A financial advisor meeting with any client for the first time will prioritize establishing a relationship and identifying common ground in order to get a fix on their short- and long-term goals. The same applies to ex-military clients. Veterans answered to a higher purpose during their service, but you’ll find that in retirement, they’re working toward the same lifestyle, career and family goals as their civilian peers and rely on your knowledge to help them along the way.
But advisors should keep in mind that many aspects of military compensation are unique. When helping a veteran craft their plan, there are a few things to be aware of and ask about.
Length and nature of service
This is the first thing to cover once you’ve discussed what your client wants out of the relationship. Keep in mind that military veterans can look different than the traditional idea of a retiree. Ex-military members can retire at the age of 40 with a lifelong pension coming in and can go on to pursue a second career, if they so choose.
In order to best advise them, you’ll need a complete picture of what defined benefits and compensation a veteran is receiving. Key factors to ask about include time served and nature of service (active duty vs. reserve).
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The military retirement system was overhauled a few years ago and, as a result, in 2017 service members with 12-or-fewer years of active-duty service were given the choice between remaining with the legacy system or enrolling in the new blended retirement system (BRS). Veterans who retired before 2017 or those with more than 12 years of service at that point have been grandfathered into the legacy system. Currently, you’ll likely be encountering veteran clients in the legacy system, which offers a defined monthly pension after 20 or more years of service. However, it’s still good to be aware of both these plans before working with veteran clients.
Health care needs
During the retirement transition, advisors should encourage all veteran clients to have any and all service-related conditions documented by a medical professional. While conversations around disabilities and health conditions incurred during military service can sometimes be delicate ones, it’s important to be aware of any documented conditions or disabilities that may impact your client’s compensation when creating a long-term financial plan.
For instance, health care plans for active-duty retirees can be roughly one-third the cost of civilian premiums. What’s more, veterans with sufficient VA disabilities could receive additional health and long-term care resources that their civilian counterparts don’t have access to. In some states, a veteran’s tax liability may also be impacted. Health care compensation can be a confusing process for the veteran and their family so it’s always a good idea for you to research the landscape to offer level-headed guidance.
Protection plans
You’ll also want to identify what financial products and protection plans your client is already investing in. These include life insurance and survivor benefit plans. There are many offerings available exclusively to veterans. Research the marketplace and come to any meetings prepared to help clients navigate options and understand which products best suit their lifestyle and goals.
Often, the default plans are not the most advantageous. For instance, the government offers Veterans Group Life Insurance (VGLI) to all retiring servicemembers. It’s a guaranteed issue, term life group policy. While this is an attractive option for individuals with health conditions that may complicate the underwriting process, for a healthy veteran there are more lucrative options available, some through third-party organizations, which are still exclusive to military members.
For veteran clients looking for a lower-risk option for life insurance and retirement income, the market for whole life policies and even annuities is also different from what is available to civilians. It’s good to be aware of options available exclusively for veterans and their spouses, as these can offer opportunities to build value without risking premiums or termination fees.
During their service, veterans were prepared for any and every situation and crafted contingency plans to handle the unexpected. Advisors working with veterans should deploy a similar approach. Take the time to learn and research your client’s unique circumstances so you can offer them informed advice and flexible planning options to help them reach their financial goals.
