Military life is unique. From PCS moves to deployments to special pays and allowances, service members face financial situations most civilians never encounter. With that uniqueness comes plenty of well-intended advice — and plenty of myths. Some are harmless misunderstandings, but others can derail long‑term financial readiness.
Let’s bust some of the most common myths service members and families hear about money.
1. Myth: “All Military Pay Is Taxable.”
- Truth: Basic pay and most special pays are taxable, but many entitlements are not. Combat zone pay, BAH, BAS, and certain other allowances are tax-free.
- Why it matters: Tax-exempt income can be a powerful wealth builder. For example, contributing tax-free combat pay into the Roth TSP means your money goes in tax-free and comes out tax-free in retirement. That’s a rare double benefit.
2. Myth: “You Don’t Need to Save for Retirement If You Have a Pension.”
- Truth: Only about 20% of all military members stay the full 20 years to be eligible for retirement, and even then, it’s a percentage of their basic pay.
- Why it matters: Your pension alone may not be enough to cover all of your retirement needs. The Thrift Savings Plan (TSP), especially with the BRA match, can provide retirement income for those members not staying in until retirement.
3. Myth: “You Can’t Contribute to TSP While Deployed.”
- Truth: You can contribute, and in many cases, you may be contributing tax-free money.
- Why it matters: The contribution of tax-free earnings combined with tax‑free growth (in Roth) is one of the most powerful wealth‑building windows you’ll ever have. You’ll pay zero tax on the income when you earn it, and you’ll pay zero taxes on the withdrawals during retirement!
4. Myth: “You Should Stop TSP Contributions During PCS or Deployment.”
- Truth: Consistency is key. PCS and deployments are often great times to increase contributions.
- Why it matters: Once contributions are stopped, it’s often harder to restart them. Deployments often come with extra pay. PCS seasons sometimes reduce expenses. Both can be great opportunities to increase contributions, not stop them.
5. Myth: “Military Spouses Don’t Need to Worry About Finances.”
- Truth: Spouses often manage the household budget, and their understanding and involvement to family finances is critical to long-term planning.
- Why it matters: Financial readiness is a team sport. When both spouses are informed and involved, families make stronger long‑term decisions. Regardless of who handles the daily decisions, by being fully aware of the financial situation, either spouse can step in and continue the process during deployment, TDY/TAD, or PCS.
6. Myth: “You Can’t Use Military Discounts Unless You’re Retired.”
- Truth: Many businesses offer discounts to active duty, Guard, Reserve, retirees, and dependents as a thank you, and others, like military Exchanges, Commissaries, and MWR facilities, are a part of your benefits.
- Why it matters: Every dollar counts! Whether buying at a discount or making a sales tax-free purchase, saving on planned and budgeted purchases stretches your dollars. Beware of impulse purchases. A discount is not a good reason to buy something you don’t need!
7. Myth: “You Should Always Choose the TSP G Fund — It’s Safe.”
- Truth: G Fund is safe, but not ideal for long-term growth.
- Why it matters: Younger service members need diversified exposure with an objective of long-term growth that outpaces inflation. You won’t lose money with the G Fund, but you’ll lose purchasing power. Consider using a Lifecycle Fund based on your anticipated final retirement date that starts out more aggressively while you are younger and becomes more conservative as you near your retirement date.
- Choose the fund(s) based on your timeframe:
- G Fund – Government Securities - Best for stability, short-term savings, or those close to final retirement – Ten-year rate of return = 2.76%
- F Fund – Corporate Bonds - Best for reducing volatility in your portfolio – Ten-year rate of return = 2.11%
- C Fund – Large U.S. Corporation Stocks (S & P 500) - Best for long-term growth - Ten-year rate of return = 14.79%
- S Fund — Small & Mid‑Size U.S. Companies - Best for: Younger investors or those seeking higher growth - Ten-year rate of return = 11.04%
- I Fund — International Stocks – Best for diversification - Ten-year rate of return = 8.70%
8. Myth: “You Can’t Invest Outside the TSP While in the Military.”
- Truth: You can open IRAs, brokerage accounts, and even invest in real estate — with proper planning. The TSP is a great, low-cost way for military members to save for retirement, but it is not your only option. There are dollar limits on how much a service member may contribute to their TSP and IRAs, but if your budget allows, you can contribute to other investment vehicles
- Why it matters: The TSP and IRAs are intended to allow us to save for our ultimate retirement years, but they’re not designed for mid-career goals. Outside investments can help you build wealth with more flexibility.
9. Myth: “You Don’t Need a Budget — You Have Steady Pay.”
- Truth: Your pay is steady, but the military lifestyle isn’t. PCS moves, sudden TDYs, deployments, and local conditions can break predictability. Car repairs, variable utility costs, kids’ activities, and more can disrupt your finances.
- Why it matters: A spending plan gives you control, not restrictions. It puts you in charge of deciding how you spend your money, giving you confidence to take on both the planned and unplanned expenses that come your way. Steady pay does not build wealth; intentionality does.
10. Myth: “Tax Refunds Are Free Money to Spend.”
- Truth: A tax refund isn’t a gift from the government! It’s simply a return of your own money that was withheld during the year. A tax refund is both a symptom of poor financial planning and interest free loan to the government.
- Why it matters: Excess tax withholding throughout the year is money that you cannot use for savings, debt repayments, investing, or lifestyle. Treating tax refunds as a windfall can lead to impulse spending and prevent intentional use of the funds. Spending a few minutes with a tax calculator or a financial counselor/coach can help you “right-size” your withholding, preventing excessive refunds or worse, a big tax bill. It is simple to adjust your withholding once you have determined the right amount to withhold.
11. Myth: “You Can’t Afford a Summer Vacation on Military Pay.”
- Truth: Summer vacations are possible on military pay! They just require planning and wise use of existing benefits available to military families. Discounted MWR-owned resorts are available at Shades of Green in Orlando, FL, the New Sanno Hotel in Tokyo, the Hale Koa in Honolulu, Dragon Hill Lodge in Seoul, and the Edelweiss Lodge and Resort in Germany. Billeting facilities, military campgrounds and RV parks, Space-A flights, MWR discounts to amusement parks, and military-exclusive deals can make vacations and downtime more affordable.
- Why it matters: Unpredictable schedules, deployments, PCS moves, and family separations make down time essential. Time away strengthens relationships, reduces burnout, and helps bring balance to military life.
12. Myth: “Financial Counseling Is Only for People in Trouble.”
- Truth: Financial coaching is for everyone! A financial counselor is not just a “fix-it” resource, but rather an invaluable team member in helping you reach your financial goals. A counselor/coach can help you build strong money habits including creating budgets that work, track your spending, understand your LES and benefits, and build a financial system that keeps you “squared away” all year long. A counselor can help you “right size” your tax withholding as discussed in myth #10, evaluate a big purchase, help you determine if renting or buying a home is best for you, compare borrowing options, and help you learn about saving and investing.
- Why it matters: Financial readiness is an important part of mission readiness. Service members who feel confident about their money are less stressed, more focused, and better equipped to handle the demands of military life. Military families have access to free, confidential financial counseling through installations, Military OneSource, and certified professionals. Use it to plan, grow, and get ahead.
Financial myths spread quickly, but the truth is simple: when you understand your benefits and use the resources available to you, military life can offer powerful opportunities to build stability and long‑term wealth. Take advantage of the tools, education, and support designed for your success — your future self will thank you.
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