IA01 Technical Exhibit 11 - FP Facilitator Guide 2018 W9124D20R0016.pdf

FACILITATOR GUIDE 2018

Technical Exhibit 11

SFL-TAP Road Map END WITH: Capstone w/Individual Transition Plan (ITP) review and DD 2648 (eForm) Capstone Review phase Soldiers participate in Capstone with ITP review to validate and verify that they are prepared to be successful following military service by producing documentation that they meet all Career Readiness Standards (CRS):

NOTE: The additional four CRS are specific to those who have selected either the Education or Technical Training Tracks

• Complete an assessment tool to identify aptitudes, interests, strengths, or skills

• Complete a comparison of academic or training institution choices

• Complete a college, university or career technical training application or receive an acceptance letter, respectively

• Confirm one-on-one counseling with a higher education or career technical training institution advisor or counselor

Prepare and submit the Job application package = Resume (Civilian or Federal), references, and two submitted job applications) OR a job offer letter

Accessing Higher Education Track - Guides and assists Soldiers pursuing college education with preparation for the college application process. Topics covered include identifying educational goals, finding education funding and researching and comparing institutions.

Career Technical Training Track - Guides and assists Soldiers pursuing career technical training with preparing for researching and selecting institutions and technical fields.

Entrepreneurship Track - Soldiers pursuing self-employment in the private or non-profit sectors learn about the challenges faced by entrepreneurs, the benefits and realities of entrepreneurship, and the steps toward business ownership.

Evaluate opportunities presented in continued Military Service counseling (AC only) - Informs Soldiers of the opportunity to continue their military service by joining a Reserve Component.

Attend DOL Employment Workshop (DOLEW) or obtain an Exemption (Waiver*) - Informs and assists transitioning Soldiers with preparation of the tools and steps required for a successful transition to civilian employment. Receive DOL Gold Card.

Attend Army MOS Crosswalk - Translates military skills, training and experience into civilian skills, education and credentialing appropriate for civilian jobs. Document GAP Analysis and complete assessment tool

• Complete assessment tool

• Identify and document requirements and eligibility for licensure, certification, and apprenticeship (MOS Crosswalk Gap Analysis)

• Crosswalk military skills set to civilian skills (MOS Crosswalk Gap Analysis)

Attend Financial Planning for Transition (Prepare a 12-month post-separation budget) - Provides information and tools needed to prepare a 12-month post-separation budget, identify financial responsibilities, obligations and goals after separation from the military.

Attend VA Benefits Briefings I & II - Informs transitioning Soldiers of their Veterans benefits options.

Complete e-Benefits Registration - Provides web-based information to Soldiers, Veterans, and their family members on how to access Veteran benefits, resources, services, and support.

BEGIN WITH: Complete Preseparation Briefing/Initial Counseling and DD 2648 (eForm) Preseparation Assessment - Introduces Soldiers to the full range of transition programs and services available.

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Financial Planning for Transition Facilitator Guide 2018 page iii

Military Life Cycle Model

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TABLE OF CONTENTS

Individual Transition Plan Deliverables ..................................................................................................... ii

Military Life Cycle ...................................................................................................................................... iii

Table of Contents ...................................................................................................................................... iv

Facilitator Overview and Instructions ....................................................................................................... v

Financial Goals

Income

Expenses

Debt

Assets

Action Plan

APPENDIX:

Course Assessment Information Investment Chart Choosing a Financial Professional How to Spot Frauds and Scams Website Guide

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Facilitator Overview and Instructions

Preface This module provides the necessary background and tools to help Soldiers develop the financial aspects of their transition goals and a written plan to achieve those goals.

Disclaimer The information provided herein does not constitute a formal endorsement of any company, its products, or services by the Department of Defense.

Specifically, the appearance of external hyperlinks does not constitute endorsement by the U.S. Department of Defense of the linked websites, or the information, products, or services contained therein. The U.S. Department of Defense does not exercise any editorial control over the information you may find at these locations. This information provides informational resource material to assist military personnel and their families, to assist in identifying or exploring resources and options.

Sub-Modules

• Financial Goals

• Income

• Debts

• Expenses

• Assets

• Resources

Time: 4 hours Delivery Requirements For Soldiers to effectively complete this module, the classroom must be equipped with the following:

• Dedicated non-CAC internet access (hard wired) for the trainer and internet access for the participants

• Smart board/white board

• Projection equipment (including projection screen suitable for audience size)

• Interactive classroom setup (i.e. round tables)

• Microphones/audio projection

• Recommend all participants bring their computers, tablets or smart phones

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Materials (varies depending on activities chosen):

• Personal Financial Planning for Transition PowerPoint presentation

• Service-specific spending plan(paper or computer)

• Calculators

• Pencils and scratch paper

• Chart paper and markers

Trainer Qualifications A nationally accredited financial educator/counselor who is a government employee or government contractor will deliver this curriculum.

(Reference DoDI – 1342.17).

