Why Save And Invest? Investment Prerequisites Risk and Return Types of Investments Short-Term Investments Common Stock Fixed Income Securities Mutual Funds Derivatives Real Estate Other Tangibles Retirement Accounts Education Savings Investment Goals and Strategies Time Value of Money Savings & Investment Terminology Investment Worksheet Chapter 11. Personal Credit Credit Cards Credit History Credit Freeze Bankruptcy Chapter 12. Social Security & Medicare Social Security Benefits In General Social Security Eligibility Applying For Social Security Estimating Social Security Benefits Retirement Benefits Consumer Loans Home Mortgages Education Loans Reverse Mortgages

Chapter 13. Life Insurance Introduction Building a Personal Insurance Program Why Life Insurance? Types of Life Insurance Term Life Insurance Whole Life Insurance Universal Life Insurance Other Types of Life Insurance Contract Provisions How Much Life Insurance? Risk Classification Selecting a Life Insurance Company The Language of Life Insurance Insurance Worksheet Chapter 14. Annuities The Annuity Principle Annuity Classifications Annuity Pros and Cons Life Expectancy Table Chapter 15. Federal & State Taxes Federal Income Tax In General Determination of Tax Liability When To File Your Return Combat Zone State Income Taxes Federal Estate And Gift Taxes State Inheritance Taxes Tax Tips Income Tax Worksheet Appendix A — Internet Resources

Appendix B — Military Information Directory

Appendix C — Identity Theft

Appendix D — Spotlight on Commissaries

Disability Benefits Survivor Benefits Supplemental Security Income (SSI) Medicare Nursing Homes

2022 TABLE OF CONTENTS

Chapter 1. Military Pay & Allowances Military Income & Benefits In General ...................................................................................... 1–1 Armed Forces Comparative Ranks. ......................................................................................... 1–2 Active Duty Basic Pay. ............................................................................................................ 1–3 Other Types of Pay & Allowances............................................................................................ 1–4 Access to Your Pay Account. .................................................................................................. 1–5 Thrift Savings Plan (TSP)........................................................................................................ 1–6 Military Information & Pay Worksheet..................................................................................... 1–7

publication. If you think you are entitled to an item we cover, check with your Finance or Personnel Office to determine specific requirements. 1–2. ARMED FORCES COMPARATIVE RANKS. While the military grade structure is the same in all departments, the titles that are associated with each rank can vary. For example, depending upon the branch of service, an E–7 may have the title Sergeant First Class, Master Sergeant, Gunnery Sergeant, or Chief Petty Officer. The table on the next page provides a summary of the grade structure and titles used in the United States Armed Forces. 1–3. ACTIVE DUTY BASIC PAY. A military member’s basic monthly pay is similar to a civilian’s salary and, like the civilian, it is usually the member’s primary source of income. Each year the President submits a pay raise request to

1–1. MILITARY INCOME & BENEFITS IN GENERAL. Military compensation is a complex system of over 40 pay and allowance items. Since military compensation is usually the service member’s primary source of income and because the entitlements are complex and subject to change, it is important that both the member (and his or her family) understand how these entitlements fit into the family’s total financial plan. As we review the most common items of pay and allow­ ances, keep in mind that the amounts and benefits we discuss are subject to change. The information provided is the most current available at the time of publication. It is also important to remember that entitlements to most military pay and allowances are based on satisfying a variety of requirements that are too numerous to outline in this

CHAPTER 1 | MILITARY PAY & ALLOWANCES

United States Armed Forces — Comparative Ranks

Rank

U. S. Army Titles

U. S. Air Force Titles U. S. Marine Corps Titles U. S. Navy Titles

U. S. Space Force

Commissioned Officers

O-10

General

General

General

Admiral

General

O-9 O-8 O-7 O-6 O-5 O-4 O-3 O-2 O-1 W-5 W-4 W-3 W-2 W-1

Lieutenant General

Lieutenant General

Lieutenant General

Vice Admiral

Lieutenant General

Major General

Major General

Major General

Rear Admiral (Upper) Rear Admiral (Lower)

Major General

Brigadier General

Brigadier General

Brigadier General

Brigadier General

Colonel

Colonel

Colonel

Captain

Colonel

Lieutenant Colonel

Lieutenant Colonel

Lieutenant Colonel

Commander

Lieutenant Colonel

Major

Major

Major

Lieutenant Commander

Major

Captain

Captain

Captain

Lieutenant

Captain

First Lieutenant Second Lieutenant

First Lieutenant Second Lieutenant

First Lieutenant Second Lieutenant Warrant Officers Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer

Lieutenant Junior Grade

First Lieutenant Second Lieutenant

Ensign

Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer

n/a

Chief Warrant Officer Chief Warrant Officer Chief Warrant Officer

(The United States Space Force has no Warrant Officer Grades)

(The United States Air Force has no Warrant Officer Grades)

Warrant Officer

Warrant Officer

Warrant Officer

Enlisted Personnel

Cmd. Sgt. Major or Sgt. Major Master Sergeant or 1st Sergeant Sergeant First Class

