Personal Finance Guide for Military Service Members and Families

Whether you’re in the military or a civilian, you need to spend less than you earn, stash money in your emergency fund, and invest for your retirement. You also need to take out insurance to protect your assets and loved ones.

But there are a lot of specific things about personal finance that relate specifically to being a military service member, partner, or spouse that don't apply to others. For instance, most people don’t have to move frequently, and they don’t have access to things like housing and higher education benefits or tax-free forms of pay.

That’s why we’ve put together this personal finance guide for military service members and their families. By following our guide, you can learn more about the resources that can help you solve specific problems, such as deciding where to live, making the most of your insurance benefits, and saving for retirement.

The Costs of Moving

Moving is a major part of military life and orders (referred to as a permanent change of station) mean packing up all your belongings, finding a new place to live, and transporting everything there—usually just when you’re starting to feel settled in your current location. While the military helps with most moving expenses, you still need to manage things carefully to limit or avoid out-of-pocket costs.

You'll generally have to pay for certain things yourself if you have a lower rank or end up with a lower dislocation allowance, which the military provides to help offset moving costs. Some of these additional costs include:

• Clothing for a new climate
• Moving expenses for your pet
• Costs associated with lost or broken belongings

Homeowners or moving insurance may cover the last item on the list even though getting reimbursed can be a challenge. On the other hand, some members report coming out ahead by accepting a reimbursement of 95% of what the government move would have cost, then doing the work themselves.

Some costs are covered by the military, which we list below.

• Dislocation allowance: Your rank and family status determine how much of a dislocation allowance you receive. The allowance ranges between $892.96 for an E-1 without dependents to $5,595.91  for an O-10 and above with dependents for fiscal year 2023.
• Temporary lodging expense: This allowance for temporary living expenses reimburses you for five or 10 days of temporary lodging and meals during your move within the continental United States. Up to 10 days when leaving and up to 60 days upon arrival are covered when you relocate outside the continental U.S.
• Moving household goods: The military pays you to move a certain weight of goods, which depends on your rank and dependent status.
• Per diems: Members of the military receive a maximum per diem of $157 for meals and lodging during their move in 2023 within the continental U.S. An additional per diem is provided for each dependent—75% for children 12 and over and 50% of the rate for children under 12.
• Vehicles: The military reimburses you per mile if you drive during your move. If you ship your vehicle within the continental United States, the expense is your responsibility. For moves outside the continental United States, the military pays to ship one personal vehicle, subject to size limits.
  

Insurance

The military has your health and dental insurance covered through TRICARE and its Active Duty Dental Plan, so you won’t have to worry about those when moving out of state as civilians often do. But if you own a home or vehicle, you have to deal with some insurance issues.

Car insurance rates vary significantly by state, so you could find yourself paying much higher (or lower) premiums after a move. If you are deployed and no one will be driving your vehicle, you may be able to save money by dropping your auto liability insurance if your state allows it. You may want to keep your comprehensive coverage in case your vehicle is damaged or stolen while you’re away.

If your home will be vacant for an extended period or you plan on renting it out, you may need to adjust your homeowner's insurance policy. You should also be aware of what personal property coverage your insurance and movers provide for your items during a move and during deployment.

Spousal Employment

Frequent moves can represent a major challenge for military spouses who want and need to work, especially when it comes to career advancement. As many as 33% of the spouses of active-duty military personnel who responded to a 2021 survey said they were unemployed but wanted or needed to work, according to Blue Star Families.

The high cost of childcare keeps many military spouses from working, as does the unpredictability of the service member’s schedule. In some cases, couples end up living apart to allow both the service member and their partner to work.

Becoming injured or disabled during combat can also be a factor. In fact, the intense caregiving responsibilities can make it a challenge for the partners of service members to work and advance in their careers.

Saving for retirement can be a challenge for spouses who can't work or are underemployed. Couples may want to establish a spousal individual retirement account (IRA). This tax-advantaged IRA allows the working service member to contribute up to $6,000 in 2022 and $6,500 in 2023 to a traditional or Roth IRA in their spouse's name. The IRS allows taxpayers to set aside an additional $1,000 catch-up contribution each year if they're 50 or older.

Taxes

Working in more than one state or country can make tax filing more complicated for civilians. But frequent moves, deployments, and special types of pay, such as combat pay, make things even more complex for service members. The Department of Defense offers free, military-specific online tax preparation and electronic filing software called MilTax, available through your Military OneSource account.

As a service member, the state to which you pay income taxes depends on your established domicile. The Internal Revenue Service (IRS) defines domicile as “the permanent legal home you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. It isn't always where you presently live.”

The state you owe income taxes to is also the state in which you may:

• Register your vehicle
• Have a driver's license
• Register to vote

Some states have no state income tax or do not tax military pay. Military.com has a comprehensive list of which areas fit the bill. Military spouses may be able to claim the same domicile as their service member spouse under the Military Spouse Residency Relief Act, but in some cases, they may have to pay state taxes where they presently live.

Serving in the U.S. military can create so many tailored tax situations that the IRS has an entire publication devoted to them. Publication 3, Armed Forces Tax Guide discusses military-specific topics, such as which types of pay are not taxable. It also covers general issues, such as information about the Child Tax Credit, Earned Income Tax Credit (EITC), and the deductibility of moving expenses, but it aims to include all the information most military service members will need to know in a single publication.

The Bottom Line

As a military service member or spouse, you will experience personal financial challenges related to frequent, mandatory moves, from moving expenses to challenges with spousal employment and child care to insurance and taxes. If you arm yourself with the knowledge beforehand, you'll learn more about how to limit the struggles and become financially successful by taking full advantage of all the pay and benefits to which you’re entitled, from basic training through retirement.