Facilitator Preparation

• Facilitator Guide and Slides

• Service-specific spending plan

• Sources of local financial assistance for veterans

Facilitator and Participant Guides: To assist the facilitator, the relevant page numbers from the participant guide are located on the lower right corner of the slide. The facilitator guide contains a small graphic of the slides and the participant guide contains larger images of the graphics on the slides, co-located with the pertinent information. The location of the graphics are also shown in the facilitator guide but the graphic is smaller than in the participant guide.

Course Assessment At the end of each module, it is requested that the participants complete the course assessment. As the Facilitator, please encourage all participants to complete the online assessment. Here are some pertinent details to share with the class:

• Participant assessments are completely anonymous; demographic information is not stored, therefore it needs to be completed every time the assessment is accessed

• Participants must only check the box for the course that was just finished; otherwise, the assessment for each checked box will be given

• The information is gathered and analyzed quarterly and is used as Soldier feedback during the yearly curriculum review

Note: Use of actual versus fictional information to complete this module is determined by the Service. The facilitator should be aware of the policies of the Service for whom they are facilitating. Some individuals will not be willing to use personal financial information in an open classroom setting.

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Suggest these individuals use estimates, or fictional numbers, to update the spend plan during class. Remind them the Career Readiness Standard (CRS) is to have a 12-month post-separation budget. Therefore, learning how to use the spending plan and components is important.

Note: All discussions should be general in nature and not specific to any participant’s personal financial situation. If a participant does start to have a discussion on their personal financial situation in the classroom, explain to them this is not the correct place to be discussing the personal financial information and they need to make an appointment with a financial counselor.

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MODULE PREREQUISITE

Soldiers should bring their most current End of Month (EOM) Leave and Earning Statement (LES) (or be prepared to access it online), and Individual Transition Plan (ITP). Your service may have requested you bring the following items to assist with creating a spending plan: list of goals (career, location, and home options), list of expenses, list of debts, and a recent credit report.

MODULE COMPETENCY

Understand and be able to plan for the changes and impact transitioning from the Service will have on personal finances.

INTRODUCTION

The SFL-TAP courses, including the Financial Planning module, should help you determine your projected path after transition. This specific course is designed to help you understand your current financial situation by using what you have learned from previous Financial Readiness courses which you have attended throughout your military life cycle. The knowledge from those courses and the content covered in the Financial Planning for Transition will enable you to complete the career readiness standard associated with this financial module.

During this course, you will develop or update a Service-specific spending plan and gain an understanding of how transition will impact your financial situation. To gain this knowledge, FACILITATOR NOTES:

Module Time: 4 Hours Times suggested for activities are approximate. Assess your audience and make adjustments as needed.

Emphasize the purpose of this module:

• Understand the changes and impact transitioning may have on their financial situation.

CRS: create a 12-month post-transition budget

Each Service will provide a Service-specific spending plan to use during the workshop. Because spending plans may vary between Services, the Participant Guide has non-specific instructions when referring to the spending plan.

As a facilitator, it is imperative you familiarize yourself before the workshop with the spending plan being used and be prepared to answer any specific questions.

Financial Planning for Transition Facilitator Guide 2018 page 2 topics such as income, debt, and assets will be discussed. Within each of these topics are subtopics to encourage awareness of changes which will affect your financial situation during transition. As each section is discussed, you are encouraged to add the pertinent information to the spending plan to create a complete financial picture now and for the future. At the end of this course, you should be able to understand how transition can affect your finances, what to expect financially as you transition, and know the income required to maintain your current lifestyle.

COMPETENCY

Formulate short-term and long-term financial goals based on your understanding of your current financial situation.

LEARNING OBJECTIVE

• Define short-, medium-, and long-term financial goals

• Determine a short-, medium-, and long-term financial goal/s

FINANCIAL GOALS

What is a financial goal?

A financial goal is an objective which is based on money. These goals can be further defined by time objectives to create short-, medium-, or long-term goals.

An important part of a financial goal is the length of time in which you expect to achieve this goal. There are three basic timelines:

• Short-term: less than 2 years

Each section has its own competency; the section competency relates to the module competency by understanding the financial situation now and what the goals are as they transition.

FINANCIAL GOALS:

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• Medium-term: between 2 and 5 years

• Long-term: greater than 5 years

Examples of financial goal statements:

• Pay off $9,000 in credit card debt in 12 months. (The 12 months should have an end date to be more specific.)

• Build my emergency fund to $10,000 within 2 years.

• Pay off student load debt early by increasing payment amount by $200 each month.

• Create a house down payment fund by creating an automatic transfer of 10% of each paycheck into a separate account.

• When setting any goals, but especially financial goals , it is important to be SMART:

• SPECIFIC: state the goal in terms that are clear; to be rich is undefined and vague.

• MEASURABLE: have a clear definition of success so you will know when you have reached your goal and be able to celebrate; to have credit card debt below $500.

• ATTAINABLE: be sure you can attain the goal, but set one that shows an improvement over your current situation; having a million dollars in the bank after 1 week is not attainable by most standards and situations.

• REALISTIC: is the goal realistic based on your situation; it may be achievable to save $1000 a month when you make $2000 a month, but is it realistic based on your life situation?