Sgt. Major or Master Gun. Sgt. Master Sergeant or 1st Sergeant

E-9

Chief Master Sergeant

Master Chief Petty Officer

Chief Master Sergeant

E-8

Senior Master Sergeant

Senior Chief Petty Officer

Senior Master Sergeant

E-7 E-6 E-5 E-4 E-3 E-2 E-1

Master Sergeant Technical Sergeant

Gunnery Sergeant

Chief Petty Officer

Master Sergeant Technical Sergeant

Staff Sergeant

Staff Sergeant

Petty Officer First Class Petty Officer Second Class Petty Officer Third Class

Sergeant

Staff Sergeant

Sergeant

Sergeant

Corporal or Specialist 4 Sergeant or Senior Airman Corporal

Specialist 4 Specialist 3 Specialist 2 Specialist 1

Private First Class

Airman First Class

Lance Corporal Private First Class

Seaman

Private Private

Airman

Seaman Apprentice

Airman Basic

Private

Seaman Recruit

Congress. The table on the next page shows the basic pay rates reflecting a 2.7% pay raise effective January 1, 2022. 1–4. OTHER TYPES OF PAY & ALLOWANCES. In addition to basic pay, active duty personnel often receive several other items of pay and allowances depending on their marital status, type of duties performed, professional skills, and areas of assignment. It is important to note that items of “pay” are generally subject to taxation and are included in the taxable income reported to the federal and state government at the end of the year. However, “allowance” items are not subject to taxation and are not included in annual taxable income. The most common special and incentive pay and allowances are discussed below (in alphabetical order).

Career Sea Pay: Career Sea Pay for officers, warrant officers and enlisted members can range from a monthly rate of $60 to $805 depending on paygrade and how many years of sea time. Sea pay is paid to members assigned to ships or to commands that are deployed onboard a ship. There are two incentives associated with Career Sea Pay: a. Submarine Duty Pay. This is a monthly pay for submarine crew members. The amount payable is based on the member’s rank and years of service. Enlisted crew members receive from $85 to $450 while warrant officers receive from $320 to $475. Officer payments range from $255 to $880.

CHAPTER 1 | MILITARY PAY & ALLOWANCES

2022 United States Armed Forces Basic Pay Table

Under 2 Years

Over 2 Years

Over 3 Years

Over 4 Years

Over 6 Years

Over 8 Years

Over 10 Years

Over 12 Years

Over 14 Years

Over 16 Years

Over 18 Years

Over 20 Years

Over 22 Years

Over 24 Years

Over 26 Years

Over 28 Years

Over 30 Years

Rank

Commissioned Officers

16,975 16,975 16,975 16,975 16,975 16,975

– – – – – – – – – – –

O-10

16,445 16,682 16,975 16,975 16,975 16,975

– – – – – – – – – – –

O-9

O-8 11,636 12,017 12,270 12,341 12,656 13,183 13,306 13,807 13,951 14,382 15,006 15,581 15,966 15,966 15,966 15,966 16,366 O-7 9,668 10,118 10,325 10,491 10,790 11,085 11,427 11,768 12,110 13,183 14,090 14,090 14,090 14,090 14,162 14,162 14,446 O-6 7,332 8,055 8,583 8,583 8,616 8,985 9,035 9,035 9,548 10,455 10,988 11,521 11,824 12,131 12,725 12,725 12,980 O-5 6,112 6,885 7,362 7,451 7,749 7,927 8,318 8,606 8,977 9,544 9,814 10,081 10,384 10,384 10,384 10,384 10,384 O-4 5,274 6,104 6,512 6,603 6,981 7,386 7,892 8,285 8,558 8,715 8,805 8,805 8,805 8,805 8,805 8,805 8,805 O-3 4,637 5,256 5,672 6,185 6,482 6,807 7,017 7,363 7,544 7,544 7,544 7,544 7,544 7,544 7,544 7,544 7,544 O-2 4,007 4,563 5,255 5,433 5,544 5,544 5,544 5,544 5,544 5,544 5,544 5,544 5,544 5,544 5,544 5,544 5,544 O-1 3,477 3,620 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 4,376 Commissioned Officers With Over Four Years of Enlisted or Warrant Officer Service O-3E – – – 6,185 6,482 6,807 7,017 7,363 7,655 7,823 8,051 8,051 8,051 8,051 8,051 8,051 8,051 O-2E – – – 5,433 5,544 5,721 6,019 6,249 6,421 6,421 6,421 6,421 6,421 6,421 6,421 6,421 6,421 O-1E – – – 4,376 4,672 4,845 5,022 5,195 5,433 5,433 5,433 5,433 5,433 5,433 5,433 5,433 5,433 Warrant Officers W-5 – – – – – – – – – – – 8,520 8,952 9,275 9,630 9,630 10,113 W-4 4,792 5,154 5,302 5,448 5,699 5,947 6,198 6,575 6,907 7,222 7,480 7,732 8,101 8,405 8,751 8,751 8,926 W-3 4,376 4,558 4,746 4,807 5,002 5,388 5,789 5,979 6,198 6,423 6,828 7,102 7,265 7,439 7,676 7,676 7,676 W-2 3,872 4,238 4,351 4,429 4,679 5,070 5,264 5,454 5,687 5,869 6,033 6,231 6,360 6,463 6,463 6,463 6,463 W-1 3,399 3,765 3,863 4,071 4,316 4,679 4,848 5,085 5,317 5,500 5,669 5,873 5,873 5,873 5,873 5,873 5,873 Enlisted Members E-9 – – – – – – 5,789 5,921 6,086 6,280 6,477 6,791 7,057 7,336 7,764 7,764 8,152 E-8 – – – – – 4,739 4,949 5,078 5,234 5,402 5,706 5,861 6,123 6,268 6,626 6,626 6,759 E-7 3,294 3,596 3,734 3,915 4,058 4,303 4,441 4,685 4,889 5,027 5,175 5,233 5,425 5,528 5,921 5,921 5,921 E-6 2,849 3,136 3,274 3,409 3,549 3,864 3,988 4,226 4,298 4,351 4,413 4,413 4,413 4,413 4,413 4,413 4,413 E-5 2,610 2,786 2,921 3,059 3,273 3,498 3,682 3,704 3,704 3,704 3,704 3,704 3,704 3,704 3,704 3,704 3,704 E-4 2,393 2,516 2,652 2,787 2,906 2,906 2,906 2,906 2,906 2,906 2,906 2,906 2,906 2,906 2,906 2,906 2,906 E-3 2,161 2,297 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 2,436 E-2 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 2,055 E-1 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833 1,833

Note: Monthly base pay for O-7 to O-10 is limited to $16,975 (Level II of the Executive Schedule). Monthly base pay for O-6 is limited to $13,775 (Level V of the Executive Schedule).

