Another major issue she brought to the attention of "a congressional member": Military ID cards have a Social Security number smack-dab on them-despite the fact that military personnel are prime targets of identity theft. This is changing, she says, as cards get reissued.
Too often, military personnel, busy in combat, assume that because their combat pay is not subject to federal income taxes, they needn't bother filing. By not filing, many overlook the complex "earned income" tax credit, which still could mean a substantial tax refund for their families. Petraeus stresses that military bases provide military personnel with free tax help, which, if they take advantage of it, should curb this oversight.
Petraeus' BBB program has offered classes on teen budgeting and teen car buying, as well as adult savings and budgeting and adult car buying. She's currently working on a FINRA-sponsored retirement class.
With the retirement class, she not only hopes to educate military personnel about traditional IRAs and Roth IRAs, but also to address a chief concern: the false sense of security military personnel may have because the military provides a defined benefit program. Under that program, it takes 20 years of service to collect benefits. And those benefits are merely one-half of the service member's base salary. After 30 years, she says, military personnel get 75% of their base salary. Meanwhile, upon retirement, service members lose extra allowances, such as housing, that they received while working. Often, they are surprised when their lower post-retirement income hampers their ability to get a mortgage.
One of Petraeus' missions will be to encourage military personnel to take advantage of the Thrift Savings Plan, the federal government's version of a 401(k). A Roth-style option, at this writing, was being added to the program. A February-released survey by the FINRA Investor Education Foundation indicated that 22% of U.S. service members are unaware of the Thrift Savings Plan, which only became available to military personnel around the turn of this century.
Combat personnel needn't worry about paying ordinary income tax on retirement distributions in the Thrift Savings Plan. Reason: Most combat pay is already tax-free. So only the service members' earnings under the plan would be taxable. Nevertheless, even with this attractive perk for combat personnel, military personnel are getting shafted. That's because the federal government provides matching contributions under the Thrift Savings Plan to civilian employees, Julian confirms, but not to military personnel.