• TIME-BASED: goals need to have a specific time limit in which to achieve the goal;

add days, weeks, months, years.

• Explain the term length of a financial goal and that this is general guide;

what is important is to have a time frame for the financial goal.

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ACTIVITY: Financial Goals for Transition DIRECTIONS: Write three SMART financial goals in the box below: one short, one medium, and one long-term financial goal.

FINANCIAL GOALS

1.

2.

3.

NOTES:

SPENDING PLAN – ALSO CALLED A BUDGET

You may be thinking, “Why are we devoting time to developing a budget or spending plan?

Haven’t we done this before? This is supposed to be about transition.” The answer to all your questions is yes; however, remember the goals established during your pre-separation counseling? Are you attending college or career technical school when you separate, starting your own business, or joining the civilian job market? Each of these three choices comes with its own set of financial questions. If you are attending school, you should have the VA educational benefits, but that may not cover all the expenses. If you are starting your own business, it could take some time to realize a profit. If you are joining the civilian job market

— it may take a few months to find a job that will cover your living expenses. How are you going to support yourself and/or your family in the meantime? How will you make ends meet

• SMART – this is a term the Soldier should be familiar with; no need to go into great detail; change the examples as needed

• Create your own examples of financial goals based on the class; a more senior or retirement class may be more concerned about retirement savings where a younger class may be saving for a car or house. Use examples that will resonate with your class.

ACTIVITY: Financial Goals TIME: 5 minutes INSTRUCTIONS: Give the Soldier 5 minutes to write their SMART financial goals.

Soldier may be frustrated by having to review their budget/spending plan again.

They may feel this is intrusive into their private lives.

Introduce this section with a discussion using the WHY slide.

Financial Planning for Transition Facilitator Guide 2018 page 5 during this transition period? The spending plan is a tool to help build a financial plan to meet your transition goals.

Developing a spending plan should not be a new experience. This is something that should have been created during one of the many Financial Readiness seminars, but it may have been awhile since you reviewed it. No matter if you just reviewed it or it has been a while, it is important to carefully examine financial details of a spending plan during a major life transition, such as leaving the military. For the next few hours, you will work with tools that can help you improve your understanding of your financial situation. Many of the topics which will be covered during this course should be familiar to you from prior classes so the basics will not be fully explained. If you have a question specific to your financial situation, it is recommended you schedule an appointment with a financial counselor on the installation.

As you proceed through this course, there are activities which will assist you in gathering the information required to create your Service-specific spending plan or update your current one. Follow the instructions provided by the facilitators to complete the spending plan.

Having a projected 12-month budget after transition is the Career Readiness Standard (CRS) for the Financial Planning module.

DISCUSSION: Why a Spending Plan?

Ask the Soldier why they think it would be important to have spending plan as they transition. Solicit responses. Examples:

• Expenses may change, i.e. increase in housing costs, purchase a vehicle, insurance payments, loss of commissary and Exchange privileges, etc.

• Good to understand your financial situation before a major life event or transition.

• How much income is necessary to maintain your current life style?

• Where can cuts/adjustments be made to save money?

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COMPETENCY

Evaluate current financial and salary information in order to determine salary requirements after transition.

LEARNING OBJECTIVES

• Determine current military salary with compensation

• Compare current military salary to civilian equivalent to predict future salary requirements

INCOME

Review of the common terms used when discussing income:

• Gross Income – An individual’s total personal income (pay and allowances), before accounting for taxes and other deductions.

• Net Income – Personal income minus taxes and any other deductions or automatic allotments. This is the amount deposited in your account each payday.

For example, the LES says an income of $2,000 per month (gross income) but the bank only receives $1,500 per month (net income).

FACILITATOR NOTES:

Income: The purpose is to provide Soldier an understanding of their current financial situation by reviewing/creating a spending plan. Most should have a spending plan or budget due to the financial literacy programs being part of the Soldier lifecycle.

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LEAVE AND EARNINGS STATEMENT

Most of you are probably aware and understand how to read your leave and earnings statement (LES). This becomes even more important when it comes to understanding what will change after transition.

Entitlements:

This includes the amounts of money that you receive in your paycheck due to base pay, BAS, BAH, Dive Pay, Fly Pay, COLA – what is important to remember is that only SOME of these are taxable.

Income is any source that provides a regular supply of money, such as employment, investments, or a pension. For your spending plan, it is important to consider these additional sources of income. Does your spouse have an income? Do you have a

• It is important to review common terms used when dealing with income.

Highlight key points.

NG/R Note: National Guard and Reservists pay grade may not reflect an accurate picture of gross income due to having other sources of income. Company may still be providing financial support.

Have a discussion of other possible sources of income which will need to be included in the spending plan.

Examples:

• Spouse income

• Second job

• Annuity

• Parental support (if parents still providing financial support)

• Child support/Alimony

• Investment income

• Medical payments

Financial Planning for Transition Facilitator Guide 2018 page 8 second job? Are you receiving income from investments? Do you receive child support or alimony? All sources of income need to be considered.

SPENDING PLAN UPDATE - INCOME

Now is the time to review the income section of the spending plan.