CHAPTER 1 | MILITARY PAY & ALLOWANCES

• He/she is qualified in a critical military skill. • He/she isn’t receiving special nuclear-training pay. • He/she reenlists or voluntarily extends their enlistment for a period of at least three years. • He/she enlists in a regular component of the service concerned; or continues in a reserve component of the service concerned. Flight Pay. There are four primary special pays for members whose military duties involve aerial flight. a. Aviation Career Incentive Pay for Officers. Active duty commissioned officers on aviation duty are entitled to Aviation Career Incentive Pay (ACIP). Aviation career incentive pay is restricted to regular and reserve officers who hold, or are in training leading to, an aeronautical rating or designation and who engage and remain in aviation service on a career basis. The amount payable ranges from $150 to $1,000 per month. b. Critical Skill Incentive Pay. This pay may be authorized in lieu of HDIP for enlisted crew members. Enlisted aviators may receive continuous flight pay as long as they meet flying requirements. The pay ranges from $225 to $600 a month. c. Aviation Bonus Pay. An annual bonus of up to $35,000, depending on branch, may be paid to selected officers who agree to extend their aviation service. d. Hazardous Duty Incentive Pay (HDIP) . HDIP is payable to crew members whose duties can only be performed on an in-flight aircraft. Monthly officer payments range from $150 to $250 while the monthly entitlement for enlisted personnel ranges from $150 to $240 per month. Foreign Language Proficiency Bonus Pay. A monthly payment, not to exceed $500 for a single language or dialect, or $1,000 for two or more, is payable to those who maintain

b. Nuclear Qualified Officer Pay. In order to train and retain nuclear qualified officers, the Navy is authorized to pay two types of special pays: an annual Continuation Pay not to exceed $40,000 and an annual Incentive Bonus not to exceed $22,000. Diving Pay. A monthly payment of up to $240 is given to officers and up to $340 to enlisted members whose duties involve diving. Enlistment & Reenlistment Bonuses. Enlistment Bonus. There are many benefits to joining the military, but few directly affect pay as much as enlistment bonuses which can be as much as $50,000. Reenlistment Bonus. The Selective Reenlistment Bonus (SRB), sometimes called the Selective Retention Bonus, is a cash incentive paid to enlisted members to encourage reenlistments and retention in critical military skills. Bonus award levels are adjusted as needed to ensure the services are retaining the correct quantity and critical skill mix to optimize their ability to accomplish the mission. Currently the SRB ranges from $30,000 to $100,000. Members may qualify for up to 2 SRBs in their military career for a maximum total of $200,000. The bonus is usually paid in a lump sum or 50% paid at the time of reenlistment. The remaining bonus amount is paid in equal annual installments. It is taxable, however if the member reenlists in a tax-free combat zone or is a foreign national who reenlists OCONUS it is not taxable, and the installments are also tax-free. Active duty members may be eligible for a reenlistment (or retention) bonus, if: • He/she has completed at least 17 months of continuous active duty (other than for training) but not more than fourteen years of active duty.

CHAPTER 1 | MILITARY PAY & ALLOWANCES

Servicemembers that meet the requirements for more than one type of hazardous duty pay during the same period are entitled to receive a maximum of two types of hazardous duty pay. This presumes that the individual in question was assigned to a unit whose mission involves the performance of both types of hazardous duties. Hostile Fire and Imminent Danger Pay. A $225 monthly payment is authorized to members who perform duties within areas designated as imminent danger zones. Involuntary Separation Pay. This is a special lump– sum payment authorized for certain members who are involuntarily separated from the service (for reasons other than misconduct) after having served at least six years but less than 20 years on active duty. Medical Pay. Military personnel who are serving in various medical specialities are entitled to receive a variety of special pays. Health Professions Special & Incentive (HPS&I) pay is paid to Health Profession Officers (HPOs) for the specialty for which they are fully qualified. Being an HPO doesn’t necessarily mean being a medical doctor. Pharmacists, dentists, social workers, veterinarians, mental health specialists and nurses also qualify to name just a few. The following is a basic summary of HPS&I Pay: a. Accession Bonus (AB). This is paid to HPOs who agree to serve at least 3 or 4 years in the military. The amount varies by medical specialty and length of service agreement. There is also a Critical Wartime Skills Accession Bonus that may pay much more money to HPOs with necessary skill sets during wartime. b. Board Certification Pay (BCP). To qualify for BCP, the HPO must maintain all their licenses, credentials, and specialty qualifications. Currently, the annual amount is $6,000, which is prorated and paid monthly. c. Retention Bonus (RB). After the initial period of obligated service ends, HPOs may sign on for an additional length of time and get an Retention Bonus. Once again, the bonus varies by specialty and length of time. The RB is paid annually when the extension is signed and on the anniversary date. Depending on the situation, an HPO can sign a new service agreement while they are under an existing RB contract. They can do this to get more money, but they have to serve the additional time. This depends on the needs of the military. d. Incentive Pay (IP). IP is paid to HPOs in designated specialties. It is a monthly pay, and paid to HPOs

proficiency in specific foreign languages and dialects designated by the military departments. Hardship Duty Pay–Location (HDP–L). These payments are for officers and enlisted personnel for service in locations where living conditions are substantially below those in the continental United States. Payments range from $50 to $150 depending upon the duty location. Hazardous Duty Incentive Pay (Non-Aircrew Members). A $150 monthly payment is authorized for members required to perform certain hazardous duties. Qualifying duties include demolition work, parachute jumping, work with toxic fuels or pesticides, work inside pressure chambers, flight duty as a non–crew member, flight deck operations, and similar hazardous duties. Additionally, in the field of parachute jumping, there is a monthly High Altitude Low Opening (HALO) pay of $225 which may be authorized for members who perform unique parachute duties.

