With bills being passed and public policy being debated at the federal level, 2014 brings certain changes to military benefits that affect every member of the armed forces. Here are a few of the most crucial ones you'll need to know about in order to prepare for both your immediate and long-term financial future.
Veteran Cost of Living Adjustments
As the Pentagon faces rising pension costs, retirement benefits have been targeted for budgetary cost-cutting. Reducing the Cost of Living Adjustments (COLA) has been hotly debated amongst the military community and in Congress.
The average retiree is in his or her 40s, and usually moves on to a second career. Because of this, Congress is looking to reduce the burden of pensions by reducing the amount of money that goes into the annual COLA increase. However, many current retirees could be blindsided by the loss of income this reduction would bring.
Starting in December 2015, military retirees will receive 1% less in their annual COLA increase, until they are 62. After a retiree reaches the age of 62, he or she will receive the full COLA increase. This affects all current members of the military and retirees, excepting those who are disabled or the survivors of those killed in action.
One thing to keep in mind is that the COLA decrease is sparking significant debate, and there is a chance it may soon be repealed in Congress.
Increase in Basic Allowance for Housing
While changes in the Basic Allowance for Housing (BAH) are in the works, troops will see a 5 percent increase in this benefit. This is the largest increase in five years, and depending on the location, some troops will see up to $80 more in their allowance. With nearly 1 million members of the military who depend on BAH for off-base housing, this will allow members who live in high-cost housing areas to receive more money to help offset those costs. Other members will actually see a decrease, depending on whether or not housing prices in their area are on a downward spiral.
Tuition Coverage Expansion
Although it may or may not take effect in 2014, one bill to keep an eye on is one aimed at reducing veterans' financial burden for higher education.
Through the GI bill, veterans (and their dependents) are entitled to have their tuition covered after their military career has come to an end. However, full coverage is applicable only at in-state tuition rates. With college tuition rising exponentially, veterans who have gone to out-of-state schools have amassed significant student debt, even with the GI bill. Many veterans also find it difficult to meet residency requirements as they are often on the move during their military career.
A recent bill requires schools to allow veterans to pay in-state rates, even if the student goes out-of-state for their education. If schools refuse, they will lose eligibility for the Post-9/11 GI bill. As the average in-state tuition was $8,655 and out-of-state was $21,706, this represents significant savings for veterans who are interested in pursuing higher education.
As always, these benefits and others can be changed by pending legislation, so keep reading for further updates here in order to stay on top of the most recent happenings. If any of the changes above make it harder for you to make ends meet every month, please read our previous articles on getting out of debt when you're going through tough times and on how to make extra income if necessary.
Fiona Lee is a personal finance writer for ReadyForZero, a website that helps people get out of debt faster on their own. She is a frugalista who loves discovering new ways to save money, especially in expensive cities. After living in New York and Beijing, she now makes her home in San Francisco. You can follow @ReadyForZero and @moderntime on Twitter.