Follow the directions provided by your facilitator and fill in the appropriate areas.

Include:

• Income from LES to include all entitlements

• Spouse income

• Income from additional sources

CIVILIAN SALARY EQUIVALENT

Now that you know your current income, we can determine the civilian equivalent based on your current salary in the military.

One way to determine your civilian equivalent is to use the Regular Military Compensation (RMC) calculator.

http://militarypay.defense.gov/Calculators/RMC-Calculator/

Two examples are provided below:

ACTIVITY: Spending Plan Update

– Income TIME: 10 minutes INSTRUCTIONS: Instruct participants to use their LES to begin completing the income portion of their spending plan and add any other income they receive. Tailor your directions to the Service-specific spending plan being used for the workshop.

Allow Soldier to complete updating their spending plans before moving on to the two civilian salary equivalent examples.

Now that Soldier know their current military income including entitlements, they can determine the civilian equivalent.

http://militarypay.defense.gov/Calculators/RMC-Calculator/

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B. Hardy, E5, single, living in Washington DC with 4 years of Service. His annual basic pay is just over $32,000, adding in BAH and BAS brings his full compensation to $59,000.

The calculator shows B. Hardy will need a salary of $64,000 to meet current financial obligations and maintain his life style.

WEB DEMONSTRATION: RMC Calculator http://militarypay.defense.gov/Calculators/RMC- Calculator/ Time: 15 minutes Instructions: (Choose one option) Website Demonstration (preferred method):

Pull up the RMC website, ask for a volunteer to provide their information and complete the required fields. Click Calculate.

Slide Demonstration (if internet access is unavailable): Show the screen shot that will resonate with your class, i.e. enlisted or officer.

Explain the information required to calculate the salary equivalent.

NEXT: Provide a quick explanation of each line and how the calculation is derived.

The box generated after inputting information includes the information provided initially and the following:

- Annual Basic Pay

- Annual BAH

- Annual BAS

- Combined to be considered non-taxable allowances

- Number of exemptions (may need to explain what an exemption is)

- Personal Exemption amount (may need to explain how this is calculated)

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H. Smith is a retiring 0-5, married with 2 children and lives in San Antonio, TX. Her base pay is approximately $105K; total compensation with BAH and BAS is approximately $134K.

The calculator shows H. Smith will need a salary of $143,000 to meet current financial obligations and maintain the family’s life style, in San Antonio, TX.

- Standard Deduction (may need to explain what a standard deduction is and how it is calculated)

- Total Deductions

- Taxable Income (Basic Pay – Deductions)

- Tax Rate (may need to explain how this varies by income amount)

- Gross Up (may need to explain)

- Tax Advantage (may need to explain why this is included)

ANIMATION ON NEXT TWO SLIDES; text boxes will fly in with second click

B. Hardy Example:

H. Smith Example:

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SALARY DIFFERENCE

This may seem to be an overly inflated number, but this is the reality of taxable versus non-taxable income.

Many of your entitlements, which are non-taxable in the military (Basic Allowance for Housing and Basic Allowance for Subsistence), would be taxed at the full monetary value in the civilian sector. Therefore, to find a civilian equivalent, the entitlements must be figured in and the taxes deducted from that total amount.

WEBSITE ACTIVITY: Determine the CIVILIAN SALARY EQUIVALENT DIRECTIONS: Using the RMC Calculator on MilitaryPay.com, determine the civilian salary equivalent based on your current location:

http://militarypay.defense.gov/Calculators/RMC-Calculator/

1. Provide the information requested on the RMC calculator

• Rate/rank (when transition occurs)

• Years of Service

• Tax filing status (single, married filing jointly, married filing separately, head of household).

• Family size ( type 1, if it is only you)

• Living OCONUS or Not Receiving BAH

• ZIP code of where you are currently living or where you plan to relocate

2. Click CALCULATE RMC

3. Write the amount in the box below

4. Repeat using a second location

5. Provide additional notes as needed

NOTE: All numbers have been rounded to the nearest whole number in both guide and slide.

This may be one of the most important aspects of this class that Soldier are interested in. Be prepared for disbelief on the amount they will need to make to maintain their lifestyle.

ACTIVITY: RMC Calculator Web Research Time: 15 minutes Instructions: Allow the Soldier time to conduct the salary equivalent activity and write their information in the space provided.

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CIVILIAN SALARY EQUIVALENT

Current Location (zip code)

Civilian Salary Equivalent

Possible Second location (zip code)

Civilian Salary Equivalent

NOTES:

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Evaluate current expenses and compare to expenses that will change and affect your income after transition.

LEARNING OBJECTIVES

• Create a list of current expenses and utilize a method to track expenses

• Compare cost of living at current and 2nd location

• Determine changes in taxes based on future salary requirement and location

• Describe the basics of health insurance

• Describe the basics of life insurance

EXPENSES OR LIVING EXPENSES

Expenses are the daily, weekly, and monthly items you pay in order to live – groceries, utilities, clothing, childcare, entertainment, etc. This includes ALL items where cash, debit, credit, or any other method of payment is used to make a purchase. This does not include debt, which will be discussed in the next section.