CHAPTER 1 | MILITARY PAY & ALLOWANCES

who agree to serve at least one additional year. The amount varies by specialty and length of additional service. HPOs can get IP and RB at the same time if their specialty warrants it. Like the RB, HPOs can sign a longer IP agreement for more money at any time depending on the needs of the service. Special Duty Assignment Pay. A monthly payment ranging from $75 to $450 is given to enlisted members who perform duties that have been designated as being extremely difficult or involving a high degree of responsibility. ALLOWANCES Basic Allowance for Housing (BAH). BAH is a monthly allowance for members not assigned to government quarters. The objective of the BAH program is to ensure the same out–of–pocket housing expense for each member regardless of duty location. BAH covers 95% of housing expenses with members paying 5% of their housing expenses out of pocket. The BAH allowance for each duty location is based on commercially gathered price data of local rental properties. Data is collected to establish the average rental and utility costs for various types of housing units. The information reflects the cost of rental properties with housing characteristics similar to those rented by civilian counterparts with salaries comparable to military members. The data is collected every summer with the new rates effective 1 January of the next year. BAH rates vary by grade and duty location. The 2022 BAH rates increased by 5.1%. The increase is an average for all areas and actual rates will continue to be set by the individual location based on the current local rental housing market survey process. A key feature of the BAH program is “rate protection.” Rate protection ensures that service members will not have a reduction in their BAH payment even if rates go down. The rate in effect when the member arrives at their duty station is the guaranteed minimum rate they will receive during their current assignment. Also, if rate increases are made for a given location, then everyone assigned to that location will receive the benefit of the new rate increase. In addition to the standard BAH, there are three other types of BAH: a. BAH RC/Transient. A prorated housing allowance paid to Reservists who are mobilized for 30 days or less. b. BAH Partial. This may be paid to members without dependents who reside in government quarters.

c. BAH Differential. Used for personnel who live on base in single quarters and make alimony or child support payments. Basic Allowance for Subsistence (BAS). BAS is a monthly allowance designed to offset the cost of meals to the member. In 2022, officers receive $280.29 a month regardless of rank. Upon completion of initial training, enlisted members who are authorized to mess separately will receive $406.98 per month. Clothing Allowance. To help pay for a uniform and other clothing costs, service members may be given a clothing allowance if appropriate clothing is not furnished. All officers are entitled to an initial uniform allowance. The initial uniform allowance is payable only once to an officer except for the following circumstance: upon transfer to another Reserve Component that requires a different uniform, a Reserve officer may receive another initial uniform allowance. Regular officers may not receive this allowance when transferring to another Military Service. Enlisted personnel receive an initial uniform issue at the time of entry into the service. To provide for uniform replacement, enlisted personnel are subsequently paid an annual clothing replacement allowance. There are two types of clothing replacement allowances — Basic and Standard. The Basic Rate is payable during the first three years of service. After three years of service, the member receives the Standard Annual Clothing Replacement Allowance Enlisted Men BASIC STANDARD Army $356.38 $509.11 Navy $327.60 $468.00 Air Force $320.22 $457.46 Marine Corps $488.64 $695.76 Enlisted Women Army $393.25 $561.78 Navy $324.00 $464.40 Air Force $324.54 $463.63 Marine Corps $486.84 $692.76

CHAPTER 1 | MILITARY PAY & ALLOWANCES

Rate which is a higher level of reimbursement. The Basic and Standard rates vary by gender and service. The table on the previous page provides allowance information. In addition, there are special clothing allowances which are payable to members whose duties require them to wear either civilian– type clothing or special military clothing (e.g., members of the Army Band). CONUS COLA. The Cost of Living Allowance for the Continental United States is designed to partially offset the higher, non–housing costs experienced by active duty members living in designated high cost areas in the United States. The amount varies based upon rank, dependent status, years of service and geographical location. Payments range from $22 to $59 per month. Dislocation Allowance (DLA). Dislocation Allowance is designed to partially reimburse active duty personnel for the expenses they incur in relocating their households in conjunction with a permanent change of station. The allowance is determined by the member’s grade and is paid at either a “with dependents” or “without dependents” rate. The table to the right provides the Dislocation Allowance rates for 2022. Family Separation Allowances (FSA). FSA is payable only to members with dependents. The monthly payment of $250 is designed to provide compensation for the added expenses incurred because of an enforced family separation under one of the following conditions: a. FSA-R. Transportation of dependents is not authorized at government expense and the dependents do not live in the vicinity of the member’s home port/permanent duty station. b. FSA-S. The member is on duty aboard a ship, and the ship is away from the home port continuously for more than 30 days. c. FSA-T. The member is on TDY/away from the permanent duty station continuously for more than 30 days and the member’s dependents do not reside at or near the TDY/ TAD station. Overseas Station Allowances. Overseas Station Allowances consist of a series of payments designed to help defray the additional costs for food, lodging, and related incidental expenses incurred by active duty members and their