FACILITATOR NOTES:

DISCUSSION: Types of Expenses TIME: 10 minutes INSTRUCTIONS: Show the slide and discuss what types of expenses could be associated with each circle.

1. Household – rent, cleaning supplies, repairs, lawn care. Mortgage is not included in this category as it is considered debt instead of an expense. This is a change from what is taught during the military life cycle finance courses. The change is necessary because commercial lenders consider rent/mortgage as debt when calculating the debt-to-income ratio for lending purposes. If it is mentioned, let Soldier know it will be discussed during the debt section.)

2. Utility – electric, gas, water, trash, cable/satellite, internet, phone

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The unknown expense is the one that can send your budget off track. This is commonly found at the end of the pay period. The money is gone, but you have no idea where it went.

It went into the unknown expense. It is best to avoid this cycle, if possible.

TRACKING EXPENSES

Living expenses take up the majority of your income. Fixed expenses include rent, car payments, and insurance. There are also those variable expenses that change depending on the time of year; electric may be more expensive during the summer when you use the air conditioner. This group may not be fixed, but you know and can generally estimate these variances. There are other expenses which are covered through disposable income.

These include items such as eating out, going to the movies, in-app purchases, stopping by the coffee shop, or eating lunch out. This is the group of expenses where you can easily lose track of where the money is spent. A $5 latte per day may not seem like much, but that amounts to over $100 per month. The $7 per day spent eating out for lunch quickly adds up to $70 per pay period.

Consider tracking your expenses for a few weeks or months to determine how much is spent on these seemingly expensive items.

HOW TO TRACK EXPENSES

There are many ways to track your expenses; the way you track is a personal preference.

As there is no “correct” way, the best way is the way that is easy and understandable so you will use it consistently.

• Use a free app to track spending; many can be found in the app store

• Keep a small notebook with you to record every purchase (cash/credit/debit)

• Keep receipts from every purchase and total them up at the end of the week

• Create your own log using computer software such as Excel or Word

How you track is not as important as the tracking itself. However you choose to track your spending, be sure to write down all purchases.

3. Transportation – car lease, registration, insurance, gas, maintenance (car loan payments are debt, not expense)

4. Food – groceries, dining out, vending machine, purchased beverages,

5. Clothing/Personal – clothes, hair-cuts, manicures, makeup/toiletries, purses, jewelry, gifts

6. Insurance – car, house, renters, life, pet, personal

7. Leisure – movies, dining out, travel, sporting events, cultural activities, going to the range

DEBRIEF: Notice that some of these expenses overlap or could be in a few different categories; is there a right or wrong place for each expense? No, the importance is to have it included.

Leisure will be the last expense discussed.

Point out that leisure is the fastest way to cut expenses as this is non-essential spending…a want, not a need. Ask them if there are other expenditures that are wants and not needs.

Use this discussion to present the concept of tracking expenses to determine exactly how and where they are spending their income.

Some Soldiers may already track expenses. Ask them how they do it, what works for them, Financial Planning for Transition Facilitator Guide 2018 page 15

SPENDING PLAN UPDATE - EXPENSES

Now is the time to review the EXPENSES section of the spending plan. Follow the directions provided by your facilitator and fill in the appropriate areas.

Include:

• Rent

• Estimate utilities

• Estimate grocery expenses

• Personal grooming

• Other expenses

CHANGES TO EXPENSES AFTER TRANSITION

As you transition, many things will change including current expenses. But how and in what way will your transition change your expenses?

• Will the expenses decrease?

• Will expenses increase?

• Will there be new types of expenses?

• Will there be a decline in income?

The reality is--some expenses will decrease, some will increase, and new expenses will occur.

Depending on where you live, expenses for groceries, gas, utilities, and housing may decrease, especially if you are moving to an area with a lower cost of living or moving in with family, friends, or roommates; however, these same expenses may increase if you are living in the barracks and now have to find a place to live or if you are moving to an area with a higher cost of living.

Take the time to think through what may be a new or unexpected expense as these new or unexpected expenses can easily turn into debt, especially since your income may decline for a short period of time. It is important to consider the cost of living if you are seeking to relocate after transition.

and if there was anything that didn’t work.

The idea is show that no single way works for everyone. It is more important to have what works for the individual because if it works for them, they are far more likely to continue to use the product than one they find difficult to use.

ACTIVITY: Spending Plan Update - Expenses TIME: 10 minutes INSTRUCTIONS: Instruct participants to use knowledge of their expenses to fill the amounts into the spending plan tool provided by the Service. Each Service spending plan will be different so be aware of what you need to tell the Soldier.

ANIMATED SLIDE: 1- small circle group; 2 – large circle

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EXPENSE OF RELOCATION

After transition you may still have one move provided by the military. Even if the military pays for your final move, there are still expenses associated with relocation that need to be considered.

When researching relocation cost and cost of living, the following should be evaluated:

• What is it going to take to move and how much will be out of your pocket?

o Moving truck, supplies, people o Transportation (gas, car repairs, lodging, food) o Down payment or first/last month rent ( security deposit, pet deposit) o Costs to set up residence (paint, curtains, tools, state vehicle tags/registration o Costs to set up utilities (no military waiver/discount anymore) o Children or pet costs (prior, during, and after the move) o Changes to insurance coverage and additional costs (vehicle, renters, or homeowners) o Furniture/appliance purchases

CHANGES TO COST OF LIVING

If you are seeking to relocate after transition, it is important to understand the financial impact this may have on your salary needs and expectations. Some factors to consider include:

• Salary

• Housing

• Utilities

• Taxes (including tax benefits for veterans)

• Food, child care, commuting costs, clothing, entertainment, school costs, climate, medical insurance

DISCUSSION: Changes/Additions to Expenses TIME: 5 minutes INSTRUCTIONS: This is the same slide from previously. Discuss what expenses may change due to transition.

1. Household – no BAH, Rent (mortgage will be included under debt, not expenses) house maintenance, lawn care, snow removal

2. Utilities – living off base may result in utility expense, rates will change depending on location

3. Transportation – cost of insurance, gas, maintenance, registration (some states require you to pay sales tax on the value of the vehicle before you can register)

4. Food – cost may be higher or lower depending on location, may not have access to commissary

5. Clothing – no clothing allowance, may need to buy clothing for new a position or civilian life

6. Insurance – change in location may change insurance costs – renters, car, homeowners; life insurance is no longer provided

7. Leisure – may no longer be able to use base facilities, e.g. gym, MWR, pool

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To understand the extent of the differences in cost of living and the impact this will have on your salary requirements, there are a few different websites to use:

• http://www.bestplaces.net

• http://www.bankrate.com

• www.money.cnn.com/calculator/pf/cost-of-living

• http://www.payscale.com/cost-of-living-calculator

Let’s revisit B. Hardy and H. Smith:

Hardy, upon learning salary requirements in Washington, DC, decided to look at other locations. He has family in Raleigh, NC, which is a larger city where he should be able to get a job. But how much would he need to make and what is the difference in the cost of living in NC compared to Washington, D.C.?

Using BankRate.com, B. Hardy found the following:

Click the slide for one last circle; “New Expenses.” Ask the class if there are any other expenses they can think of that they may incur as part of transition.

8. Relocation – Moving people/HH goods, utility/housing deposits, purchasing furniture, appliances, lawn mower, snow blower

9. Taxes – May need to start paying state tax;

all income will be taxed

These expenses can easily become debts if not considered prior to transition.

One major change in expenses may be due to cost of relocation and cost of living.

Explain that the same salary in one location may be different in another location per the items on the slides. Mention that the Relocation Program or the PFM program can assist as a resource to determine a cost-of-living analysis.

http://www.bestplaces.net/ http://www.bankrate.com/ http://www.money.cnn.com/calculator/pf/cost-of-living http://www.payscale.com/cost-of-living-calculator

Financial Planning for Transition Facilitator Guide 2018 page 18

Most of his expenses would go down, as would his salary requirements, which is what would be expected when moving out of Washington, D.C.

H. Smith and her family are seeking to move to a location where her retirement pay will not be taxed; something that was not a consideration for B. Hardy. H. Smith has been interviewing with a company in Boston, MA. What salary range would H. Smith need to request to be equivalent to her current salary with all the compensations?

According to BankRate.com:

H. Smith’s income will need to be significantly higher than her current income to adjust for the cost of living in Boston.

Highlight the following in the examples:

Hardy:

• Moving from D.C. to Raleigh NC, and the decrease in required income to $39K; a decrease of 38%.

• Note the differences in housing costs and rent; energy is not much different.

Smith:

• Moving from San Antonio, TX, to Boston, MA, requires an income increase of 65% to $236K

• Note the cost of housing, increase in rent, and increase in energy costs

• Be sure to explain this is IN Boston Metro;

just as living IN DC, it is more expensive than VA or MD

Follow with a web demonstration or research using a cost-of-living calculator.

ACTIVITY: Cost-of-Living Web Demonstration OR Research WEBSITE: www.bankrate.com http://www.bankrate.com/

Financial Planning for Transition Facilitator Guide 2018 page 19

These are not the only considerations to be made when viewing cost-of-living information.

The information provided by any of the cost-of-living calculator websites is incomplete and many have differing numbers. Take time to think about your situation and research the area before determining if a particular location will fit your personal and financial needs after transition.

WEBSITE ACTIVITY: Determine the COST OF LIVING at a new location after transition DIRECTIONS: Using the BankRate.com website, find the location based salary equivalent: http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx

1. Write your new location in the box provided

2. Determine your new salary based on location and using civilian salary equivalent

3. Write the amount in the box below

4. Determine a secondary location and repeat the calculations.

5. Review housing adjustment. Is it higher or lower than your current housing price?

6. Provide additional notes as needed

COST OF LIVING

1st Location (city, state)

Salary adjustment for location

Housing difference for location

2nd Location (city, state)

Salary adjustment for location

Housing difference for location

NOTES:

INSTRUCTIONS for DEMONSTRATION: Show Soldier how to locate the calculator following the directions below:

10. Go to bankrate.com

11. Click on See all calculators under

Popular Calculators

12. Click on Cost of Living under

Savings Calculators

Ask a participant to share their relocation information. For bankrate.com, ask for the nearest large city. Discuss the comparison, pointing out differences in income, housing, food, etc.