Dislocation Allowance

Without Dependents $4,345.94 $4,345.94

With Dependents $5,349.82 $5,349.82 $5,349.82 $5,349.82 $4,817.02 $4,643.12 $4,092.99 $3,386.27 $2,891.47 $2,584.80 $3,639.23 $3,283.56 $3,033.76 $3,950.70 $3,621.89 $3,318.33 $2,3,052.73

Paygrade

O-10

O-9 O-8 O-7 O-6 O-5 O-4 O-3 O-2 O-1

$4,345.94 $4,345.94 $3,987.05 $3,840.05 $3,558.63 $2,851.96 $2,262.31 $1,905,00 $3,079.60 $2,618.00 $2,251.23 $3,615.52 $3,210.82 $2,698.61 $2,396.68 $2,006.15 $2,637.00 $2,420.37 $2,067.85 $1,871.77 $1,726.35 $1,501.85 $1,473.41 $1,196.76 $1,067.17

O-3E O-2E O-1E

W-5 W-4 W-3 W-2 W-1

$2,640.16 $3,476.44 $3,204.52 $2,975.28 $2,749.19 $2,472.52 $2,472.52 $2,472.52 $2,472.52 $2,472.52

E-9 E-8 E-7 E-6 E-5 E-4 E-3 E-2 E-1

CHAPTER 1 | MILITARY PAY & ALLOWANCES

dependents as a result of assignment to permanent duty outside the United States. This allowance contains four separate components: 1) Cost of Living Allowance (COLA); 2) Overseas Housing Allowance (OHA); 3) Temporary Lodging Allowance (TLA); and, 4) Interim Housing Allowance (IHA). The amount of each of these allowances varies geographically because the excess costs upon which they are based vary from one foreign locality to another. Temporary Lodging Expense (TLE). Temporary Lodging Expense is designed to partially offset the lodging and meal expenses incurred by active duty personnel and/or their dependents when it is necessary to occupy temporary lodgings in conjunction with a permanent change of station (PCS). The allowance is payable for a limited period of time — up to ten days in connection with a CONUS PCS and up to five days in conjunction with a PCS to a duty station outside CONUS. 1–5. ACCESS TO YOUR PAY ACCOUNT. MyPay is a great tool to help members of the military, defense civilians, retirees, and annuitants manage their pay. This tool lets you make changes to your pay account information online at anytime at mypay.dfas.mil . MyPay allows you to view your LES, adjust the amount of your federal and state tax withholdings, change direct deposit accounts for your monthly pay, etc. Features vary slightly by service and status. 1–6. THRIFT SAVINGS PLAN (TSP). The Thrift Savings Plan is an optional retirement investment program that is similar to 401(k) plans administered by many private corporations. Active, reserve, and guard members can contribute to the plan from their military pay and are entitled to keep both their contributions and additional earnings regardless of whether they leave the service prior to retirement or actually retire from military service. On www.tsp.gov , you can access your investment account, get current information on the performance of various funds, find retirement planning information, and more. Enrollment and Member Contributions. If you are a member of the uniformed services who is not covered by the Blended Retirement System (BRS), your account is established by your service after you make a contribution election using your service’s automated system such as myPay. If your service does not use an electronic system, you can complete

form TSP-U-1. These forms can be downloaded at www.tsp. gov . You may sign up to contribute to the TSP at any time. If you are a BRS member who began or rejoined service after October 1, 2020, your service automatically enrolled you in the TSP, and 5% of your basic salary is deducted from your paycheck every pay period and deposited into the traditional balance of your TSP account unless you made a contribution election to stop or change your contributions. If you are a BRS member who stopped your contributions during the year, you are automatically re-enrolled at 5% of your basic pay on January 1. If you are a BRS member who began or rejoined service between August 1, 2010 and September 30, 2020, you were automatically enrolled at 3%. You may invest up to 100 percent of your basic pay each pay period. Contributions are limited only by the restrictions imposed by the Internal Revenue Code. For 2022 tax rules limit the annual dollar amount that can be contributed to $20,500. If you are age 50 or older and are already contributing the maximum amount of regular TSP contributions, you may elect to make up to $6,500 in additional “catch–up” contributions. If you contribute to the TSP from your basic pay, you may also contribute up to 100 percent of any incentive, special, or bonus pays that you earn. You may start, stop, or change your contribution at any time. You can not invest any allowances (BAS, BAH, etc.) that you receive. Service Automatic and Matching Contributions. If you are covered by the BRS, your service will automatically contribute an amount equal to 1% of your basic pay into your TSP account each pay period. This does not come out of your pay. If you elect to contribute a portion of your pay, your service will match dollar to dollar up to 3%. For every dollar beyond 3% and up to 5%, your service will contribute 50 cents. So if you contribute 5%, you will receive a 4% matching contribution plus 1% automatic for a total of 5% from your service. There is no service contribution if you are under the traditional retirement system. Investment Options. The TSP provides six mutual fund investment opportunities: a. Lifecycle Fund — L Fund. These funds are invested in the individual funds shown above. The specific mix is chosen based on the date when you will need your

CHAPTER 1 | MILITARY PAY & ALLOWANCES

money. For younger investors, the mix is equity or stock weighted, while for older investors, the allocation is weighted toward bonds and other fixed income securities. b. Government Securities Investment Fund — G Fund. Investment focus is on short term U.S. Treasury securities. c. Fixed Income Index Investment Fund — F Fund. Investment focus is on government and corporate bonds and mortgage backed securities. d. Common Stock Index Investment Fund — C Fund. Investment focus is on the stocks of large and medium size companies included in the S&P 500 Index. e. Small Capitalization Stock Index Investment Fund — S Fund. Investment focus is on the stocks of medium and small companies that are not included in the C Fund. f. International Stock Index Investment Fund — I Fund. Investment focus is on international stocks of 22 developed countries. All new money coming into your TSP account is automatically invested in the L Fund unless you request a contribution allocation. You may make the allocation online, by phone, or mail. Loans. If the need arises, the TSP loan program gives you access to the money in your account. There are two types of loans — a general purpose loan and a loan for the purchase of your primary residence. Repayment periods are one to five years for a general purpose loan and one to fifteen years for a home loan. The interest rate charged is the G Fund rate at the time the loan is initiated. Interest and principal repayments are credited back to your account.

Withdrawal. Since the TSP is designed to be a long-term retirement savings program, withdrawals made before 59 1/2 years of age may be subject to a 10% early withdrawal tax. The simplest rule to get around the 10% penalty before 59 and 1/2 is if you retire in the year you turn age 55 or later. For example, if you turn 55 in December of this year and you retire this year as well then you’d be able to access your TSP without the 10% penalty. In addition, there are special rules covering a financial hardship withdrawal for members who are still in–service. Tax Implications. The TSP program allows contributions to be made on either a pre-tax (Traditional TSP) basis or an after tax (Roth TSP) basis. a. Traditional. Contributions that you make today are deducted from your pay before taxes are computed, meaning that you pay less taxes now. The payment of taxes on this income is deferred until you actually withdraw the money from your account. Additionally, taxes on fund earnings are not paid until the money is withdrawn. b. Roth. Taxes on contributions are paid up front. Consequently, contributions are not taxed at the time of withdrawal as long as five years have passed since 1 January of the year you made your first Roth contribution and you are 59 1/2 or older.

CHAPTER 1 | MILITARY PAY & ALLOWANCES

1-7. MILITARY INFORMATION & PAY WORKSHEET General Military Information

Service Number:

Present Rank:

Date Entered Service: Enlistment Date: Commission Date:

Regular/Reserve:

Flying Status:

Pay Date:

Promotion List Service Date:

Total Active Military Service Date:

Dates of Rank or Promotion

Dates of Active Duty Tours

Rank

Date

Rank

Date

From

To

From

To

Present Military Income

Deductions From Military Pay

Basic Monthly Pay..................................... $_______________ Basic Allowance for Housing (BAH). ....... $_______________ Basic Allowance for Subsistence (BAS). . $_______________ Family Separation Allowance (FSA)......... $_______________ Flight Pay. .................................................. $_______________ Foreign Language Proficiency Pay ........... $_______________ Hazardous Duty Pay .................................. $_______________ Hostile Fire Pay/Imminent Danger Pay.... $_______________ Medical/Dental Pay................................... $_______________ Sea Pay/Submarine Pay/Diving Pay. ....... $_______________ Other (Explain)........................................... $_______________ Other (Explain)........................................... $_______________

Federal Income Tax (FITW)....................... $_______________ Social Security Tax (FICA)......................... $_______________ State Income Tax For:. .............................. $_______________ Local Income Tax For: ............................... $_______________ Allotment To:.............................................. $_______________ Allotment To:.............................................. $_______________ Allotment To:.............................................. $_______________ Allotment To:.............................................. $_______________ Combined Federal Campaign................... $_______________ Other (Explain)........................................... $_______________ Other (Explain)........................................... $_______________ Other (Explain)........................................... $_______________

Total Military Pay and Allowances:....... $_ _____________

Total Deductions From Military Pay:.... $ _ _______________

Notes, Comments, Points to Check, Computations, etc.

CHAPTER 1 | MILITARY PAY & ALLOWANCES

Chapter 2. Reserve & National Guard Introduction............................................................................................................................. 2–1 Categories of Service & Duty Requirements.............................................................................2–2 Pay..........................................................................................................................................2–3 Retirement...............................................................................................................................2–4 TRICARE..................................................................................................................................2–5 Education Benefits ...................................................................................................................2–6 Reserve Component Survivor Benefit Plan (RCSBP) ................................................................. 2–7 Life Insurance..........................................................................................................................2–8

a. Ready Reserve. This group is most often called to active duty and consists of three sub categories — Selected Reserve, Individual Ready Reserve (IRR), and Inactive National Guard (ING). The Selected Reserve consists of designated guard/ reserve units and individuals who are considered essential to wartime mission accomplishment. Most reservists are in this category and are the first to be activated. The president may mobilize up to 200,000 members of the Selected Reserve without declaring a national emergency for a period not to exceed 365 days. Members of the Selected Reserve are generally required to perform one weekend of training each month (“inactive duty for training” or IDT, also known as “weekend drill”) and two weeks of training each year (“annual training” or AT, sometimes known

2–1. INTRODUCTION. An essential component of the nation’s military force is the Reserve and National Guard. The term “Reserve Component” (RC) refers collectively to the seven individual reserve components of the U.S. military: the Army National Guard, the Army Reserve, the Navy Reserve, the Marine Corps Reserve, the Air National Guard, the Air Force Reserve, and the Coast Guard Reserve. This chapter will look at the duty requirements, pay, and retirement that are provided to these members. We will also examine the health, education, and survivor benefits that are available. 2–2. CATEGORIES of SERVICE & DUTY REQUIREMENTS. Members of the Guard and Reserve are assigned to one of three categories — Ready Reserve, Standby Reserve, or Retired Reserve.