Soldier WEB RESEARCH OPTION:

INSTRUCTIONS FOR WEB RESEARCH:

http://www.bankrate.com/calculators/savings /moving-cost-of-living-calculator.aspx

Direct the Soldier to the link above, (it is in the guide). Allow them 10 minutes to conduct the research and fill in the box provided.

Encourage them to choose two different locations for comparison.

DEBRIEF: Ask if anyone would like to share their findings. Any surprises?

http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx http://www.bankrate.com/calculators/savings/moving-cost-of-living-calculator.aspx

Financial Planning for Transition Facilitator Guide 2018 page 20

FEDERAL, STATE AND LOCAL TAXES

Taxes are one of the most important changes to understand as you transition. During your time in the military, certain parts of your income were non-taxable.

WHAT IS TAXABLE? WHAT IS NON-TAXABLE?

While in the military, certain allotments and entitlements are non-taxable. It is important to understand the differences because what is taxable during military service and what is taxable after you transition can affect your net income. Generally, items labeled “pay” are taxable, but there are some exceptions to that rule. Using your LES, determine which entitlements are taxable/non-taxable and list them in the boxes below.

Taxable Non-Taxable

These previously non-taxable items, are fully taxable as a civilian when included as part of your civilian gross income, which helps to explain the previous section where the civilian equivalent of your current income was determined. One reason it may seem to be unreasonably high is the increase in taxes due to the increase in taxable income which needs to be accounted for in the civilian sector. Basically, the amount of taxes you pay will increase, thereby decreasing the amount of net income, i.e. your take home pay.

[Blank chart will load first; after completing the exercise, each list will load separately during debrief.]

ACTIVITY: Taxable vs. Non-Taxable Time: 5 minutes

• Instructions: Have Soldier pair up and complete the “Taxable” and “Non- Taxable” lists on the left. Have Soldier look at the LES and determine in which category they will place the various entitlements.

• Taxable o Base Pay, CONUS Cola

• Non-taxable o BAH, BAS, Clothing allowance, OCONUS Cola, DLA, FSA, Per Diem, TLA

DEBRIEF: Reveal the slide and compare to their lists. Discuss any differences.

For a full list go to: https://paycheck-chronicles.military.com/2010/03/14/taxable-and-non-taxable-allowances/

General Rule of Thumb:

https://paycheck-chronicles.military.com/2010/03/14/taxable-and-non-taxable-allowances/ https://paycheck-chronicles.military.com/2010/03/14/taxable-and-non-taxable-allowances/ https://paycheck-chronicles.military.com/2010/03/14/taxable-and-non-taxable-allowances/

Financial Planning for Transition Facilitator Guide 2018 page 21

UNDERSTANDING HOW TAXES AFFECT YOUR INCOME

The following are changes that you need to prepare for:

• Paying State Income Tax: You may not have been paying state income tax while in the military depending on the state you listed as your home residence (such as Florida or New Hampshire); however, as a civilian, you may start paying an income tax depending on your location.

• All Income is Taxable: Also, while in uniform you have been receiving compensation that is not taxable. Except in a few circumstances, ALL your civilian salary will be taxed at both the federal and state levels. In some areas, county and city taxes may also be assessed on your income.

• No Automatic Extensions: You will no longer receive an automatic extension on the April 15 tax filing deadline, unless you specifically request it. Remember, the IRS will charge interest on any unpaid amount due on the April 15 deadline.

• Property Taxes: You may have been exempt from certain local and/or property taxes while you were serving that you will now be responsible for paying. You may have also received substantially discounted rates for vehicle registration and tags by registering as a military non-resident where you were stationed.

To understand the complete tax burden for a location and salary amount, use the following website: https://smartasset.com/taxes/income-taxes

• Pay = Taxable

• Allowances ≠ Taxable

NG/R NOTE: VITA may not be available for National Guard and Reserve at standalone locations. Military One Source and American Job Centers are available for National Guard and Reserve at all locations.

Explain that taxes will vary by location, mostly due to differences in state taxes. For the Soldier to gain a good understanding of the taxes and income that will be required, research using the smartasset.com website.

Restate that this is not an endorsement of the website by DOD or any of its partners and these websites are for research purposes only https://smartasset.com/taxes/income-taxes

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B. Hardy: Estimated civilian equivalent $63,656 and not intended to provide tax advice or a tax bill.

This activity has separate websites for those separating and those retiring. Perform a quick demonstration of one and let them research on their own to complete the activity.

Instructions are provided in the participant guide and as a slide.