CHAPTER 2: RESERVE & NATIONAL GUARD

2022 Monthly Reserve Drill Pay Schedule Listed below are the Reserve rates of Pay for a weekend cycle of four drills

Under 2 Years

Over 2 Years

Over 3 Years

Over 4 Years

Over 6 Years

Over 8 Years

Over 10 Years

Over 12 Years

Over 14 Years

Over 16 Years

Over 18 Years

Over 20 Years

Over 22 Years

Over 24 Years

Over 26 Years

Over 28 Years

Over 30 Years

Rank

Commissioned Officers

O-7 1,289 1,349 1,377 1,399 1,439 1,478 1,524 1,569 1,615 1,758 1,879 1,879 1,879 1,879 1,888 1,888 1,926 O-6 978 1,074 1,144 1,144 1,149 1,198 1,205 1,205 1,273 1,394 1,465 1,536 1,576 1,617 1,697 1,697 1,731 O-5 815 918 982 994 1,033 1,057 1,109 1,147 1,197 1,273 1,309 1,344 1,385 1,385 1,385 1,385 1,385 O-4 703 814 868 880 931 985 1,052 1,105 1,141 1,162 1,174 1,174 1,174 1,174 1,174 1,174 1,174 O-3 618 701 756 825 864 908 936 982 1,006 1,006 1,006 1,006 1,006 1,006 1,006 1,006 1,006 O-2 534 608 701 724 739 739 739 739 739 739 739 739 739 739 739 739 739 O-1 464 483 583 583 583 583 583 583 583 583 583 583 583 583 583 583 583 Commissioned Officers With Over Four Years of Enlisted or Warrant Officer Service O-3E – – – 825 864 908 936 982 1,021 1,043 1,073 1,073 1,073 1,073 1,073 1,073 1,073 O-2E – – – 724 739 763 802 833 856 856 856 856 856 856 856 856 856 O-1E – – – 583 623 646 670 693 724 724 724 724 724 724 724 724 724 Warrant Officers W-5 – – – – – – – – – – – 1,136 1,194 1,237 1,284 1,284 1,348 W-4 639 687 707 726 760 793 826 877 921 963 997 1,031 1,080 1,121 1,167 1,167 1,190 W-3 584 608 633 641 667 718 772 797 826 856 910 947 969 992 1,024 1,024 1,024 W-2 516 565 580 590 624 676 702 727 758 782 804 831 848 862 862 862 862 W-1 453 502 515 543 576 624 646 678 709 733 756 783 783 783 783 783 783 Enlisted Members E-9 – – – – – – 772 789 811 837 864 905 941 978 1,035 1,035 1,087 E-8 – – – – – 632 660 677 698 720 761 781 816 836 883 883 901 E-7 439 479 498 522 541 574 592 625 652 670 690 698 723 737 789 789 789 E-6 380 418 437 454 473 515 532 563 573 580 588 588 588 588 588 588 588

E-5 348 371 389 408 436 466 491 494 494 494 494 494 494 494 494 494 494

E-4 319 335 354 372 387 387 387 387 387 387 387 387 387 387 387 387 387

E-3 288 306 325 325 325 325 325 325 325 325 325 325 325 325 325 325 325

E-2 274 274 274 274 274 274 274 274 274 274 274 274 274 274 274 274 274

E-1 244 244 244 244 244 244 244 244 244 244 244 244 244 244 244 244 244

CHAPTER 2: RESERVE & NATIONAL GUARD

(assuming attendance at 48 annual drills and two weeks of active duty training). 2–4. RETIREMENT. In general, reservists must have a minimum of 20 qualifying years of service to be eligible for retirement. A qualifying year of service is any 365 day period during which the member has earned at least 50 service points. Point totals are also important because they are used to calculate retired pay. Excluding points earned while in an active duty status (which includes annual training), reservists may not earn more than 130 points per year. Service points are normally earned in accordance with the following criteria: a. One point for each day of active duty. b. One point for each 4 hour drill period. c. 15 points for each year of service in the Guard or Reserve. d. One point for each 3 credit hours of accredited correspondence study. Eligibility to draw retired pay normally begins at age 60. However, the member may begin to draw retired pay as early as age 50 if he/she has 20 qualifying years of service including active duty service performed after January 28, 2008. Specifically, each 90 days of active service performed after January 28, 2008, entitles the member to begin drawing retired pay 3 months prior to age 60. Therefore a member with 360 days of active service would be eligible to draw retired pay at age 59 versus 60. Computation of Retired Pay. The computation of retired pay is determined based upon the DIEMS (Date Initially Entered Military Service). Those with a DIEMS before September 8, 1980 use the Final Pay System, those with a DIEMS on or after September 8, 1980 through December 31, 2017 use the High–36 System, and those with a DIEMS date on or after January 1, 2018 use the Blended Retirement System (BRS). All systems determine the years of service by dividing the total points earned in all years by 360. The result is then multiplied by 2.5% for Final Pay and High-36 or 2% for BRS which provides the percentage of base pay that will be received at retirement. For example, a member accruing 2,880 points would have a retirement rate percentage of 20% under Final Pay and High-36 (2,880/360 = 8 years; 2.5% x 8 years = 20%). Under BRS, this same member would have a retirement percentage of 16% (2,880/360 = 8 years; 2% x 8 years = 16%). The systems also differ in the determination of the base pay amount. In the Final Pay System, the pay computation is based upon the base pay for the grade and length of service

as “summer camp”) for which they receive pay and benefits. Individual Mobilization Augmentees (IMAs) are members of the Selected Reserve who participate in training activities and are eligible for unit assignment at the time of mobilization. IRR personnel are normally prior service individuals (active or Selected Reserve) who have some remaining period of obligated military service. Usually, they are not affiliated with a unit and generally do not have to satisfy an annual training requirement. ING personnel are normally members assigned to a specific Guard unit who have been excused from training requirements because of legal or contractual requirements. b. Standby Reserve. This group consists of members who have retained their military affiliation but who are excused from active participation because of hardship, “critical” civilian employment, or other legal requirements. Under certain circumstances members in this category may be involuntarily called to active duty for the duration of a national emergency plus six months. c. Retired Reserve. This group consists primarily of retired members who are drawing retirement pay (over age 60) and those retired members who are not yet eligible for retired pay (under age 60). Eligibility for mobilization is a function of category. Category I retirees are those within their first five years of retirement and are under age 60; Category II retirees are under age 60 but have been retired for more than five years; and, Category III retirees include all remaining retirees. 2–3. PAY. The pay received by members of the reserve and national guard is determined by the type of duty performed — active duty or inactive duty training. While on active duty, generally he/she receives the normal active duty pay and allowances associated with their grade and years of service. While on inactive duty training, reservists receive drill pay in lieu of normal pay and allowances. Generally, a drill is one four hour period of assembly, training, or military service. Pay for one drill period is equivalent to one day of active duty base pay. Reservists cannot be paid for more than two drills in one calendar day. Reserve units will often drill on a weekend basis performing two drills on Saturday and two drills on Sunday, thereby enabling the member to draw four days of active duty base pay for weekend service. The table on the previous page shows the monthly drill pay while the table on the next page provides an estimate of the annual pay earned by a reservist

CHAPTER 2: RESERVE & NATIONAL GUARD

A Year in the Reserves — 2022

Under 2 Years

2 Years

3 Years

4 Years

6 Years

8 Years

10 Years

12 Years

14 Years

16 Years

18 Years

20 Years

22 Years

24 Years

26 Years

Rank

Commissioned Officers

O-7 20,304 21,247 21,683 22,030 22,659 23,279 23,997 24,712 25,430 27,685 29,589 29,589 29,589 29,589 29,740 O-6 15,397 16,915 18,025 18,025 18,094 18,869 18,972 18,972 20,050 21,956 23,075 24,193 24,830 25,475 26,723 O-5 12,836 14,459 15,460 15,648 16,274 16,646 17,468 18,072 18,851 20,042 20,609 21,170 21,807 21,807 21,807 O-4 11,075 12,819 13,676 13,866 14,659 15,511 16,573 17,397 17,971 18,301 18,491 18,491 18,491 18,491 18,491 O-3 9,737 11,038 11,912 12,989 13,612 14,295 14,736 15,462 15,841 15,841 15,841 15,841 15,841 15,841 15,841 O-2 8,414 9,582 11,036 11,409 11,643 11,643 11,643 11,643 11,643 11,643 11,643 11,643 11,643 11,643 11,643 O-1 7,302 7,601 9,189 9,189 9,189 9,189 9,189 9,189 9,189 9,189 9,189 9,189 9,189 9,189 9,189 Commissioned Officers With Over Four Years of Enlisted or Warrant Officer Service O-3E – – – 12,989 13,612 14,295 14,736 15,462 16,075 16,428 16,907 16,907 16,907 16,907 16,907 O-2E – – – 11,409 11,643 12,013 12,639 13,124 13,483 13,483 13,483 13,483 13,483 13,483 13,483 O-1E – – – 9,189 9,812 10,175 10,546 10,909 11,409 11,409 11,409 11,409 11,409 11,409 11,409 Warrant Officers W-5 – – – – – – – – – – – 17,893 18,800 19,476 20,224 W-4 10,063 10,824 11,135 11,440 11,967 12,488 13,016 13,808 14,504 15,166 15,708 16,237 17,013 17,650 18,377 W-3 9,190 9,572 9,966 10,094 10,505 11,315 12,158 12,555 13,015 13,488 14,339 14,913 15,257 15,622 16,120 W-2 8,131 8,901 9,137 9,300 9,827 10,646 11,053 11,453 11,942 12,324 12,670 13,084 13,357 13,572 13,572 W-1 7,137 7,907 8,113 8,549 9,064 9,825 10,180 10,678 11,166 11,550 11,904 12,334 12,334 12,334 12,334 Enlisted Members E-9 – – – – – – 12,157 12,433 12,780 13,188 13,602 14,260 14,819 15,406 16,305 E-8 – – – – – 9,952 10,392 10,665 10,991 11,345 11,983 12,307 12,858 13,163 13,915 E-7 6,918 7,551 7,840 8,222 8,522 9,035 9,325 9,839 10,266 10,558 10,868 10,988 11,392 11,609 12,434 E-6 5,984 6,585 6,876 7,158 7,452 8,115 8,374 8,874 9,027 9,138 9,268 9,268 9,268 9,268 9,268 E-5 5,482 5,851 6,134 6,423 6,874 7,345 7,733 7,779 7,779 7,779 7,779 7,779 7,779 7,779 7,779 E-4 5,026 5,283 5,569 5,852 6,102 6,102 6,102 6,102 6,102 6,102 6,102 6,102 6,102 6,102 6,102 E-3 4,537 4,823 5,115 5,115 5,115 5,115 5,115 5,115 5,115 5,115 5,115 5,115 5,115 5,115 5,115 E-2 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 4,315 E-1 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850 3,850

The chart above provides an approximation of the annual compensation earned by a member of the reserves.

CHAPTER 2: RESERVE & NATIONAL GUARD

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