ACTIVITY: Federal Income Tax Calculator Web Demonstration and Research TIME: 20 minutes WEBSITE: www.smartasset.com Or https://smartasset.com/retirement/retiremen t-taxes

INSTRUCTIONS for INSTRUCTOR DEMONSTRATION: Display the website. You may ask a volunteer to provide the information required, make up an example, or use the example provided in the participant guide:

www.smartasset.com/taxes/income-taxes B. Hardy:

- income: $63,656

- Location: Washington, DC

- Filling Status: Single http://www.smartasset.com/ https://smartasset.com/retirement/retirement-taxes https://smartasset.com/retirement/retirement-taxes http://www.smartasset.com/taxes/income-taxes

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SEPARATION TAX CALCULATIONS

WEBSITE ACTIVITY: Determine your taxes after transition DIRECTIONS: Find the 3 tax amounts using:

https://smartasset.com/taxes/income-taxes

1. Enter your Civilian Salary Equivalent as the Household Income

2. Enter a location

3. Indicate Filing Status

4. Choose a secondary location

5. Write the information in the space provided below

6. Provide additional notes as needed

TAXES FOR CIVILIAN SALARY EQUIVALENT:

1st Location (city, state, zip)

1st Location - Taxes based on civilian salary equivalent

2nd Location (city, state, zip)

2nd Location - Taxes based on civilian salary equivalent

NOTES:

https://smartasset.com/retirement/retiremen t-taxes H. Smith:

- Income: $50K for retirement pay and $95K for income (total civ salary equal = $145K)

- Location: San Antonio, TX

- Filing Status: Married If the majority of the class is separating, present the SEPARATING slide and activity first and then direct retirees to the Taxes for Retirement activity.

RESEARCH INSTRUCTIONS - SEPARATING

Soldier:

Provide 15 minutes to research the following:

1. Taxes on civilian salary equivalent at 1st location

2. Taxes with civilian salary equivalent at 2nd location

Note: the calculator only allows for 5k increments in the salary adjustment.

https://smartasset.com/taxes/income-taxes

Financial Planning for Transition Facilitator Guide 2018 page 24

RETIREMENT TAX CALCULATIONS

H. Smith: Estimated civilian equivalent $142,995;

https://smartasset.com/retirement/retirement-taxes

NOTE: using militarypay.mil to estimate retirement pay at $50,000 – leaving a gap of $95,000 for annual wages estimation to fulfilled the $145,000 civilian salary equivalent.

If you are facilitating a retirement class, use the following retirement slide and activity.

RESEARCH INSTRUCTIONS - RETIRING Soldier:

Provide 15 minutes to research the following:

1. Estimate the retirement amount by using http://militarypay.defense.gov ; use this as the retirement pay on the website smartasset.com/retirement/retirement-taxes

2. Taxes on civilian salary equivalent at 1st location

3. Taxes on civilian salary equivalent at 2nd location

DEBRIEF FOR EITHER ACTIVITY: Note the cost of Federal, FICA, State, and local taxes. Explain that this calculator is very simple and will only provide the basic information. Ask Soldier what other taxes may be required that are not shown on this calculator?

http://militarypay.defense.gov/

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WEBSITE ACTIVITY: Determine your taxes with retirement pay (Calculating taxes for retirees requires you to first determine your pre-tax retirement pay.) DIRECTIONS:

1. Estimate pre-tax retirement pay using http://militarypay.defense.gov/Calculators/Active-Duty-Retirement/High-36- Calculator/

2. GO TO: https://smartasset.com/retirement/retirement-taxes

3. Choose the state where you wish to retire

4. Complete the following information:

- SS = $0 (if not drawing SS)

- Annual Retirement = military retirement

- Annual wages = amount needed to close the gap between retirement pay and civilian salary equivalent

- Location = zip code

- Year of birth

- Filing Status

5. Choose a secondary location

6. Write the information in the space provided

7. Provide additional notes as needed

TAXES FOR RETIREMENT

Retirement Pay

Annual Wages: Amount used for gap between retirement pay and civilian salary equivalent

1st Location for Retirement (city, state, zip)

1st Location Tax Amount

2nd Location for Retirement (city, state, zip)

2nd Location Tax Amount

EXAMPLES: county, city, paying income taxes to two municipalities if you work in a location different than where you live

After transition, there will be two new expenses for Soldier that were covered while in the military—health insurance and life insurance. For health insurance, it is important that they realize two facts:

• They must secure health insurance or pay a penalty

• Even with health insurance, they will still have medical expenses for co-payments, deductibles, and services/prescriptions not covered by their plan.

For the section on healthcare, query the class to determine knowledge level and instruct accordingly. All of this information may not need to be covered in detail.

http://militarypay.defense.gov/Calculators/Active-Duty-Retirement/High-36-Calculator/ http://militarypay.defense.gov/Calculators/Active-Duty-Retirement/High-36-Calculator/

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HEALTH CARE

Healthcare and health insurance could be considered two of the best benefits provided by the military. While in the Service, if you are on Tricare Prime, you have become accustomed to having your health/medical benefits completely covered. There has been no need to worry about the cost of medicines, co-pays, or if the doctor is in your network.

Decisions about healthcare and health insurance are important and should be considered carefully. Most importantly, you will be required to have healthcare insurance after transition and even with insurance, you will still have medical expenses. Be prepared, know your options, and make informed decisions.

IMMEDIATELY AFTER…